Desert Dreams Meet Silicon Ambitions: A Middle Eastern Kingdom’s Billion-Dollar Bid to Woo Samsung

The United Arab Emirates (UAE) has entered the race to host a global semiconductor factory, with Taiwan’s TSMC and Samsung Electronics, the first and second largest global foundry companies, reportedly trying to attract large semiconductor factories.

According to the Wall Street Journal (WSJ) on the 22nd (local time), TSMC’s top executives recently visited the United Arab Emirates and discussed plans to build a semiconductor manufacturing complex. The UAE wants the new complex to be on par with TSMC’s existing manufacturing site in Taiwan, which is the largest and has the most advanced processes, the WSJ reported.

Samsung Electronics chief executives are also said to have recently visited the UAE and are considering building a new semiconductor manufacturing plant in the UAE within the next few years.

The money needed to build the factory will be provided by the United Arab Emirates, led by Mubadala, the sovereign wealth fund of the United Arab Emirates. Mubadala is the world’s second-largest sovereign wealth fund and manages assets of $302 billion (about 403 trillion won) at the end of last year.

The United Arab Emirates is considering investing a total of $100 billion (about 134 trillion won) in a complex facility where multiple factories will be built. As construction costs have skyrocketed recently, it takes about $20 billion (about 27 trillion won) to build one semiconductor factory.

The UAE established MGX, a state-owned investment company, for AI projects early this year. Mubadala said MGX is making securing AI semiconductor production facilities a key pillar of its strategy and said, “We are in regular dialogue with partners around the world.”

The world is now working hard to attract semiconductor factories. Although the five major powers, including Korea, the United States, Japan, Taiwan, and China, continue to make large-scale investments to maintain their leadership in advanced semiconductors, not only the UAE but also Germany, the Czech Republic, and Vietnam are joining the competition.

The German government is sending love calls with 5 billion euros (about 7.4 trillion won) in semiconductor subsidies. As a result, TSMC recently started building Europe’s first semiconductor wafer factory in Dresden, Germany.

However, the plan to build a semiconductor factory in the United Arab Emirates is still in the early stages of discussion and may be canceled due to technical and political issues. A large amount of clean water is required during the semiconductor manufacturing process, and in the UAE, most water is made from desalination of seawater, so the significant purification costs are the biggest obstacle.

Another problem is that the US is concerned that advanced semiconductors will flow to China, bypassing the Middle East. Accordingly, the UAE discussed with the Biden administration a plan to allow the US government to oversee the UAE factories of TSMC and Samsung Electronics as well as the logistics process.

However, given Samsung Group’s cooperative relationship with the UAE, including Samsung C&T’s participation in the UAE nuclear power plant construction project, a long-term cooperation plan may emerge. UAE President Muhammad bin Zayed Al Nahyan paid a state visit to Korea at the end of May this year and met with Samsung Electronics Chairman Lee Jae-yong to discuss various cooperation measures.