Overview

Valued at over $32.1 billion, Saudi Arabia’s Information and Communications Technology (ICT) market is the largest in the Middle East and North Africa region, and is well-positioned to become a technology service and cloud hub with access to international connectivity through the Red Sea and the Gulf, and with the potential to serve the European, Asian, and African markets.

Key Players in the Saudi Arabia ICT Sector

• Ministry of Communications and Information Technology (MCIT):  MCIT is responsible for the development of policies that govern the communication and information technology sector. 
   
• Communications and Information Technology Commission (CITC): Under the MCIT, CITC is responsible for regulating the ICT and postal sectors in Saudi Arabia. 

• Saudi Data and AI Authority (SDAIA):  Under the MCIT, SDAIA and its subagencies – the National Centre for Artificial Intelligence, the National Data Management Office, and the National Information Center – are responsible for Saudi Arabia’s national data and AI agenda.
   
• National Cybersecurity Authority (NCA): The NCA reports directly to the Royal Court and has both regulatory and operational functions related to cybersecurity. It works closely with public and private entities to improve the cybersecurity posture of the country in order to safeguard its vital interests, national security, critical infrastructure, high-priority sectors, and government services and activities in alignment with Vision 2030.

Doing Business in the Saudi Arabian ICT Sector

Since 2019, Saudi Arabia’s digital regulatory environment has been somewhat fragmented, with MCIT, SDAIA, CITC, and NCA creating a host of new regulations and policy frameworks vis-à-vis the cloud, cybersecurity controls, data management and personal data protection standards, e-commerce, and the internet of things.  U.S. industry has noted that there are significant discrepancies between some of these laws and regulations, which creates ambiguity.  Perhaps the most significant factor when considering Saudi Arabia’s ICT sector is Saudi Arabia’s strict data localization requirements which are out-of-step with global best practices for privacy and data protection, and potentially raise the cost of doing business in Saudi Arabia as companies are required to build duplicative local infrastructure and must find cloud-based applications on which to run their business.

Regarding procurement, although U.S. exporters are not required to appoint a local Saudi agent or distributor to sell to Saudi companies, it is strongly recommended that companies consider partnering with a local company for the purposes of monitoring business opportunities, navigating import and standard testing regulations, and identifying public sector sales and contract opportunities.  

Saudi Arabia’s Procurement Law regulates all government procurement – including MCIT tenders.  The Ministry of Finance is the overarching authority for the law and its implementation and administers the procurement portal, Etimad, which serves as a centralized repository for all government tenders. 

Since ICT is a cross-cutting sector, U.S. companies might also find ICT-related tenders on a number of other government and non-government procurement portals and websites including those of:

• Saudi Telecom Company
• National Unified Procurement Company (NUPCO)
• Ministry of Energy
• Saudi Power Procurement Company
• Saudi Electric Company
• Saudi Aramco
• General Authority for Military Industries

Opportunities

MCIT aims to establish a robust and cutting-edge digital architecture that supports Vision 2030’s goal of digital transformation through e-commerce, digital education, digital health, smart cities, national data, and e-government. Saudi Arabia’s ICT Strategy 2023 outlines the creation of more than 25,000 jobs in the sector, increasing the size of the IT market and emerging technologies by 50 percent, and raising the sector’s contribution to GDP by $13.3 billion.  It also aims to attract foreign investments and to support the participation of women in this sector.  

According to the International Data Corporation (IDC), the Saudi ICT sector grew by eight percent between 2019 and 2021, reaching a   value of $32.1 billion.  IDC predicts that spending in the sector will further grow by 2.3 percent in 2022 to reach a value of almost $33 billion. Growth is primarily being driven by digital transformation efforts in the government, telecom, finance, and oil and gas sectors, with an increased focus on giga-projects, smart cities and e-governance.  Opportunities exist in cybersecurity, cloud, artificial intelligence, and internet of things.

Leading Sub-Sectors

Cybersecurity:  According to the International Telecommunication Union (ITU), Saudi Arabia currently has the largest cybersecurity industry in the Middle East. The Saudi Arabian cybersecurity market was valued at $3.6 billion in 2020 and is expected to grow at a CAGR of 17.98 percent to reach $9.8 billion by 2026  Cyber threats in Saudi Arabia continue to be a major challenge.  Sectors that are most heavily targeted include government, education, finance, energy, and healthcare.  The most common attacks involve ransomware, DdoS, and malware. Increasing cyberattacks have spurred the government to launch significant initiatives to fight cybercrimes. These efforts are led by the Saudi Information Technology Company (SITCO), CITC, the Ministry of Interior, and the King Abdulaziz City for Science and Technology.  Key areas of opportunity include application security, cloud security, consumer security software, data security, identity access management, infrastructure protection, integrated risk management, network security equipment, and security services.  The recently established NCA’s cybersecurity control regulations  present an opportunity for cybersecurity firms to support thousands of companies that will need help complying with  NCA’s mandates.

Internet of Things (IoT) & Smart Cities:  Saudi Arabia is currently building  several  smart cities (including NEOM, Red Sea, Qiddiya, Waad Alshamal, and SPARK), and aims to be the world’s most connected and digitized nation by 2030.  According to the International Data Corporation (IDC), Saudi Arabia’s IoT market is estimated to reach $2.9 billion by 2025 with an annual growth rate of 12.8 percent.  Specific areas of focus include industrialized IoT, AI, cloud computing, and data centers.  In addition, Saudi Arabia aims to equip five existing cities with smart infrastructure to rank among the top 100 cities worldwide.  Opportunities also exist for international companies to develop industrial IoT solutions tailored to local business specifications and higher levels of operational effectiveness. Specific opportunities include predictive maintenance, asset tracking, fleet management, and warehouse optimization.

Cloud Computing: Saudi Arabia requires government entities to prioritize cloud-based solutions.  The introduction of its Cloud First Policy in 2019 signaled the government’s intent to push widespread cloud adoption across its public and private sectors, evidenced by the 16 percent growth rate of cloud services (the fastest growing cloud segment in-market).  In July 2021, MCIT launched an $18 billion plan to build a network of large-scale data centers across Saudi Arabia. The purpose of the initiative is to transform Saudi Arabia into the main data center hub for the region, by working closely with the private sector, including local and international investors, to achieve this goal.  Saudi Arabia’s strategic location allows global cloud service providers (CSPs) to serve the MENA region.  Current data shows that local cloud providers are offering mainly Infrastructure as a Service (IaaS) with very limited Software as a Service (SaaS) availability, creating an opportunity for CSPs to build critical SaaS and full stack cloud solutions. In February 2022, Saudi Telecom Company (STC) announced that it would set up a new entity with an initial capital of $26.66 million to which it would transfer its data centers, international submarine cables and points of presence assets.

Artificial Intelligence (AI): According to the Saudi Ministry of Communications and Information Technology, the AI market is expected to exceed $35 billion by 2030. Opportunities exist for cutting-edge AI companies specialized in manufacturing and oil and gas to tailor their solutions to fit the local market.  These include truck hauling optimization, equipment lifetime analytics, supplier delivery date prediction and asset tracking, shipping optimization, satellite/aerial image analytics, and asset failure predictors.

5G: Saudi Arabia  was among the first countries in the MENA region to launch  5G networks in 2019. According to Saudi Arabia’s Communications and Information Technology Commission (CITC), the total number of governorates covered by 5G at the end of the second quarter was 60 out of 118, up by seven from the first quarter of 2021. The fixed-line internet market has grown strongly in recent years, boosted by the growing popularity of social media, video downloads, and a pandemic-led surge in online streaming and gaming. The number of internet users grew at an estimated annual rate of seven percent between  2017 and 2021. Internet user penetration is expected to reach about 97.6 percent by 2026 as the government seeks/solicits  for more investment in broadband networks., By liberalizing more than 1100 GHz of spectrum and making it available to operators, mobile internet speed has increased to  105.42 Mbps, positioning Saudi Arabia at the fifth spot globally, and  second among the G20 countries, surpassing the global average by nearly  250  percent.  Furthermore, in response to the U.S. Federal Communications Commission announcement in 2021 that the entire 6 GHz band would be open to unlicensed wireless technology, Saudi Arabia followed suit.  Moving forward, its wireless ecosystem will be able to support next generation Wi-Fi 6 and wireless technology based on 3GPP 5G NRU standards, positioning the KSA for future innovations in the wireless ecosystem.

Consumer Electronics: Saudi Arabia is one of the largest consumer electronics markets in the GCC region.  Growth in this segment is attributed to favorable demographics and will benefit from the country’s early adoption of 5G and the subsequent rollout of new devices.  Total spending on consumer electronics in the country was over $9 billion in 2020, marking a 2.4 percent decrease in spending after three straight years of growth.  The decrease is attributed to heightened economic uncertainty worldwide from the COVID-19 outbreak and subsequent impact. According to Statcounter, Apple (U.S.) has the largest share of the Saudi Arabian mobile-phone market, at 53 percent as of January 2022. It is followed by Samsung (South Korea) with 22 percent and Huawei with 14 percent.

E-Commerce: According to the Saudi Central Bank (SAMA), the share of electronic payments in retail business was almost 57 percent of total transactions in 2021, exceeding the 55 percent target set out by the Financial Sector Development Programme (FSDP), an important objective under Vision 2030. With Vision 2030 aiming to achieve 70 percent cashless transactions by 2030, the market is expected to see more investment by start-ups and telecoms service providers in the digital payments sector.

Resources

• Saudi Information Technology Company
• Ministry of Communications and Information Technology
• Communications and information technology Commission
• Saudi Data and AI Authority
• National Cybersecurity Authority

Events

• GITEX Technology Week
• Consumer Electronics Show  

For more information, contact: Tareq.Ghazal@trade.gov