Samsung Seeking Breakthrough in Foundry, Plans Semiconductor Factory Establishment in UAE

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Taiwan's TSMC and South Korea's Samsung Electronics, the world's top two semiconductor foundries, are pursuing plans to establish new semiconductor factories in the "land of opportunity," the United Arab Emirates (UAE). These companies have long built strong human networks and maintained close cooperation in the UAE, signaling an intensifying foundry competition, analysts say.

Samsung Electronics Chairman Lee Jae-yong is attending a meeting with Sheikh Mohamed bin Zayed Al Nahyan, President of the United Arab Emirates (UAE), held at a hotel in Jung-gu, Seoul, last May.
[Image source=Yonhap News]

The American daily newspaper The Wall Street Journal (WSJ) reported on the 22nd (local time) that TSMC and Samsung Electronics have discussed plans to build large semiconductor manufacturing plants in the UAE. The CEOs of each company recently visited the UAE to review the establishment of semiconductor manufacturing facilities, and the plan is expected to materialize soon.

The media also added that funding necessary for building the factories is likely to be supported by Mubadala, the sovereign wealth fund operated by the UAE. It is known that the UAE plans to invest more than $100 billion (approximately 134 trillion KRW) in total to build semiconductor industrial complexes including factories for TSMC and Samsung Electronics.

The UAE appears to be executing an ambitious plan to establish itself as a Middle Eastern hub for artificial intelligence (AI) by attracting semiconductor production facilities from TSMC and Samsung Electronics, the world's top two foundry companies. While the UAE has long held a strong position as a global oil-producing country, it has recently been aggressively investing in semiconductors as AI has emerged as a core element of the global economy. In February, there were reports that the UAE and investors would invest a massive fund of up to $5-7 trillion in OpenAI, led by Sam Altman, drawing significant attention. Earlier, in 2008, the UAE acquired the manufacturing division spun off from AMD, which had transitioned to a fabless semiconductor design company, and took steps to establish a semiconductor factory domestically, but the plan was never realized.

Samsung Electronics is drawing attention as it attempts to open a new path in the foundry competition by building a factory in the UAE. Samsung Electronics, ranked second in the foundry market, recorded an 11.5% market share in the second quarter among the top 10 foundry companies announced recently by global market research firm TrendForce. Although this is a slight increase from 11.0% in the first quarter, the gap with first-place TSMC (62.3%) has widened to 50.8 percentage points. The company was in need of momentum to catch up. Additionally, Samsung Electronics is reportedly planning to combine foundry process technology with memory products, such as high-bandwidth memory (HBM), which are intensifying competition, as part of its strategic move.

From Samsung Electronics' perspective, the UAE is expected to serve as a springboard for growth. Samsung Electronics Chairman Lee Jae-yong has maintained a close relationship with the UAE royal family. After becoming chairman in 2022, Lee chose the Barakah Nuclear Power Plant construction site in the UAE as his first overseas business trip destination, and this year he has actively pursued activities related to the UAE. In February, just one day after being acquitted in the first trial for charges related to the unfair merger of Samsung C&T and Cheil Industries and accounting fraud at Samsung Biologics, he boarded a plane to the UAE. In May, he met with UAE President Mohammed bin Zayed Al Nahyan, who made a state visit to South Korea, to discuss investment and cooperation projects.

However, several challenges must be overcome for the UAE factory to become a reality. First is the water supply issue. It is not easy to supply the water used on-site when a semiconductor factory is built in the UAE. Semiconductor manufacturing requires ultrapure water, which is purified to remove impurities, for processes such as rinsing silicon wafers. Most of the UAE's water comes from desalinated seawater, which requires significant purification. It is reported that the UAE has not yet established the necessary facilities for this. Additionally, the companies must persuade the United States, which is concerned about semiconductor technology potentially being transferred to China through the UAE. The U.S. is reportedly worried that trade sanctions could be circumvented via the UAE, a major trading partner of China. In this regard, TSMC and Samsung Electronics are also exchanging views with U.S. government officials.