TSMC (TSM.US) and Samsung Electronics (SSNLF.US) are reportedly considering building new chip factories in the UAE.

Media reports citing people familiar with the matter said TSMC and Samsung Electronics are discussing building large chip factories in the United Arab Emirates in the coming years to meet growing demand for artificial intelligence computing. The reports said TSMC executives recently visited the UAE to discuss building a comprehensive factory there that could rival the company's advanced facilities in Taiwan. The reports quoted another person familiar with Samsung's strategy as saying the company also sent people to the UAE to discuss a major new business there. The reports added that the discussions were still in early stages and could fail to materialize, considering the array of technical and other hurdles they face. The reports said the contemplated projects could require more than $100bn. The UAE is trying to establish itself as a regional center and testbed for artificial intelligence. More broadly, Gulf countries have been trying to reduce their reliance on petrochemicals. For more than a decade, they have been pursuing the semiconductor industry as a growth opportunity. For example, Abu Dhabi's Mubadala Investment is a major shareholder in GlobalFoundries. However, these efforts have been stymied, in part because the Gulf lacks the necessary infrastructure to justify building chip factories, which cost hundreds of billions of dollars to build and equip — and will become obsolete unless they are updated. Chipmakers prefer to build factories in clusters, where they can tap into pools of skilled workers, existing infrastructure, and proximity to suppliers and support. G42, an Abu Dhabi-based artificial intelligence company, is the UAE's main pusher of artificial intelligence. Last week, Nvidia announced it would work with G42 to create a climate technology lab. According to a statement, the companies will work together to develop artificial intelligence that can improve the accuracy of weather forecasting. They will rely on Nvidia's Earth-2 climate digital twin cloud platform, which is designed to help scientists and researchers better understand and predict the impacts of climate change by using high-precision simulation and visualization technologies to reduce the economic losses caused by extreme weather. In addition to Nvidia, Microsoft announced it would work with G42 to open an artificial intelligence institute, with two centers in Abu Dhabi to work on "responsible" artificial intelligence projects. The companies said the deal was based on a partnership announced in April, under which Microsoft would invest $1.5bn in G42. G42 also has a partnership with OpenAI, which is looking to expand in the region.