TSMC, Samsung in early talks for $100B chip megafactories in UAE

Global semiconductor leaders Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung Electronics are in discussions with the United Arab Emirates (UAE) to build massive chip-manufacturing factories in the Gulf state, according to sources familiar with the matter.

Potential projects, valued at more than $100 billion, could significantly impact the semiconductor industry and contribute to artificial intelligence (AI) development in the region.

Talks with TSMC, Samsung

Executives from TSMC, the world’s largest chipmaker, and Samsung have recently visited the UAE to explore the feasibility of constructing factory complexes comparable to some of their largest and most advanced facilities in Taiwan and South Korea.

The discussions are still in their early stages, and while no formal agreements have been reached, these projects could transform the UAE into a major player in global chip production.

TSMC officials confirmed that no new investment plans have been announced. In a statement to Reuters, TSMC noted: “We are always open to constructive discussion on ways to promote development of the semiconductor industry, but we remain focused on our current global expansion projects and have no new investment plans to disclose at this time.”

Samsung, which is also considering building major chip-making operations in the UAE, declined to comment on the discussions.

Funding and key stakeholders

The projects are expected to be funded by the UAE government, with a central role for Abu Dhabi’s sovereign wealth fund, Mubadala, according to The Wall Street Journal. The overarching goal is to increase global chip production capacity while ensuring that chipmakers maintain profitability, particularly in an industry where demand for advanced AI chips is booming.

However, major challenges remain, including the need for clean water – a critical resource in chip manufacturing – and a sufficient supply of qualified engineers, which may hinder the projects’ progress.

US-China tensions

As technology deals accelerate in the Middle East, U.S. officials have raised concerns about the UAE’s growing technological partnerships, particularly regarding the potential for advanced AI-related chip technology to be transferred to China.

The U.S. government is likely to press the UAE to avoid collaborating with China, given the potential for UAE-based factories to produce AI chips that could end up in Chinese hands.

According to Alex Capri, a senior lecturer at the National University of Singapore: “The U.S. will likely continue to pressure the UAE not to work with China, especially as these plants could produce advanced AI-related chips.”

AI chip boom

The surging demand for advanced AI chips, driven by the rapid expansion of AI technologies, has played a key role in fueling semiconductor growth.

Companies like Nvidia, which uses TSMC’s manufacturing technology to produce AI chips for tech giants such as Microsoft and Alphabet, have seen their stock prices soar in recent years.