TSMC's Middle East Chip Gamble: Seeking to Build a "Super Wafer Factory" in the UAE but Fate Tied to Washington

According to media reports citing informed sources, Taiwan Semiconductor Manufacturing Company (TSMC) is evaluating the construction of a large chip manufacturing plant in the United Arab Emirates (UAE) equipped with TSMC's most advanced technology, and has discussed this with officials from the administration of U.S. President Donald Trump. This plan represents a significant investment in the Middle East, seeking to capitalize on AI chip manufacturing capacity as it aims to establish a strong presence in wealthy Gulf countries such as the UAE, Saudi Arabia, Qatar, and Kuwait. However, TSMC's ambitions to build in the Middle East will only proceed with approval from Washington.

Informed sources indicate that in recent months, TSMC's management has met multiple times with U.S. Special Envoy for Middle East Affairs Steve Vitkoff and officials from MGX, a globally influential investment institution managed by the brother of the UAE president. These discussions have continued from the Biden administration's initial talks, which stalled before its term ended.

The chip manufacturing plant under discussion is a "gigafab"—a complex that includes six chip factories, similar to TSMC's chip campus being built in Arizona, but on a larger scale. The total construction cost of the facility in the UAE remains unclear. TSMC previously planned to invest $165 billion in the Phoenix chip project in the U.S., which also includes R&D and chip packaging infrastructure.

Informed sources state that the timeline for the potential UAE site remains uncertain, with construction at least several years away, if not longer. Whether TSMC proceeds with the plan depends on support from Washington.

Some senior officials from the Trump administration are concerned that the expansion of the world's largest chip manufacturer into the Gulf region could have national security and economic implications. Since Trump's first term, TSMC has been collaborating with the U.S. government on the Arizona chip factory project and has received $6.6 billion in federal funding. TSMC is also acutely aware of Washington's sensitivity to any new overseas factories.

A TSMC spokesperson stated that the company would not comment on market rumors and is currently focused on its established expansion plans. The White House and Vitkoff's office did not respond to requests for comment, nor did the UAE Ministry of Foreign Affairs and MGX.

TSMC is one of the most critical large companies in the global chip supply chain and the global economy. The company produces advanced process chips for U.S. chip giants such as Apple, Qualcomm, NVIDIA, AMD, and Broadcom. These chips serve as the "brains" of various electronic devices and are the core infrastructure supporting the efficient operation of large AI models. It is no exaggeration to say that TSMC has a stranglehold on the AI chip production capacity of leaders like NVIDIA, Broadcom, and AMD, controlling nearly all global AI chip capacity and occupying a central position in the AI computing power industry chain.

With decades of experience in chip manufacturing technology and being at the forefront of chip manufacturing technology improvement and innovation (pioneering the FinFET era and driving the 2nm GAA era), TSMC has long dominated the vast majority of global chip foundry orders, especially for the most advanced process chips at 5nm and below, thanks to its leading advanced processes and packaging technologies, as well as ultra-high yield rates Taiwan Semiconductor Manufacturing Company (TSMC) has long operated solely in Taiwan, but in recent years, due to supply chain and geopolitical risks, it has begun the process of establishing factories in Japan, Germany, and the United States.

The establishment of a factory in the UAE will open a new chapter in TSMC's overseas expansion, specifically in the Middle East, and will significantly aid the country's ambition to become a stronghold for AI chips in the region. Although the UAE currently lacks the technical workforce to operate such factories, it has ample land, energy, and funding. TSMC executives visited the UAE last year to explore the possibility of setting up a factory.

Insiders say that some officials in the Biden administration were open to the idea at the time, but on the condition that the UAE accept some strict terms that were deemed "unacceptable." These included guarantees that the U.S. would have access to a certain share of production capacity during supply chain crises, as well as the U.S. having de facto sovereignty over the factory. Negotiations ultimately stalled, and the Biden team no longer viewed the plan as a realistic option before the end of their term.

After Donald Trump returned to the White House, the UAE government attempted to advance this matter again as part of broader negotiations to strengthen AI cooperation between the two countries. In addition to seeking TSMC to establish a chip factory, UAE officials have been hoping to more easily acquire NVIDIA AI GPUs for data centers than during the Biden era, and key figures in Trump's team are eager to reach related agreements. Officials, including David Sachs, who is responsible for AI and cryptocurrency affairs at the White House, believe that the U.S. should actively export its chips to the global AI infrastructure sector and set up security barriers.

According to media reports, during recent negotiations regarding the export of chips to UAE data centers, the Gulf nation also sought U.S. support for TSMC to build a factory locally. Insiders noted that Sachs expressed a willingness to jointly develop AI during a meeting with UAE officials before Trump's visit to the Middle East earlier this month, but the TSMC topic was left for further discussion. Media reports indicated that the AI agreement announced during Trump's visit did not include U.S. support for the TSMC factory.

Insiders pointed out that some senior officials from the Trump administration in Washington remain skeptical or explicitly opposed to the plan. Their concerns mainly focus on two points: first, they worry that another overseas TSMC project could undermine its investment process in the U.S.; second, they are concerned that the UAE factory could be advantageous to countries like Iran.

TSMC's Phoenix, Arizona project is the flagship result of Washington's efforts to revive domestic semiconductor manufacturing through the 2022 CHIPS and Science Act, which provides $52 billion in direct subsidies to chip manufacturers. Officials from the Trump administration hope to avoid the UAE factory diverting funds or management resources from this project, which could jeopardize U.S. chip capacity and even the economy; TSMC has warned that if Trump implements the threatened semiconductor tariffs, the costs of the Phoenix project will increase