RIYADH: Saudi Arabia is rapidly emerging as a major player in the global semiconductor industry, with ambitious efforts aimed at gaining a stronger foothold in this vital sector.
Semiconductors, an essential component for powering AI software, electric vehicles, smartphones and a range of other cutting-edge technologies, have spawned fierce competition among countries and tech giants. Currently, Taiwan leads the world in semiconductor foundry capacity with 46% of the world’s total, followed by China, South Korea, the United States and Japan.
This concentrated supply chain has prompted Saudi Arabia to invest heavily in developing domestic semiconductor manufacturing capabilities under its Vision 2030 initiative, with the aim of reducing dependency and promoting economic diversification.
“Semiconductors are the foundation of modern technology and essential to economic growth, currently a $500 billion industry that is projected to reach $1 trillion by 2030,” Frederic Ozer, partner and head of Oliver Wyman’s automotive and manufacturing industry practice for India, Middle East and Africa, told Arab News in an interview.
He added: “For the modern economy, semiconductors are the basis for nearly all electronic devices in key sectors such as computing, communications, energy, automotive and healthcare.”
Ozea explained that these technology components will drive innovation, advancing AI, 5G and autonomous vehicles with significant improvements in speed, efficiency and capabilities.
As a strategic asset to our national security, semiconductors play a vital role in defense systems and infrastructure, with applications ranging from communications equipment to advanced weaponry. Economically, like oil in an energy-driven economy, semiconductors drive growth, jobs and global competitiveness.
At the forefront of Saudi Arabia’s semiconductor push is the $100 billion Arat project, led by the kingdom’s wealthy fund, which aims to meet growing domestic demand and position the country as a global hub for semiconductor innovation and production.
Alat is working with King Abdulaziz City for Science and Technology to focus on developing the local talent and infrastructure needed for semiconductor design and manufacturing.
“The semiconductor industry represents a transformational opportunity for the Saudi Arabian industrial sector,” emphasized Amit Midha, CEO of Alat. “Our partnership with KACST is crucial in advancing our capabilities in key semiconductor technology areas such as power, cognitive and processing.”
Saudi Arabia’s semiconductor ambitions underscore a strategic imperative beyond diversifying its economy to strengthen national sovereignty and technological independence.
To this end, Saudi Arabia has launched a 1 billion riyal investment fund dedicated to semiconductor companies and established a national semiconductor hub. At least 50 semiconductor design companies are expected to be established in Saudi Arabia by 2030 and will be backed by a deep tech venture capital fund of more than 1 billion riyals ($266 million) as part of the new tech hub.
These efforts will be complemented by efforts to attract global expertise through targeted residency programs aimed at accelerating knowledge transfer and capacity building.
“Saudi Arabia has inherent competitive advantages to support a successful semiconductor industry,” Ozeir noted. “The country also has competitive utilities and infrastructure, providing reliable energy, clean water and vast land areas. Political stability and government support are also key, with a stable regulatory environment that includes direct incentives and efficient processes,” he emphasized.
Ozeir explained that to develop the sector, the need must be addressed and the right enabling environment must be created for specialist talent such as process engineers, material scientists and precision engineers. “Furthermore, as domestic demand for semiconductors is still in its infancy, the country needs to develop an industrial ecosystem and ensure access to international markets,” he said.
Saudi Arabian economist Talat Zaki Hafiz highlighted the wider economic benefits, saying: “The semiconductor industry will contribute significantly to the Kingdom’s economy and overall industrial sector, especially as Saudi Arabia is involved in and promotes multiple industries that require significant amounts of semiconductors.”
For example, Saudi Arabia is expanding into high-tech industries that require large amounts of semiconductors, such as electric vehicles, helicopters, drones and advanced ships. This shift will drive greater demand for semiconductors and aligns with Vision 2030’s economic diversification and industrial development goals, Hafiz said.
The urgency of Saudi Arabia’s semiconductor push has been highlighted by disruptions to the global supply chain, exposing vulnerabilities in the dependent economy. By developing a robust semiconductor ecosystem, Saudi Arabia aims not only to ensure the security of its supply chain but also to emerge as a major exporter of high-tech components in the global market.
“Our collaboration with KACST is a cornerstone of Saudi Arabia’s journey towards semiconductor leadership,” said Munir bin Mahmoud Al Dosouki, president of KACST. “It underscores our commitment to foster a sustainable industrial ecosystem based on advanced technologies and clean energy sources,” he added.
Ozeir outlined his strategic approach for the coming years: “Saudi Arabia should adopt an integrated, cluster-based approach to developing its semiconductor industry. Initially, this will involve expanding capacities for front-end manufacturing, backward integration into wafer production and design, and in the medium term, forward integration into cutting-edge manufacturing and back-end manufacturing.”
The Oliver Wyman partners noted that Saudi Arabia could implement support policies similar to those of major semiconductor countries, using a combination of direct FDI subsidies, low-interest loans, investment tax credits and sovereign wealth funds to encourage international investment.
“Special visa regimes, financial incentives for foreign workers with specialized knowledge and elite university programs in semiconductor-related fields will be essential to drive this development,” he added.
Saudi Arabia’s proactive approach in the semiconductor sector reflects its strategic vision to strengthen its international competitiveness.
“Saudi Arabia is the largest economy in the Middle East and the fastest growing economy in the Arab world and internationally, so it can easily become a competitive player in the global semiconductor market,” Hafiz said.
“We have the necessary resources in semiconductor manufacturing that can aid and support our efforts to be competitive and gain leadership in the global semiconductor market and industry,” he added.
Despite having the world’s largest oil reserves and emerging as a global energy superpower, Saudi Arabia is actively pursuing clean energy and building capacity, as well as reducing the carbon impact on both humanity and the environment.
Hafiz highlighted the various efforts the Kingdom is undertaking, including the implementation of a circular carbon economy and the Saudi Green Initiative, to reach its goal of zero neutrality by 2060. He expressed confidence in the Kingdom’s ability and ultimate success in integrating sustainable practices and clean energy sources into the semiconductor manufacturing process.
As global demand for high-performance chips continues to grow, Saudi Arabia’s proactive approach underscores its determination to assume a key position in the global semiconductor industry. “The Semiconductor Future Forum announced several new national initiatives, confirming Saudi Arabia’s desire to move forward towards developing and localizing this industry,” Hafiz said.
One such initiative is the National Semiconductor Capability Center, which economists say aims to “develop and localize the electronic chip industry in Saudi Arabia.”
In conclusion, Saudi Arabia’s strategic investments and partnerships in the semiconductor industry reflect a bold vision to secure the country’s economic future and demonstrate its technological prowess on the global stage. As the country continues to improve its semiconductor capabilities, it is poised to play a key role in driving innovation around the world and shaping the next generation of high-tech industries.
Hafiz expressed optimism about the future: “I believe Saudi Arabia has a bright future for the semiconductor industry over the next decade, as the country has made efforts to increase its capacity to develop the domestic semiconductor industry by nurturing local talent and relying on years of expertise, especially in high-tech related industries.”
