Middle Eastern Chip Factory Plans Raise Concerns for U.S. National Security
TSMC is reportedly exploring the option of establishing a new semiconductor manufacturing facility in the United Arab Emirates, a move that could provoke displeasure from the U.S. administration, particularly from Donald Trump, who has expressed the belief that all fabs should align with U.S. interests.
As per Bloomberg’s report, TSMC has engaged in discussions with Steve Witkoff, the U.S. special envoy to the Middle East, along with MGX, the UAE’s state investment entity. These talks focus on constructing a plant comparable to the one TSMC is currently developing in Arizona.
Previously, both Samsung and TSMC contemplated building fabs in the UAE, with executives from both companies reportedly visiting the region in the third quarter of 2024. TSMC even opened talks with the Biden administration, but they fell through when the U.S. insisted on maintaining sovereign oversight of the proposed site, a demand that did not sit well with the UAE.
Two significant factors are causing concern in Washington. The first is the potential diversion of focus and resources from the expansive $165 billion project in Arizona, which includes $42 billion earmarked for development by 2025. The second, and more concerning, deals with national security. Although the UAE is currently an ally of the U.S., geopolitical tensions with China and Iran raise fears that this partnership could change. A high-tech chip factory outside U.S. control could become an appealing target for nations the U.S. aims to isolate.
Another challenge lies in the lack of local expertise in the UAE. The region does not have a substantial talent pool to operate a fab, which would necessitate TSMC relocating essential engineers from other operations, potentially depleting the workforce supporting U.S. projects.
Despite the reservations from Washington, the UAE continues to strive for prominence as a regional technological hub. It has already secured approval to utilize Nvidia AI GPUs through G42, its own firm, and OpenAI is set to establish a significant 1 GW Stargate AI data center in Abu Dhabi.
David Sacks, a former official in the Trump administration overseeing AI and cryptocurrency initiatives, is reportedly open to the idea. He believes the U.S. should broaden its AI technology distribution to stay competitive against Chinese firms. Additionally, the Trump International Hotel and Tower in Dubai is slated for completion by December 2031, and investment from UAE-controlled funds in a Trump-affiliated stablecoin further complicates the matter.