Abu Dhabi to set up pioneering $6bn chip plant UAE to have Mideast’s first microchip factory

Abu Dhabi to set up pioneering $6bn chip plant UAE to have Mideast’s first microchip factory

A microchip laid on a finger (File)

DUBAI (Al Arabiya)

The UAE is set to be the first country in the Middle East to set up a microchip factory which will start production in 2015, the UAE-based newspaper The National reports.

The pioneering project will cost the Abu Dhabi Government-owned Advanced Technology Investment Company (ATIC) between $6 and $7 billion.

After months of study the company decided to base the project near Abu Dhabi International Airport.

“$6bn to $7bn is the estimated cost of what it will take to build a state of the art fabricating facility anywhere in the world,” said a spokesman for ATIC.

UAE eyeing demand for high-tech products

Emerging markets in the Gulf and India have increased demand for high-tech products, an opportunity UAE is eyeing to seize.

“It’s our strong belief that Abu Dhabi will be a hub as part of the global technology network,” he said.

It is estimated that the rising demand in the sector means the semiconductor foundry industry will be worth $26.8 billion, said the technology research firm IC Insights, propelling the UAE capital on to the world stage of technological development.

The microchip project will create employment for 1,000 to 1, 5000 individuals, and will help building a talent base essential for the successful operation of chip-making plant.

Talent gap

The talent gap is a “huge concern” in the launch of high-tech ventures such as the Abu Dhabi microchip plant, said Ranjit Rajan, the research director at IDC Middle East, Turkey and Africa.

“One of the biggest concerns with establishing high-tech manufacturing in general is lack of skills. In spite of all the Government has invested in education, it takes time for this to yield results,” he said.

Rajan said there were several reasons behind ATIC’s decision to build a new plant in Abu Dhabi. One factor was the geographical position of the country between the markets in the East and West. Another was the expected increase in demand for microchips. A third was that the semiconductor business was not as labor intensive as other parts of the technology manufacturing industry, where much of the production has been outsourced to cheaper labor markets.

“The UAE can’t compete there, so it’s looking at areas that are not labor intensive but are technology intensive,” Rajan added.

He said the semiconductor business suited Abu Dhabi as it “requires a lot of investment, and not everyone can do that”.

ATIC investment expansion

ATIC has pledged $3.6 billion in the expansion capacity of its Globalfoundries microchip business, and this investment will be divided between Globalfoundries chip-making plants in Germany and the U.S.

“About $1.6 bn of that will be in Dresden, the other $2 bn will be in New York,” the spokesman said.

ATIC has gained 65.8 percent stake in Globalfoundries after it paid its U.S. counterpart Advanced Micro Devices (AMD) $2.1 billion. While ATIC’s stake has since grown to 73 percent since March, the spokesman said it did not intend to take 100 per cent ownership of Globalfoundries.

“Every new dollar we invest in Globalfoundries will, by evolution, reduce the percentage of what [AMD] owns in it. The intention is to continue to have a long partnership with AMD and not buy [Globalfoundries] outright. It’s not our intention to buy their share completely,” he said.

ATIC plans to broaden its investment focus next year. “Right now, the focus is on Globalfoundries. As you look at 2011, you will see that perspective start to broaden. You’ll see complementary kinds of investments in the technology ecosystem in 2011 and beyond,” the spokesman said.

He said design companies, intellectual property companies and those that serve chip-making plants were possible investment targets.

ATIC said the Abu Dhabi plant would “be part of the Globalfoundries network” but added that ATIC may provide auxiliary services for the facility.