29.09.16

Changing times in Saudi Arabia

Fedor Selivanov Shutterstock.com

Saudi Arabia may have a wealthy reputation, but that doesn’t stop budgets for AV projects in the country getting squeezed like the rest of the world, says Paul Milligan.

Saudi Arabia and oil are inextricably linked, but that’s probably no surprise given it’s the largest oil producer in the world. As the oil price has fallen in recent years,so have the fortunes of the country, forcing the government to take steps to make it less oil reliant in the future. In April this year Deputy Crown Prince Mohammed bin Salman  unveiled Saudi Vision 2030, a plan to create the world’s largest sovereign wealth fund and raise non-oil revenue. One of the first fruits of this plan was a deal signed with Japan, calling for closer ties with the country, with the hope Japan will make direct investments in healthcare, alternative energy, technology and logistics in Saudi Arabia.

One huge non-oil project currently underway is the construction of the biggest urban  mass transport system ever built from scratch, in the capital city of Riyadh. The project, costing $22 billion (€19bn), consists of six metro lines that connect 85 stations and span nearly 180km of track. Saudi officials approved the plan in 2012 after  population growth forecast  for Riyadh suggested a 50% increase by 2035.

When oil falls in value it hits the country’s AV market too. So how has business been for integrators working in the country in the last 18 months?  “Last year was ok, but if we compare 2016 to 2015, it has been very quiet,” says Yousef Hadi, senior business  development engineer, Smartech. Hadi puts this down to two factors; falling oil prices and war in the region but expects 2017 to be better, and for things to return to full health in 2018 and 2019.

Alistair Duthie, regional manager UK and Middle East, Mitsubishi Electric, has  enjoyed a successful last 18 months, but he too feels a low oil price is affecting the  market; “Our understanding is that for 2017 there were originally 25 projects schedules in the government budget, and that number has been reduced to five.”

How interlinked are oil prices and the AV sector in Saudi Arabia? Maybe not as much as you think says Joe Graziano, Christie regional sales manager, Saudi Arabia. "Oil isn’t necessarily tied to the AV market although it would be naïve to believe that the AV industry in the area is not directly affected by the conditions of the oil market."   Projects will still be worked on but the prospect of them being placed on hold does increase as the market jostles with the realisation of an oil price decrease. From an integrator and manufacturers’ standpoint, qualification and understanding the real requirements, drivers and business needs are more important than ever so as to avoid the risk of wasted hours of work on projects that are unlikely to be realised is perhaps greater than it has been in recent years."

Even  though  times are tough, are there any sectors outperforming others in Saudi Arabia right now?  “The retail sector is moving aggressively,” says Ammar Laskari, founder and CEO of turnkey digital signage company 2point0 Concepts. “New malls are being announced all the time, and they need menu boards up quickly.  Screens on the façade are becoming very popular, they are seeing what shops in London do, and emulating that here.”

Alongside retail, Laskari has also been seeing movement in the healthcare, banking and education sectors. “Healthcare and education have avoided any austerity  measures, because Saudi Arabia is in a dire situation and needs to increase its technical workforce.” 

Laskari’s company was involved in supplying AV to the world’s largest women’s  university (the €15bn Princess Nourah Bint Abdulrahman University) in 2011, so despite cuts in government budgets, there is still money being spent in the public sector. “If you want to talk about the AV market in Saudi  Arabia right now, you have to talk about government projects, like the Metro,” says Hadi. “For other markets like corporate and  hospitality, spending is on hold.”

Another to echo those views was Duthie; “Going forward utilities and transport will be the key markets. It’s still an immature country in terms of infrastructure.”

"There are signs that budgets aren’t as free as they were two or three years ago," says Graziano. "There’s definitely more of a cautious approach about making a purchase.  2-3 years ago the market would look at say a 20,000 lumens 3-chip projector whereas now they might ask for something like a 12,000 lumens single-chip DLP model.   There are definitely more discussions now around ‘how can we save money here?"

When looking at what products are proving popular  with  clients  right  now  in  Saudi  Arabia,  it’s a familiar story to the rest of the world. “In Saudi Arabia, all the legacy installs are projector-based, and projectors enjoyed pretty strong penetration, but  those are slowing down now, and  we are slowly shifting towards  LFDs and videowalls.  Another popular product right now is low pixel pitch LED displays for indoor usage.  We have always seen a lot of outdoor LED systems in Saudi Arabia and the UAE, but because the price point  of  low  pixel  pitch  LED  products  coming from China is so low, it now makes it much more feasible  to  adopt  indoors  too,”  says  Laskari. 

A lot of projects in the country are coming about because  of  the move from analogue systems to digital  says  Hadi.  “Clients are asking  for  4K, because they are getting their information from the consumer market. If you talk about 4K it starts a discussion about digital technology. The market here is moving towards HDMI, HDBaseT and 4K.”

Unsurprisingly given the often harsh climate, the demand for IP67 rated displays is high.  It’s expected the Metro will be full of outdoor transit-grade LCD displays, and the new Terminal 5 of the King Abdullah Airport in Jeddah has a huge number of IP65 and IP67 grade LCD displays.

“It’s always the price that wins contracts. It’s a country where they want the best of the best, but  when  it  comes  down to the negotiation table, it all comes down to the big P’s - price and the proposal,” says Laskari. This sentiment was echoed by Graziano; "There was a time when price was possibly the least important factor in favour of achieving the absolute impact and grand result with less consideration given to other factors such as longevity, flexibility, robustness, accessibility and after sales care and support.  Price is now extremely important, as is more than ever the relationship, ongoing support and after sales care. Having regional visibility and presence has been an important factor in business development and growth."

Finding the right staff can be difficult in Saudi Arabia.  At a time when project work is scarce, integrators are having to reduce overheads, which can mean letting go of your most expensive staff, who are usually the most skilled.  There is also a lot of cheap labour available in the country from India, the Philippines and Egypt. “We are losing jobs to companies with less trained staff because they have lower costs,” says Hadi. 

A solution to this might lie in the country’s Human Resources Development Fund.  It has been created to create skilled young workers in Saudi Arabia, a separate entity for AV innovations and visual creations has now been added, meaning we could be seeing a wave of local AV engineers soon.   

Looking at the AV sector as a whole in Saudi Arabia,  there are only a few AV consultants actually based in the country itself, so most of the big project work is completed by American or UK consultants. When the project size gets smaller, that is where it changes.  All small to medium sized AV projects are completed by local integrators on nearly every occasion.  

Is  there  anything  that  those  involved  in  the AV sector would like to change about working in Saudi  Arabia?  “A  lot of  AV companies here are not really ‘in’ AV.  We need more companies to be certified properly, so that we can provide more  professionalism, and we deliver the right technology to the right people,” says Hadi.