Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung Electronics, two global semiconductor giants, have reportedly been in discussions with the United Arab Emirates (UAE) about the possibility of establishing major chip manufacturing plants in the Middle East. This information was shared by The Wall Street Journal on Sunday, citing individuals familiar with the ongoing talks and strategic planning.
According to the report, top executives from TSMC recently visited the UAE to explore the idea of building large-scale factory complexes, comparable to some of their most advanced facilities in Taiwan. Similarly, South Korea’s Samsung Electronics is also considering significant investment plans to develop chip manufacturing facilities in the UAE over the next few years. Senior leaders from Samsung have made recent visits to the UAE to assess the viability of these projects.
These ambitious plans would involve building complexes that house multiple factories and could demand investments exceeding $100 billion. Under the preliminary agreements discussed, the majority of funding for these projects would be provided by the UAE. The Abu Dhabi sovereign wealth fund, Mubadala, which has been tasked with boosting domestic semiconductor manufacturing, is expected to play a key role in funding these projects.
The UAE is actively ramping up its efforts to develop its technology industry and expand its semiconductor manufacturing capabilities as part of a broader strategy to establish itself as a global hub for advanced technologies and artificial intelligence (AI).
However, these discussions remain in the early stages, and the outcome depends on overcoming several technical and political challenges, according to the report. As the region witnesses intensified competition between the U.S. and China for technological influence, Washington has been increasingly cautious about Beijing’s presence in the Gulf state. For instance, UAE-based AI company G42, a key player in Abu Dhabi’s AI aspirations, announced last year that it would phase out Chinese hardware, following concerns about the transfer of U.S. AI technology to China.
The U.S. is likely to continue urging the UAE not to engage with China, given the advanced AI-related chips that could be produced in these planned factories. Alex Capri, a senior lecturer at the National University of Singapore’s business school, told CNBC that Washington would view the UAE as a potential “backdoor” for China to access advanced semiconductors, especially given Beijing’s current lag in semiconductor production capabilities.
According to the report, TSMC and Samsung Electronics have also been in discussions with U.S. officials, who have expressed apprehension about the possibility of advanced chips manufactured in the UAE being exported to China. There have been proposals for the U.S. to monitor the production and shipment of these chips, but reaching a final resolution is still a work in progress. Construction of the proposed plants will only commence once a concrete agreement is established.
In addition to political concerns, there are technical challenges associated with setting up chip manufacturing facilities in the UAE. One major issue is the production of the ultra-pure water required for semiconductor manufacturing, as the UAE relies heavily on desalination for its water supply. Another concern is the availability of skilled technical talent in the country, which currently lacks a robust semiconductor supply chain.
