23-05-2025
Saudi Arabia's bet on deep tech to shape future of energy
Saudi Arabia stands at a pivotal juncture, embarking on a profound economic and technological transformation aimed toward building a knowledge-based economy.
Central to this ambitious vision is the development of the deep-tech sector, representing the intersection of advanced scientific research and emerging technologies capable of reshaping entire industries.
The Kingdom's ecosystem is now recognized among the leading startup destinations in the Middle East, commanding significant venture funding and deal volume.
What distinguishes Saudi Arabia's deep tech ecosystem is its integration with national energy ambitions — where startups are not just building apps or hardware, but tackling frontier challenges in grid resilience, hydrogen innovation, and sustainable infrastructure.
Saudi Arabia's planned increase in research and development spending — targeting approximately 2.5 percent of gross domestic product by 2040 — reflects a robust commitment to innovation with expenditures already rising by 17.4 percent to around $6 billion in 2023, alongside a notable 22.1 percent increase in the number of active researches, representing a tenfold increase from $2.4 billion in 2019 to nearly $28 billion by 2040.
Despite such promising developments, considerable hurdles remain. Deep tech ventures inherently involve substantial initial capital, extended development timelines, and complex market-entry barriers.
Local venture capital, while growing, remains relatively limited compared to established ecosystems such as Silicon Valley or Shenzhen. The scale of private sector engagement, crucial for mature innovation ecosystems, has not yet matched the magnitude of governmental investments.
Furthermore, Saudi Arabia's talent pool, although improving through expanded STEM initiatives and eased visa regulations for foreign experts, still faces deficits in specialized, advanced skills essential for scaling deep tech ventures, particularly in areas such as quantum computing, advanced materials, and sophisticated semiconductor industries.
Globally, Saudi Arabia can glean insights from deep tech ecosystems in the US, China, and Europe. Silicon Valley thrives through robust private investment and close collaboration with leading research universities, whereas Shenzhen leveraged state-driven economic zones to build deep technological expertise rapidly.
Europe, especially Germany and France, emphasizes public-private partnerships, industrial research hubs, and strategic R&D tax incentives. Saudi Arabia is uniquely positioned to blend these distinct strategies: it already employs special economic zones like NEOM and proactive regulatory reforms and aims to be a global talent hub.
Saudi Arabia's Vision 2030 framework acts as an enabling platform, aligning cross-sector investments with national innovation objectives while embedding sustainability and resilience at its core. Accordingly, these efforts significantly contribute to the Kingdom's GDP and employment opportunities, offering high-quality jobs in advanced sectors and reducing reliance on traditional industries.
This supports the Kingdom's national pledge of achieving net-zero emissions by 2060, alongside its ambitious goal of generating half its electricity from renewable sources by 2030, which fundamentally hinges on breakthrough deep tech solutions in renewables integration, grid-scale storage, carbon capture, and utilization technologies.
As Kenneth Gillingham, professor of Economics at Yale University explains: 'Reducing domestic consumption of fossil fuels allows energy-exporting countries to redirect valuable resources toward export markets, thereby supporting national economic resilience. For Saudi Arabia, this shift also aligns with the broader imperative of global decarbonization. Deep tech, particularly in areas like grid optimization, energy storage, and emissions management, may prove to be a critical enabler in achieving and sustaining these dual objectives.'
This insight underscores the dual opportunity for Saudi Arabia: securing economic gains through increased exports while simultaneously accelerating its transition to a low-emissions future through strategic advancement of its deep tech sector.
To continue strengthening its position in the global deep tech landscape, Saudi Arabia must adopt several key strategies.
First, incentivizing substantial private venture capital participation is critical. Co-investment schemes and targeted tax incentives could spur greater private engagement, reducing the Kingdom's reliance on state financing alone.
Second, talent cultivation should be significantly deepened through specialized university-industry collaborations, expanded international scholarships in frontier tech domains, and proactive efforts to attract and retain international expertise.
Third, regulatory sandboxes should be more aggressively deployed to expedite testing and commercialization of energy breakthroughs, particularly in renewable integration, hydrogen technologies, and carbon management.
Fourth, the Kingdom should elevate global partnerships, fostering intensive collaborations with renowned global research institutions in the US, Europe, and China to drive innovation and integrate Saudi deep tech ventures into international supply chains.
Fifth, enhancing access to advanced testing facilities, prototyping labs, and deep-tech incubators can shorten development cycles and strategically improve investor confidence.
Deep tech plays a pivotal role in reducing unemployment by fostering high-value industries that require specialized skills. As these sectors expand, they absorb a growing pool of highly educated Saudi graduates, addressing structural employment challenges highlighted in recent studies on the Kingdom's transition to a knowledge-based economy.
If nurtured with foresight and coordination, Saudi Arabia's deep tech revolution could become a cornerstone of its economic competitiveness and environmental leadership and sustainable development in the decades to come.
• Hamad S. Alshehab is a strategic adviser to NGOs focused on empowering youth and community development in Saudi Arabia. He is experienced and specialized in areas including control systems, digital transformation, entrepreneurship, innovation, investments, and economics.
• Hassan M. Alzain is pursuing a master's degree in environmental management at Yale University and is the author of the award-winning book Green Gambit: Climate Change, Climate Policy and the Race Against Time. He is experienced in areas such as sustainability reporting, climate policy, environmental technology, and data assurance.
