The UAE is courting chip giants like TSMC and Samsung to build factories there.

According to people familiar with the matter, executives from TSMC, the world's largest chipmaker, recently visited the UAE and talked about building a factory complex that would be comparable in size to TSMC's largest and most advanced factory in Taiwan, China.

Meanwhile, Samsung Electronics is also considering setting up a large chip manufacturing operation in the UAE in the coming years. It is understood that Samsung Electronics' senior leadership recently visited the UAE and discussed this possibility.

Sources familiar with the matter said that these negotiations are still in the early stages, and there is still a large uncertainty about the final outcome.

The sources also said that the chip factory project in question would be funded by the UAE. UAE sovereign wealth fund Mubadala (Mubadala), the UAE technology company MGX or participate in it.

Technology investment company MGX was organized by the Abu Dhabi Artificial Intelligence and Advanced Technology Council (AIATC) in March this year, Mubadala and artificial intelligence giant G42 are both partners in MGX.

These chip factory projects mentioned above are expected to boost the UAE's domestic technology industry. The broader goal is to increase global chip production and help lower chip prices without hurting the profitability of chipmakers, some people familiar with the matter said.

However, the cost of building these chip factories is also prohibitive. Projects of the scale being discussed in the UAE are said to involve complexes that could contain numerous factories, and the total cost could exceed $100 billion. Luckily, the UAE's sovereign wealth fund isn't short on cash. As of last year, Mubadala's portfolio was worth $300 billion alone.

Even if money isn't an issue, the built environment could be an obstacle. Because chip manufacturing requires large amounts of ultra-clean water to rinse silicon wafers etched with microcircuits, among other things, but most of the UAE's water is produced through desalination, the pressure on the country to purify water could then increase. Moreover, the UAE's current chip manufacturing supply chain is not perfect, and the scarcity of related engineering talent will also be a problem.

In addition, political factors will also be a major test. For the United States, may not be happy to see the Middle East and other places to build a large and advanced chip manufacturers. On the one hand, this will affect the United States is attracting the chip manufacturing industry back to the policy; on the other hand, it will also lead to advanced chips through the Middle East into China and other places, leading to its chip export restrictions in effect.

It is understood that TSMC and Samsung are discussing with U.S. government officials to talk about letting the U.S. supervise the production and transportation of chips from any factory in the UAE, but the relevant discussions are still in the early stages, there are many uncertainties. Discussions and progress on the factory project are likely to be slow due to political considerations.

In addition to pulling chipmakers to build factories locally, the UAE has also been keen to invest in advanced technology sectors such as artificial intelligence in recent years.

UAE entities have established ties with other large AI companies, including taking a stake in startup Anthropic for nearly $500 million and recent talks to participate in OpenAI's latest funding round. The country's leading AI company, G42, received a $1.5 billion investment from Microsoft this year.

MGX has also partnered with firms such as BlackRock and Microsoft, announcing a fund this month to invest up to $100 billion in expanding and building AI data centers.