Pioneering chip plant in Abu Dhabi to cost at least $6bn

ATIC reveals bill for first microchip factory in the Middle East, designed to tap into rising demand for semiconductors.

The Abu Dhabi Government-owned Advanced Technology Investment Company (ATIC) is to spend between US$6 billion and $7bn building its microchip manufacturing plant in the emirate. The move is part of the company's efforts to tap into rising demand for semiconductors. News of the multibillion-dollar price tag comes just four months after the company selected a site for the plant near Abu Dhabi International Airport, which will become the first microchip factory in the Middle East when it begins production in 2015.

"$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. ATIC's planned spending on the plant comes on top of the $3.6bn the company has pledged to expand the capacity of its Globalfoundries microchip business. That investment will be divided between Globalfoundries chip-making plants in Germany and the US. "[About] $1.6bn of that will be in Dresden, the other $2bn will be in New York," the spokesman said.

In March, ATIC paid its US counterpart Advanced Micro Devices (AMD) $2.1bn for a 65.8 per cent stake in Globalfoundries. While ATIC's stake has since grown to 73 per cent since March, the spokesman said it did not intend to take 100 per cent ownership of Globalfoundaries. "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-makingplants 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. The launch of a factory will propel the UAE capital on to the world stage of technological development, the spokesman said. "It's our strong belief that Abu Dhabi will be a hub as part of the global technology network," he said, pointing to the increasing demand for high-tech products from the emerging markets in the Gulf and India.

Rising demand in the sector means the semiconductor foundry industry will be worth $26.8bn this year, said the technology research firm IC Insights. Building a talent base in the UAE will be essential to the successful operation of a chip-making plant, which would typically employ 1,000 to 1,500 employees, ATIC said. 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. Mr 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 labour intensive as other parts of the technology manufacturing industry, where much of the production has been outsourced to cheaper labour markets.

"The UAE can't compete there, so it's looking at areas that are not labour intensive but are technology intensive," , Mr Rajan said. He said the semiconductor business suited Abu Dhabi as it "requires a lot of investment, and not everyone can do that". @Email:[e-mail]