The semiconductor market has become the fourth largest market in the world, following crude oil, automotive, and petrochemical products. With a scale of more than US$500 billion in 2023, it is expected to exceed US$1 trillion by 2030. Attracted by the industry's robust outlook ignited by the Generative AI infrastructure, Middle Eastern countries are diversifying their business portfolios to include the semiconductor and AI industries.
UAE and Saudi Arabia: Beckoning Chinese Tech Giants
Various Chinese media outlets have reported that the Abu Dhabi Investment Authority of the United Arab Emirates has researched more than 30 A-share publicly listed companies in China. These include wafer manufacturer Sai Micro Electronics, SiC substrate maker SICC, and IC design IP company VeriSilicon, to explore investment, merger and acquisition, and technology collaboration opportunities.
The UAE is not the only Middle Eastern country enticing Chinese tech companies to establish operations. Saudi Arabia has successfully established a Cloud Computing Economic Zone, where Alibaba and Huawei have set up data centers. Alibaba Cloud has formed a joint venture with Saudi Arabian telecoms and AI firms to run the country's largest public cloud service in two data centers in Riyadh.
Similarly, Huawei announced in the second half of 2023 that its cloud data center in Riyadh will serve as its data hub for the Middle East, Central Asia, and Africa.
Building a Silicon Valley in the Desert: Saudi Arabia's Ambitious Plans
Lenovo also announced a collaboration with the PIF Sovereign Wealth Fund of Saudi Arabia in May 2024. PIF will become a shareholder of Lenovo, while Lenovo will set up its headquarters for the Middle East and African region in Riyadh, including an R&D center, customer center, and production base.
PIF plans to set up a US$40 billion fund to invest in AI technologies. As a crucial component of the country's Vision 2030 strategies, PIF has also established a subsidiary, called Alat, to enable Saudi Arabia's transformation into a global electronic and advanced industrial hub. Currently, Alat has US$100 billion of assets under management. According to an executive of Alat's Semiconductor Business Unit, the company aims to help the country achieve an annual production of 1 million wafers by 2030 and create US$10 billion in revenue.
In addition to data centers and AI, Saudi Arabia has announced the establishment of a National Semiconductor Center to attract 50 IC design firms and train 5,000 engineers. The goal is to develop a semiconductor ecosystem with a value exceeding US$13 billion and transform the area into the "Silicon Valley of Saudi Arabia."
Notably, Saudi Arabia has emphasized that the chips designed there will be produced globally. This indicates that they don't have plans to set up manufacturing fabs but instead aim to expand their IC design services from the Middle East and Western Asia to Europe, Africa, and beyond.
