Semiconductor challenges arise from Gulf crisis
The sudden escalation in regional hostilities has temporarily stalled momentum
The semiconductor industry thrives on speed, efficiency and sustained investment — strengths that the Gulf region had been steadily building until recent geopolitical tensions disrupted the landscape.
While the UAE and Saudi Arabia do not yet host large-scale semiconductor fabrication plants, both countries have been actively positioning themselves as global technology hubs. Their strategy focuses on attracting international investment while serving as a gateway to rapidly growing markets across the Indian subcontinent, Africa and Asia.
However, the sudden escalation in regional hostilities has temporarily stalled momentum. Disruptions to logistics networks, potential risks to critical infrastructure and broader geopolitical uncertainty are complicating ambitious digital transformation and artificial intelligence strategies. The UAE, for example, aims to become a global leader in AI by 2031, with plans for the technology to contribute between 20% and 35% of non-oil GDP — equivalent to roughly AED335 billion ($91 billion).
In the immediate term, the most pressing challenge is supply chain disruption. Semiconductor shipments moving through the Gulf risk delays as the “just-in-time” delivery model that underpins the chip industry comes under pressure. There are also concerns about potential knock-on effects in related supply chains, including helium, a critical material used in semiconductor manufacturing.
Shipping routes are also under strain. Any disruption in the Strait of Hormuz or damage to major logistics hubs could force cargo to be rerouted, increasing transit times and raising shipping costs.
Technology companies operating in the region have already felt the impact. Drone strikes were reportedly carried out near several Amazon Web Services facilities in Dubai and Bahrain, posing operational challenges for the US hyperscaler.
Despite the uncertainty, the Gulf remains closely linked to Asia’s semiconductor ecosystem. Major chipmakers such as Samsung Electronics and SK hynix signed agreements in October 2025 to supply memory chips for the Stargate AI data centre project in the UAE — one of the largest AI infrastructure initiatives outside the United States. Companies including TSMC and Samsung have also explored the possibility of establishing semiconductor manufacturing operations in the region.
The UAE has long maintained strategic exposure to the chip sector through sovereign wealth funds. Mubadala Investment Company, for instance, has been a key investor in GlobalFoundries, one of the world’s leading semiconductor manufacturers.
Connectivity has also been central to the Gulf’s ambitions. Airlines such as Emirates and Etihad Airways connect the region to roughly 80 Asian destinations, while global shipping flows pass through major ports including Jebel Ali Port and Khalifa Port. Saudi Arabia is also preparing to launch Riyadh Air, which is expected to strengthen the kingdom’s global connectivity alongside Saudia.
Elsewhere in the region, Iran has been developing a state-backed semiconductor industry focused primarily on military, aerospace and industrial applications. Although it lacks advanced high-volume chip fabrication capabilities, the country has invested in areas such as power semiconductors, chip design and packaging through organisations like Iran Electronics Industries. In a more stable geopolitical environment, this sector could eventually present new commercial opportunities.
For now, businesses across the semiconductor ecosystem will be hoping for a swift resolution to the conflict. A prolonged crisis could have far-reaching consequences, not only for the Gulf’s economic ambitions but also for global technology supply chains.
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