Middle Eastern Mega Fabrication Plans Raise Concerns in U.S.
TSMC is reportedly exploring the United Arab Emirates as a potential location for a new chip manufacturing facility, a move that could provoke discontent from the U.S. administration, which is keen to maintain control over semiconductor production.
As reported by Bloomberg, TSMC has been in discussions with U.S. Special Envoy to the Middle East, Steve Witkoff, and MGX, a state-owned investment entity in the UAE. The talks focus on establishing a plant comparable in size to TSMC’s ongoing project in Arizona.
Both Samsung and TSMC have previously considered the prospect of setting up factories in the UAE. Executives from both companies reportedly explored the region in the third quarter of 2024. TSMC also discussed the matter with the Biden administration, but those negotiations stalled when the U.S. requested sovereign control over the proposed site—a demand that did not sit well with the UAE.
There are two significant concerns that are making waves in Washington. The first is the fear that such a facility could divert resources and personnel from the expansive $165 billion project in Arizona, which includes a $42 billion phase planned for 2025. The second, more concerning issue, relates to national security. While the UAE is currently an ally of the U.S., complexities with China and Iran in the region raise questions about the long-term stability of that relationship. A state-of-the-art chip factory outside U.S. control could become an attractive target for countries the U.S. seeks to isolate.
Additionally, there is the challenge of local expertise. The UAE lacks a substantial talent pool to operate a manufacturing plant, which means that TSMC may need to transfer key engineers from its existing operations, potentially weakening the workforce supporting U.S. projects.
Despite the skepticism from Washington, the UAE is determined to establish itself as a technology hub in the region. It has already received approval to acquire Nvidia AI GPUs through its company G42, and OpenAI is planning a 1 GW Stargate AI data center to be located in Abu Dhabi.
David Sacks, who was part of the Trump administration overseeing AI and cryptocurrency initiatives, appears to be in favor of wider distribution of AI technology. He warns that the U.S. risks falling behind Chinese competitors if it does not pursue collaborative efforts. Furthermore, the Trump International Hotel and Tower in Dubai, developed in partnership with Dar Al Arkan and DarGlobal, is set for completion by December 2031. This project, along with a $2 billion investment in a Trump-affiliated stablecoin by UAE-controlled funds, suggests that maintaining good relations is crucial for ongoing ventures.