The Iran war highlighted the need for cheap drone offensive and defensive systems — and companies were already vying to present solutions. Utah-based defense technology company Vector signed an MoU with Riyadh-based SR2 Defense Systems earlier this month to explore locally manufacturing its “attritable” unmanned aerial systems — including its Hammer F1 foldable quadcopter.

Why it matters: Iranian Shahed drones cost 20-50k per unit, creating a massive cost asymmetry when they are intercepted by highly expensive, conventional air defense systems. Vector aims to localize the production of cheap, consumable drones inside the Kingdom to close that financial gap.

The MoU, signed at the 2026 World Defense Show in Riyadh, will see Vector and SR2 form a special purpose vehicle (SPV), with the initial phase involving introducing Vector's systems and tactical training to the Saudi military. Armed with a recent USD 20 mn debt facility from JPMorgan Chase to scale its US manufacturing, Vector wants to eventually transition to standing up local manufacturing for components within the Kingdom.

We sat with CEO Andy Yakulis yesterday to put Vector’s plans in the context of the ongoing regional conflict and Saudi’s defense localization targets. Edited excerpts from our conversation:

EnterpriseAM (E): You describe Vector’s model as “modern warfare as a service.” What does that mean?

Andy Yakulis (AY): Vector was founded after seeing how small, unmanned systems were being used in the war in Ukraine. The unit economics of unmanned systems used at a massive scale captivated us. We focus on “attritable” systems — a US Department of War term for consumable technology that is cost-effective enough that losing a drone — whether intentionally expended or lost to electronic jamming — is an acceptable casualty.

If you look at defense contracting in the US market, it’s a very long procurement cycle — seven to ten years is the average to get a piece of hardware from R&D to full delivery. However, if the drone is attriting and the technology is advancing fast, there is a unique window to provide an updated variant.

We built an “as a service” model: Instead of just buying the drone, our customers buy access to Vector's innovation cycle, tactical training, and manufacturing capacity. This allows us to rapidly contract and deliver our products underneath service contracts, moving around that standard, lengthy procurement process.

E: How does deploying these systems in the Saudi and GCC theater differ from what we’re seeing in Ukraine?

AY: You cannot copy and paste how the Ukrainians are building unmanned systems and employ them on the battlefield against Russia into the US or Saudi markets. I am amazed at Ukraine's innovation cycle and how fast they manufacture, but they are in a conflict where their survival is at stake. They do not have the same regulatory restrictions on supply chains or integrating munitions that the US market does.

US restrictions on using critical components originating from China are very serious. It is difficult to decouple from China, and we have a very strict interpretation of those rules. We assume that in Saudi Arabia, there will be a similar need to be very clean on the supply chain and uphold rigorous safety standards, especially when integrating munitions. A drone is worthless without a munition integrated on it if you are using it as a one-way attack system. That requires a much more robust safety certification process than what you see outside the US.

E: How does your hardware design support this expansion into Saudi and the need for localized manufacturing?

AY: You could call us the Android of drones. Our drones have a very open architecture and are very modular. A lot of other drone companies are more closed architecture — like an iPhone. That modularity makes it easy to manufacture at the point of need.

It also gives us flexibility: Not every country has the same long lead times on procurement that the US Department of War does, so the service model isn't needed everywhere. Because our drone is so modular, it's easy for us to provide a highly capable system even on a normal, straight procurement-based contract.

We are willing to set up manufacturing in a series of different countries, including the Kingdom. We even lean into their supply chain where it makes sense — for example, instead of buying carbon fiber from here, we are willing to look at sourcing carbon fiber in Saudi to help support the local economy.

E: You recently formed a partnership with SR2 Defense Systems. What is the structure of that joint venture?

AY: We announced a partnership with SR2 at the World Defense Show in Riyadh a few weeks ago that will see us creating a JV with SR2 in the form of a special purpose vehicle (SPV). Once that’s completed, we are looking to acquire backing from Masna Ventures, which will finance the initial start of the localization and manufacturing in Saudi Arabia.

E: Will the initial drones be manufactured in Saudi Arabia, or will they come from your US facility?

AY: The initial delivery of drones will potentially come from the US. That JPMorgan vehicle was a debt vehicle here to help scale up manufacturing and help with pre-inventory purchases to build systems at our facility in Salt Lake City, Utah.

We are working toward an initial contract to do the first phase, which is introducing our systems and our training to the Saudi military in the very near future. Once they have awareness of the products, we see a pathway for larger sales, and then standing up manufacturing hopefully in the very near future.

We were in Saudi Arabia well before this conflict erupted. We see Saudi as an important market and ally of the US, and we wanted to enter that market months before this conflict even kicked off. The conflict made it a little difficult to get back over to Riyadh, which slowed us down a bit, but it has also shown that our thesis of attritable systems in mass is the future of warfare.

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