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on september 22, local time, the wall street journal quoted people familiar with the matter as saying that executives of tsmc, the world's largest chipmaker, recently visited the uae and discussed the possibility of building a factory complex there that is comparable to some of its largest and most advanced factories in taiwan. in addition, south korea's samsung electronics is also considering launching a new large-scale chip manufacturing business in the uae in the next few years, and the company's executives also recently visited the uae to discuss this possibility.

the two chip manufacturing giants are reportedly discussing building a large factory in the uae, which could transform the industry in the coming years and become a cornerstone of artificial intelligence investment in the middle east. however, these discussions are still in the early stages and face technical and other obstacles, and their success remains to be seen.

the report also specifically mentioned that tsmc and samsung discussed with us government officials when considering new projects in the uae. the us claimed that it was "concerned that advanced artificial intelligence chips would be shipped to china, the uae's trading partner." to this end, the two companies have discussed with biden administration officials about allowing the us to supervise the production and transportation of chips from any factory in the uae, but the specific details have not yet been finalized.

"we have worked extensively with the uae in the field of advanced technology over the past two years, and this partnership is moving in the right direction," said a spokesman for the u.s. national security council (nsc). according to people involved in the discussions, the two chipmakers expect that the u.s. "concerns" about china will not be resolved soon, and construction of the factory may not start before that.

tsmc logo from reuters

according to reports, under the preliminary terms being discussed, the projects will be funded by the uae, with abu dhabi-based uae sovereign wealth fund mubadala investment company playing a key role. the agency has been eager to develop a domestic technology industry and, according to some people familiar with the matter, its broader goal is to increase global chip production and help lower chip prices without hurting chip manufacturers' profits.

a spokesman for mubadala investment co. said one of its partners, mgx, a state-backed tech conglomerate that has led some of the country’s highest-profile ai investments, has made semiconductor manufacturing a pillar of its strategy and is in regular dialogue with partners around the world, but there are no specific plans to build a factory in the uae at this time.

the wall street journal believes that the uae's negotiations with tsmc and samsung reflect both its growing technological ambitions and its efforts to fund the expansion of chip production around the world, largely to meet the needs of the artificial intelligence boom. in recent years, due to the sharp rise in costs, it may cost $20 billion to build a cutting-edge chip factory. the project being discussed by the uae is large-scale, involving a complex that may include multiple factories, with a total investment of more than $100 billion.

the uae is home to one of the world's largest sovereign wealth funds, with mubadala investment company saying its portfolio was worth about $300 billion as of last year.

mubadala investment company, the united arab emirates sovereign wealth fund - the wall street journal

the wall street journal quoted government officials and industry executives as saying that in addition to the "political obstacles from the united states", there are still huge technical difficulties in building chip factories in the uae. one of the concerns is that chip manufacturing requires a large amount of ultra-clean water to rinse silicon wafers for etching microcircuits, and most of the water in the uae comes from desalination, which requires a lot of purification. people are also worried about whether engineering talents can work in large new factories far away from company headquarters in a country like the uae, which does not have much existing chip manufacturing supply chain.

previously, under the chips and science act of 2022, the united states provided $39 billion in grants to the domestic chip manufacturing industry, as well as tax incentives expected to be worth more; european leaders have also pieced together their own "incentive package" to attract companies including intel and tsmc. the report believes that previous manufacturing growth in the united states, europe and east asia was driven by these government subsidies, and if tsmc and samsung insist on moving forward, these projects in the uae may usher in the next wave of industrial expansion.

the uae, a member of the organization of the petroleum exporting countries (opec), is a major producer of oil and natural gas. like other natural resource powers in the region, the uae has sought to diversify its economy in recent decades, using its oil wealth to invest in industries such as aluminum production.

the uae has made progress in recent years in its efforts to become a player in the field of advanced technology. the wall street journal reported in february that sam altman, ceo of openai, a well-known artificial intelligence company, has met with investors in the uae and other places to significantly expand the production scale of chips, electricity and other basic inputs needed to develop artificial intelligence. these efforts may eventually involve investments of up to $5 trillion to $7 trillion.

on april 15 this year, the us technology company microsoft announced on its official blog that it would invest $1.5 billion in g42, an abu dhabi-based artificial intelligence company in the united arab emirates. at the same time, microsoft will acquire a minority stake in g42, and its president brad smith will join the g42 board of directors. g42 will run its artificial intelligence applications and services through microsoft's cloud computing platform azure.

microsoft and g42 sign agreement g42 website

the washington post reported the news on april 16, citing anonymous insiders as saying that as part of the negotiations, g42 has agreed to withdraw investment from china and remove chinese equipment from its business, and huawei was named. bloomberg also reported on the same day, citing insiders as saying that the us government was involved in the negotiations involving "terminating any cooperation with china", and said that before reaching this "unusual agreement", g42 had been reviewed by the us and faced punitive sanctions, but now the us is "deeply encouraged and satisfied" with this.

on july 29, reuters reported that a u.s. congressional spokesman said that the uae prevented a meeting between relevant personnel from the two countries after u.s. congressmen expressed "concerns" that g42 might transfer u.s. artificial intelligence technology to china. the report said that the uae ambassador to the united states "personally intervened" to prevent the u.s. house of representatives' "special committee on china" from meeting with g42 and uae government officials.

in response to the us hype that the cooperation between the uae ai company and chinese enterprises poses a security threat, a spokesperson for the chinese ministry of foreign affairs previously stated that the us has repeatedly used unfounded security reasons to undermine the cooperation between chinese companies and other countries, which is an act of economic coercion. when the relevant countries asked the us to provide credible evidence of the so-called "security threat", the us hesitated and was vague.

the spokesperson stressed that china has always opposed the us's generalization of the concept of national security, politicization, weaponization and generalization of economic and trade issues, and obstruction of normal investment and business activities between industries and enterprises. the us's actions seriously undermine international economic and trade rules and impact the security and stability of the global industrial chain and supply chain. they are unpopular and will not succeed.