Saudi Arabia: Building a Semiconductor Ecosystem under Vision 2030
An Accessible Overview
After a recent visit to KSA in November 2024, I was fascinated by Kingdom’s focus on investment in and cultivating a local semiconductor ecosystem amidst global competition around their production. I decided to do a paper to help readers develop a better accessible understanding of the dynamic.
Saudi Arabia’s efforts to integrate into the global semiconductor supply chain are grounded in its Vision 2030 strategy, which aims to diversify the kingdom’s oil-dependent economy and position it as a leader in technology and innovation. The country’s vast energy resources, growing emphasis on advanced manufacturing, and ambitious digital transformation projects place it in a strong position to contribute to and benefit from the semiconductor industry. However, achieving this vision requires overcoming significant challenges and developing a coordinated manufacturing and use econosystem.
Energy as an Advantage for Semiconductor Manufacturing
Semiconductor fabrication plants - also known as fabs - are among the most energy-intensive facilities, requiring constant and reliable power supplies to operate at the precision needed for chip production. Saudi Arabia’s abundant energy resources—particularly its low-cost oil, gas, and growing renewable energy capacity—offer a unique advantage.
The kingdom’s investments in renewable energy projects, such as the $500 billion NEOM city and its accompanying green hydrogen initiative, signal a shift toward sustainable energy production. By aligning its renewable energy ambitions with the needs of semiconductor manufacturing, Saudi Arabia could present itself as a destination for fabs seeking energy resilience and sustainability. This could prove especially attractive to global semiconductor leaders looking to diversify their production base beyond East Asia.
NEOM and Semiconductor-Driven Digital Transformation
The NEOM project represents a cornerstone of Saudi Arabia’s technological ambitions. Envisioned as a fully integrated smart city powered by renewable energy, NEOM is designed to incorporate cutting-edge technologies, including artificial intelligence, the Internet of Things (IoT), and advanced robotics. These systems rely heavily on semiconductors to function effectively, creating a natural demand for advanced chips.
NEOM’s promise as a “living laboratory” for semiconductor-enabled innovation extends beyond its digital infrastructure. By situating research and development (R&D) facilities within NEOM or similar zones (such as the King Abdullah Science and Technology University), Saudi Arabia could establish itself as a hub for semiconductor applications, from renewable energy grids to autonomous systems. Collaborations with international semiconductor companies could also bring expertise, technology transfer, and investment to the kingdom.
Advanced Manufacturing and Industrial Zones
Saudi Arabia’s commitment to building an advanced manufacturing sector is evident in initiatives like the King Salman Energy Park (SPARK) and the Jazan Economic City. These industrial zones are designed to attract high-tech industries, including those related to semiconductors. The country’s strategy involves leveraging its existing energy and logistics infrastructure to support semiconductor assembly, packaging, and testing operations, which require less technical expertise than full-scale fabrication but are critical components of the global supply chain.
Additionally, the Saudi Industrial Development Fund (SIDF) offers financing and incentives to attract foreign investment in high-tech sectors. By targeting semiconductor firms looking to expand their manufacturing base, Saudi Arabia could position itself as a regional leader in semiconductor assembly and testing and attract global talent. But this will take time as its capacity matures.
Human Capital Development
One of Saudi Arabia’s key challenges in developing a domestic semiconductor industry is the shortage of technical expertise required for chip design, fabrication, and testing. Recognizing this gap, the kingdom has prioritized education and workforce development through initiatives like the Human Capability Development Program under Vision 2030. Partnerships with leading universities and research institutions, as well as scholarships for Saudi students in science, technology, engineering, and mathematics (STEM) fields, are designed to build the human capital necessary for a high-tech economy.
Saudi Arabia could accelerate this effort by establishing specialized training centers focused on semiconductor manufacturing and R&D. Collaborations with global chipmakers, such as Intel or TSMC, could provide training programs and internships that fast-track the development of a skilled workforce.
Strategic Partnerships and Investment
Saudi Arabia’s Public Investment Fund (PIF), a key driver of Vision 2030, has the financial resources to secure strategic partnerships with global semiconductor companies. The PIF could invest directly in chipmakers or R&D initiatives, leveraging its capital to attract technology and expertise to the kingdom. For example, partnerships with firms specializing in renewable energy-related semiconductors or AI applications could align with Saudi Arabia’s broader economic goals.
Moreover, Saudi Arabia’s growing diplomatic and trade ties with China, a global leader in semiconductor consumption and an emerging player in production, present additional opportunities. While maintaining its longstanding security and economic relationship with the United States, the kingdom could position itself as a bridge between the two superpowers in the semiconductor supply chain.
Areas to Watch
Alat, established in February 2024 by Saudi Arabia's Public Investment Fund (PIF), is a strategic initiative aimed at transforming the Kingdom into a global hub for electronics and advanced industries. A central focus of Alat is the development of a robust semiconductor industry within Saudi Arabia.
Semiconductor Manufacturing: Alat is dedicated to establishing a comprehensive semiconductor manufacturing ecosystem in Saudi Arabia. This includes the production of semiconductors across three primary technology segments: Power, Perception, and Processing. Alat
Strategic Partnerships: In March 2024, Alat entered into a partnership with the King Abdulaziz City for Science and Technology (KACST) to bolster the semiconductor industry. This collaboration focuses on localizing semiconductor manufacturing, fostering research and development, and nurturing a skilled workforce tailored to the sector's needs. Alat
Sustainable Manufacturing: Aligned with Saudi Arabia's Vision 2030, Alat emphasizes sustainable industrial solutions powered by clean energy. The initiative aims to contribute to the Kingdom's goal of achieving net-zero carbon emissions by 2060. Vision 2030
Economic Impact: By 2030, Alat aspires to create approximately 39,000 direct jobs and contribute over $9.3 billion to Saudi Arabia's non-oil GDP. This endeavor is part of a broader strategy to diversify the national economy and reduce reliance on oil revenues.
Challenges to Saudi Arabia’s Semiconductor Strategy
While Saudi Arabia has made significant progress in laying the groundwork for a semiconductor ecosystem, several challenges remain:
High Barriers to Entry: Semiconductor fabrication requires advanced expertise, precision engineering, and significant capital investment. Entering this sector will take years of sustained effort and collaboration.
Global Competition: Countries like Taiwan, South Korea, and the United States dominate the semiconductor industry, while other emerging players, such as India and Vietnam, are rapidly developing their capabilities.
Geopolitical Risks: Saudi Arabia’s balancing act between the U.S. and China could complicate its semiconductor ambitions, particularly as export controls and technology restrictions intensify.
Opportunities for Saudi Arabia in the Global Semiconductor Ecosystem
Despite these challenges, Saudi Arabia has several pathways to integrate itself into the global semiconductor supply chain:
Regional Leadership: By leveraging its energy resources, advanced industrial zones, and digital transformation projects, Saudi Arabia can position itself as the GCC’s semiconductor leader, setting an example for neighboring states.
Collaborative Ecosystem: Fostering partnerships with global technology firms and GCC peers could create a regional semiconductor hub that combines energy, logistics, and innovation.
Focus on Applications: Instead of competing directly in advanced chip fabrication, Saudi Arabia could focus on semiconductor-dependent applications, such as renewable energy systems, autonomous vehicles, and AI technologies, aligning with its economic diversification goals.
Other Recent Investments
National Semiconductor Hub: In June 2024, Saudi Arabia launched the National Semiconductor Hub, aiming to attract 50 semiconductor firms by 2030 to build design expertise within the kingdom.
AI Investments: The Saudi government is in discussions with venture capital firms to establish a $40 billion fund dedicated to artificial intelligence initiatives, which include semiconductor technologies.
Additional Reading:
Saudi Vision 2030 Official Document. Vision 2030. Government of Saudi Arabia, 2016. https://www.vision2030.gov.sa/en.
"Saudi Arabia's Expanding Role in Advanced Technologies." Diplomatic Courier, 23 March 2023. https://www.diplomaticourier.com/posts/saudi-arabias-expanding-role-in-advanced-technologies.
"Saudi Arabia Launches 'National Semiconductor Hub' to Drive Industry Localization." Arab News, 15 June 2024. https://www.arabnews.com/node/2524301/business-economy.
"Saudi Arabia Makes Significant Moves in Semiconductor Sector with Strategic Investments." Arab News, 10 September 2024. https://www.arabnews.com/node/2566001/business-economy.
"From Vision to Reality: Saudi Arabia’s Bold Tech Strategy for 2030." Edge Middle East, 7 February 2024. https://www.edgemiddleeast.com/business/from-vision-to-reality-saudi-arabias-bold-tech-strategy-for-2030.
"Saudi Arabia's National Semiconductor Hub: Attracting SR1 Billion Investment and Establishing 50 Companies for Chip Design." Saudi Press Agency, 25 July 2024. https://saudipress.com/saudi-arabia-s-national-semiconductor-hub-attracting-sr1-billion-investment-and-establishing-50-companies-for-chip.
"Saudi Arabia's Tech Transformation: Embracing AI and Semiconductors for a New Era." Al Arabiya English, 26 January 2024. https://english.alarabiya.net/News/saudi-arabia/2024/01/26/Saudi-Arabia-s-tech-transformation-Embracing-AI-and-semiconductors-for-a-new-era.
"Saudi Arabia Boosts Chip Ambitions, Launches Semiconductor Hub." MIT Sloan Management Review Middle East, 20 February 2024. https://www.mitsloanme.com/article/saudi-arabia-boosts-chip-ambitions-launches-semiconductor-hub/.