Anamika Dey, editor
Brief news
- Taiwan Semiconductor Manufacturing Co. and Samsung Electronics are exploring the construction of megafactories in the UAE, with potential costs exceeding $100 billion, primarily funded by the UAE’s Mubadala sovereign wealth fund.
- Discussions are in early stages, facing technical and political challenges, including U.S. concerns over advanced semiconductor production linked to China.
- The UAE aims to enhance its tech industry and semiconductor supply, but faces hurdles like water purification needs and a lack of local technical expertise.
Detailed news
The Wall Street Journal reported on Sunday that Taiwan Semiconductor Manufacturing Co. and Samsung Electronics, global semiconductor titans, have been in discussions with the United Arab Emirates to investigate the possibility of constructing megafactories in the Middle East. The report cited individuals who are familiar with the interactions and strategies involved.
The report stated that TSMC’s top executives have recently visited the Gulf state to discuss the construction of factory complexes that are comparable to some of the company’s largest and most sophisticated facilities in Taiwan.
Samsung Electronics, which is headquartered in South Korea, has also expressed interest in establishing semiconductor manufacturing facilities in the country in the years ahead. The report stated that senior executives from the South Korean company have recently visited the country to investigate the concept.
The potential cost of these initiatives exceeds $100 billion, as they entail complexes that contain numerous factories. According to the report, the UAE would provide the majority of the funding under the initial terms that were discussed during the meetings. Mubadala, the sovereign wealth fund of Abu Dhabi, will be instrumental in financing the expansion of its domestic semiconductor manufacturing.
As part of its efforts to establish itself as a global center for advanced technology and artificial intelligence, the Gulf state has been increasing its investment and efforts to develop its domestic tech industry and expand its home-grown semiconductor supplies.
Nevertheless, the report stated that the discussions with UAE officials were still in the early phases and the outcome of these plans is contingent upon the successful resolution of numerous technical and political obstacles.
The region has witnessed a tug-of-war between the United States and China, as the pace of technology transactions accelerates and Washington becomes more apprehensive about Beijing’s influence in the Gulf state. Last year, G42, a prominent AI company based in the United Arab Emirates that is instrumental to Abu Dhabi’s AI aspirations, announced its intention to discontinue the use of Chinese hardware. This decision was made in response to concerns regarding the transfer of U.S. AI technology to Beijing.
Alex Capri, a senior lecturer at the business school of the National University of Singapore, stated to CNBC that the United States will likely persist in its efforts to discourage the UAE from collaborating with China, as the plants would be producing advanced AI-related processors.
Washington has implemented comprehensive export controls on the sale of sophisticated processors, which are utilized to construct AI models, as well as associated manufacturing equipment, to China.
“The UAE will always be perceived as a potential backdoor as long as China continues to lag behind in the production of advanced semiconductors,” Capri stated, which would create some uncertainty regarding the agreement.
The WSJ report stated that TSMC and Samsung Electronics have been in discussions with Washington officials who have conveyed apprehensions regarding the advanced semiconductors that are being transported from these UAE factories to China.
The report suggested that the United States could gain control over the production and shipment of these processors. However, the report also indicated that a definitive resolution may not be reached in the near future, and the construction of these facilities will not occur until an agreement is reached.
The report also noted that the establishment of chip manufacturing facilities in the UAE presents technical challenges, including the extensive purification necessary to generate the ultra-clean water required for the chip manufacturing process. Much of the water in the UAE is generated through desalination.
It was also noted that the chipmakers were concerned about the availability of technical expertise for their new facilities in a country that lacked a robust extant chip supply chain.
Source : CNBC News, Wall Street Journal.
