Middle East’s big AI push lures Korean tech firms

In the wake of the artificial intelligence boom, Korean tech giants are seen swiftly expanding their foothold in the Middle East, where countries are turning their eyes to AI as a hedge to diversify their oil-centric economies.

On Monday, the Wall Street Journal reported that the world’s leading chipmakers, Samsung Electronics and Taiwan Semiconductor Manufacturing Co., were reviewing the notion of building new semiconductor manufacturing facilities in the United Arab Emirates in the coming years.

The news outlet said executives from TSMC visited the UAE recently to discuss building a plant complex that could be "on par" with some of the company's most advanced facilities in Taiwan. Senior leaders of Samsung Electronics were also reported to have visited the country recently to discuss possible chipmaking operations in the years ahead.

While the discussions are only in "early phases" and may not materialize, the news outlet added that projects on the scale discussed in the UAE could cost over $100 billion in aggregate.

Samsung refused to comment on the report. But some industry observers here are skeptical of the prospect of Samsung building a new manufacturing fab there.

"The sandy regional environment in the Middle East is not the condition for making the most intricate chips," an industry official said under condition of anonymity.

Among the hurdles is securing "superclean" water for uses including rinsing the silicon wafers that microscopic circuits are etched onto. Considering that much of the UAE's water is produced through desalination, a substantial purification process would be required, experts explain.

Still, the tech giants could develop new ties with the UAE to collaborate on AI development, given the country's strong determination to secure a superpower position through massive investments.

Korea has an advantage in the region, having built a good reputation in different industries, said Lee Kyoung-jun, a business professor specializing in AI and big data at Kyung Hee University.

"For the UAE and Saudi Arabia, the US is too expensive and China lacks quality. Korea is seen as having reasonable prices, good quality and a strong reputation for meeting deadlines," Lee said.

The Middle Eastern countries are "very willing" to lead the fourth wave of revolution, which is likely centered on AI, and expanding collaboration with them can create great opportunities for Korean companies to strengthen their AI presence, he added.

"The UAE and Saudi Arabia regimes do not change and have stable decision-making powers, so their investment can stand long-term and be steady."

The Saudi Public Investment Fund, for instance, has formed a $100 billion fund this year to invest in advanced technology, including AI, and plans to add $40 billion solely for AI firms.

Mubadala, a UAE-backed fund, has $302 billion under management, while the Abu Dhabi Investment Authority has $1 trillion under management.

Other IT giants and AI startups in Korea have also expanded their presence in the Middle Eastern region, forging new ties and building their first regional headquarters there.

Naver announced Monday that it will open its regional headquarters, called Naver Arabia, to oversee its operations in the Middle East.

"For the plan, we will be joining Saudi Arabia's Regional HQ program and collaborating with the government on a number of large-scale national projects in advanced technology sectors, while exploring various business opportunities," Naver said.

Saudi Arabia has been investing heavily in AI to cut its reliance on oil and gas. The Saudi Data and AI Authority projected that AI will contribute 12 percent to the country's gross domestic product by 2030, with the sector growing at an annual rate of 29 percent.

Naver said it is also planning to establish joint ventures with Saudi government entities for the smooth operation of their joint projects. One such joint venture under discussion is with the Saudi Ministry of Municipalities and Housing and National Housing Co. on digital twin technology projects, Naver said.

Earlier this month, top Naver executives including Lee Hae-jin, its founder and global investment officer, attended the Global AI Summit 2024 organized by the Saudi Data and AI Authority. They inked a new agreement to collaborate extensively in AI, cloud technology, data centers and robotics.

Korean AI startups Rebellions and FuriosaAI also separately inked partnerships with Aramco, Saudi Arabia's energy and chemicals firm.

Aramco said it will be working on supercomputing and AI domains with FuriosaAI. With Rebellions, the collaboration will focus on the potential deployment of the startup's neural processing unit chips in Aramco's data centers, to enhance digital infrastructure, the company said.

Wrtn Technology, another Korean AI startup specializing in generative AI, is likewise preparing to open its regional headquarters in the Middle East. The company was among 30 startups globally chosen by the Dubai Center for its AI accelerator programs last September.

A UAE economic delegation, led by its Minister of Economy Abdullah bin Touq Al Marri, also visited the startup's headquarters in Seoul last November.