Middle East Military Unmanned Aerial Vehicle Growth Opportunities, 2024 2027

The Impact of the Top Three Strategic Imperatives on the Middle East Military UAV Industry

Disruptive Technologies

• Why:

  • Advanced communications; artificial intelligence (AI) solutions; energy innovation; and intelligence, surveillance, and reconnaissance (ISR) payloads are transforming the region’s military unmanned aerial vehicle (UAV) industry.
  • The ability to operate beyond existing ranges creates a more robust interpretation of the battlefield.
• Frost Perspective:
  • As UAV platforms gain momentum in Middle Eastern defense posture and military projection, connectivity and interoperability will begin to play important roles in the industry. In particular, UAV platforms will leverage cross-country accessibility and bypass political boundaries.

Geopolitical Chaos

• Why:

  • Hamas's terrorist attack against Israel and the subsequent war in Gaza, as well as the projections of the Russo-Ukrainian War or the Middle East, indicate continued regional instability.
  • Iranian aggression through a series of proxies throughout the region contributes to destabilization, with widespread use of UAVs.
• Frost Perspective:
  • Given UAVs’ popularity for military purposes throughout the region, a significant increase in defense budget allocations for this domain is expected.
  • At the same time, a trend is evident: shifting from traditional strategic platforms (categories 4 and 5) to the tactical UAV space (categories 1–3).

Competitive Intensity

• Why:

  • Over the past 20 years, the US and Israeli defense industries have dominated the nascent Middle Eastern military UAV space.
  • In recent years, various developments have drastically changed the competitive landscape and altered the traditional market share and structure.
• Frost Perspective:
  • This emerging market is likely to flourish. Contributing factors include the steady growth of the indigenous drone space, Turkey’s emergence as a global military UAV leader, and ongoing tensions between the United States and its GCC allies regarding arms export regulations and defense ties with China and Russia.

Purpose and Overview

• Although the United States and Israel enjoy long-standing reputations and dominance in regional UAV markets, recent strategic developments have dramatically changed the competitive landscape with new powers including the emerging indigenous Saudi and Emirati defense industries. The massive penetration of Turkish and Chinese UAV platforms also is having a substantial effect, bringing new challenges and tensions between the United States and its traditional GCC allies as the US arms export policy diminishes the motivation for further collaborate with US defense OEMs in this domain.
• Still, most regional UAV contracts are controlled by government-to-government (G2G) relations, supporting the growth of the domestic defense industrial base (DIB). This trend changes the nature of contracts’ regulatory and decision-making processes and encourages large procurement deals.
• Frost & Sullivan anticipates that the competitive landscape will become more complex over the next few years, introducing new business models and opportunities. Lower-altitude loitering munitions likely will be preferred over the more expensive high-altitude platforms that dominated the industry in the past decade.
• This analysis examines leading trends, programs, and platforms. It is based on analyst interviews with leading vendors, technology innovators, and military end users, as well as data collected from the Frost & Sullivan database. Primary research accounted for 25% of this research.

Military UAV Industry Segmentation

Group 1 Mini/Micro UAS (MUAS)

• These lower-cost, stand-alone systems are often used by military and law enforcement agencies to respond to tactical urban threats and save lives. They are also gaining prominence in special operations.
• These systems operate below 1,200 feet, weigh 20 pounds or less, and fly at airspeeds up to 100 knots. Missions range from the provision of close-in ISR to the attacking of small targets in tactical support.
• MUAS are man-portable systems and are usually tossed by hand or launched from a mortar-like tube.

Group 2 Small UAS (SUAS)

• These systems typically operate below 3,000 feet, weigh 21 to 55 pounds, and fly at airspeeds below 250 knots.
• They perform similar missions as Group 3 systems, but they are much smaller and easier to carry. Because of their small size, only a few platforms fall under this category.
• They support infantry corps’ tactical ISR missions to enhance situational awareness, increase operational effectiveness, and help commanders on the battlefield.

Group 3 Tactical UAS (TUAS)

• They are becoming multimission platforms and include systems for ISR, target acquisition, strikes, theater air missile defense, electronic warfare (EW), and information warfare.
• Typically, they operate below 18,000 feet, weigh less than 1,320 pounds, and maintain airspeeds below 250 knots.
• They provide near-real-time intelligence and strike ability on the battlefield.
• Militaries rely on them to accomplish MALE and HALE missions, with longer endurance and better survivability capabilities.

Group 4 Medium Altitude, Long Endurance (MALE)

• Typically, MALE UAVs operate below 18,000 feet, weigh more than 1,320 pounds, and fly at airspeeds below 250 knots.
• Missions include ISR and attack. MALE unmanned vehicles include VTOL aircraft.
• MALE platforms are generally assigned for strategic long-range military tasks, including for offensive purposes. This brings to market new heavy-payload ammunition for Group 4 and 5 systems. This trend also pushes for indigenous UAV weaponizations.

Group 5 High Altitude, Long Endurance (HALE)

• As strategic UAVs’ size increases, they will be able to offer greater payload capacity, reliability, and endurance.
• HALE UAVs operate above 18,000 feet, weigh more than 1,320 pounds, and can be deployed across any theater of military operations with high range flexibility. These systems are not governed by speed restrictions.
• Missions include strategic ISR and attack

Key Competitors

• AeroVironment (US)
• Lockheed Martin (US)
• Honeywell (US)
• Leonardo (US)
• Thales (UK, France)
• General Dynamics (UK)
• Leonardo (UK)
• EDGE (UAE)
• Halcon (UAE)
• IAI (Israel)
• Rafael Advanced Defense Systems (Israel)
• Elbit Systems (Israel)
• Aeronautics (Israel)
• BlueBird Aero Systems (Israel)
• X-TEND (Israel)
• Baykar Makina (Turkey)
• Asisguard (Turkey)
• Northrop Grumman (US)
• Boeing Insitu (US)
• Thales (France)
• Safran (France)
• SAAB (Sweden)
• Schiebel (Austria)
• EDGE (UAE)
• GAMI (KSA)
• IAI (Israel)
• Elbit Systems (Israel)
• Aeronautics (Israel)
• IAI (Israel)
• BlueBird Aero Systems (Israel)
• Steadicopter (Israel)
• Baykar Makina (Turkey)
• Northrop Grumman (US)
• Boeing Insitu (US)
• AeroVironment (US)
• General Atomic (GA, US)
• AAI Corporation (US)
• Textron (US)
• Safran (France)
• Leonardo (US)
• Schiebel (Austria)
• Airbus (Pan European)
• GAMI (KSA)
• Advanced Electronics Company (KSA)
• EDGE (UAE)
• IAI (Israel)
• Elbit Systems (Israel)
• Aeronautics (Israel)
• Gadfin (Israel)
• Kale Baykar (Turkey)
• Zyrone Dynamics (Turkey)
• General Atomics (US)
• Leonardo (US)
• China Aerospace Science & Technology Corp. (China)
• Chengdu Aircraft Industry Group (China)
• Dassault (France)
• BAE Systems (UK)
• Turkish Aerospace Industries (Turkey)
• EDGE (UAE)
• SAMI (KSA)
• Intra Defense Technologies (KSA)
• General Atomics (US)
• Northrop Grumman (US)
• Leonardo (US)
• Airbus (Pan European)
• SAMI (KSA)
• IAI (Israel)
• Baykar (Turkey)

Growth Drivers

Changing Nature of Warfare

The Russo-Ukrainian War and the Israeli military campaign against the Hamas terrorist group in Gaza are re-emphasizing the crucial importance of UAVs—particularly in tactical domains—for military operational effectiveness in asymmetric and symmetric warfare. Because of UAVs’ impressive operational performance, demand is increasing for affordable, interoperable, and multitask UAV platforms in all categories to bring holistic military solutions to the end user while addressing vast mission-cover possibilities including ISR, offensive purposes, situational awareness, and cargo needs.

Rising Demand for Drones

The proliferation trend is increasing access to UAVs at low costs and intensifying the already high demand in the Middle East. Most contractual engagements for this industry today are long-term and resource-intensive, in a manner that lays the foundation for competition among leading domestic and international players.

Advanced UAV Applications

Automatic target recognition (ATR) for visual, real-time intelligence—mostly based on AI technologies—has become a central tool supporting an infantry commander’s tactical decisions. Integrating ATR capabilities onto UAVs is dramatically increasing the fire-lethal capabilities of those platforms while keeping the shooter out of range of sophisticated fire capabilities of near-peer adversaries. A primary need is cutting-edge thermal imaging sensors for advanced ATR applications to enhance operational effectiveness and lethality to counter armored vehicles on ground.

Growth Restraints

Supply Chain Shortages and Economic Burdens

• High inflation rates and geopolitical instability impact the DIB to some extent. The ongoing threat of attacks in the Red Sea and Houthi (Iranian proxy) attacks on commercial naval routes intensify supply chain disruptions and add uncertainty to the business environment, especially for non-regional UAV vendors focused on fixed-price contracts. This is slowing long-term contract awards and new military procurement programs across the Middle East.
• While defense budgets are constantly growing, supply chain shortages are expected to hamper regional armed forces’ operational readiness. This is becoming a crucial challenge amid increasing threats (particularly as Iran’s massive UAV DIB procurement programs bring regional tension to new heights) and may impact the prioritization of budgetary flexibility for UAV programs and contracts.

Regulation

• In light of the UAV diversification trend across GCC member states, the US Department of Defense (DoD) continues to express its concerns regarding possible sensitive technology leaks to Russia, China, and—to a lesser extent—Turkey. This creates some delays in regional contracting with US vendors that affect the competitive landscape and damage US UAV OEMs’ business potential in the region.
• Some indigenous UAV platforms are not in accordance with NATO STANAG (standardization agreement) protocols. STANAGs are ratified at the national level and allow for the common use of operational and administrative procedures, logistics, and equipment among NATO forces without the need for additional testing or modifications. Noncompliance with those standards can affect local demand and the ability to export those platforms. Leading Saudi, Emirati, and Israeli UAV vendors, however, are focused on implementing NATO UAV standards.