The Peter Zeihan Podcast Series - Should the UAE Invest in a Tech Sector? || Peter Zeihan

Episode Date: September 9, 2025

The UAE is pouring money into building a tech sector, focusing on semiconductor fabrication plants and data centers.Join the Patreon here: https://www.patreon.com/PeterZeihanFull Newsletter: https://mailchi.mp/zeihan/should-the-uae-invest-in-a-tech-sector

Hey all, Peter Zion here, coming to you from Colorado. Today we are taking a question from the Patreon page, and it's specifically about tech and some of the things that are going on in the Persian Gulf. Specifically, a number of the Persian Gulf Arab states, most notably the United Arab Emirates, are splashing around a lot of cash and trying to build a tech industry. There are two forms that is taking. The first is they're trying to get kind of like what happened in Arizona, a high-end semiconductor fabrication facility, and second, getting a data center, two very different pieces of technology that have very different requirements. So let's start with the semiconductor fab facility. Semiconductor fabs, like the kind that we now have outside of Phoenix, the one that's being

built outside of Columbus, Ohio, the ones that are in Taiwan, are incredibly sophisticated. And what people tend to forget is that these are not just like assembly locations. They bring some of the most advanced machining into one place. They bring some of the most advanced materials under one place. They bring some of the most sophisticated designs in one place. And basically, you've got something in excess of 10,000 pieces that come together on the floor of the fab. It's not simply an issue of making a semiconductor. You have a high-end machine that's called a extreme ultraviolet machine that does etching, and you have to dope.

Well, let me back up. I just tell you the whole thing. The whole process. Step one. You buy some really, really expensive sand, silicon dioxide that's just pure, pure, purified, usually only comes from the United States. You melt it down into that. You put in a seed crystal, and over the course of several days, sometimes weeks, you grow it into a crystal that weighs more than a car. You then slice it laterally into wafers, and then you take those wafers into your semiconductor fab facility, because these are all done in different places. And then you hit it with lasers that come out of the e-e-visom, you dope it, you bake it, you etch it again, you dope it, you bake it, you bake it, you bake it, you,

You etch it again, you do that, you know, 10 times, 20 times, 90 times. And eventually, you get a bunch of semiconductors on your disc. You then break those into pieces and test them and eventually incorporate them into actual hardware, like say a motherboard or a flash drive, and then goes into the intermediate products trade. So, fabs are essential, absolutely. But they are one step in an entire process that has thousands of steps. They just happen to be where a lot of these steps come together. They are not the high value-added part of the process.

That's going to be almost everything else. Does it mean that they're not important? No, it doesn't mean you can do it with unskilled labor. No. Does the United Arab Emirates have skilled labor? No. So, if the UAE were to pay the $20, $25 billion it takes to build a top-rated facility, then they would have to do exactly the same thing that the Chinese have had to do.

Import the labor to make it run. The most exacting work that is done in a high-end fab facility is the quality checks at every step. And that is something that if the chips are above, say, 28 to 30 nanometers, the Chinese can't do it at all. And the idea that the UAE could do it is absolutely laughable. So if they did build this, no one would want to probably work on the UAE unless the pay was absolutely immense. And you would have basically a white element project generating very error-prone high cost. items. That's probably not going to happen. What is less unlikely would be, say, a data farm or a data center. This doesn't require nearly the maintenance work. It's not nearly as

worker intensive. Basically, you get a bunch of GPUs. You build into something called a module with a bunch of DRAM and NAND chips. Now, DRAM are memory chips and NAND are long-term memory chip. So flash memory, short term, needs power. NAND is a long-term memory, not as quick, doesn't need the power. And then GPU is all the processing. So you basically build a module, and then you put a bunch of them into server blade. You put a bunch of server blades in a rack. And then you put hundreds of racks in a room with really good cooling. And then you just let it run. Data cables coming in, data cables going out, traffic comes and goes. You can house AI algorithms on it. You can house your AOL account on it, whatever you want. Two problems. Number one, all of the hardware is really, really expensive,

and demand for the high-end chips is very, very high. So most server farms do not have the sub-7 nanometer chips that are, for example, necessary for most AI applications. Second problem, latency. As a rule, you want your data center to be as close to your demand as possible. So the United States of various qualities has about 10,000 data centers. And we try to put them either right outside of a population center or somewhere roughly in the middle of the country. for a trans coast traffic. So the idea that the UAE with a couple first world cities is going to need a couple data centers makes perfect sense.

The idea that it's going to be a global information hub, no, because there are no countries near it that generate the volume and quality of data that would want to go all the way to Dubai and Abu Dhabi before then moving on. So if the Emirates decide to go down this path, this won't be nearly as much of a white elephant project as, say, building a fab facility,

but they would have to subsidize it in order to get the high-end chips, and it appears that's exactly what they're doing. There is one of what's supposed to be one of the world's most advanced data centers under construction in the United Arab Emirates right now. If everything goes to plan, rarely does with these things.

If everything goes to plan, it'll become operational before the end of 2026. But it will be in a very expensive place to operate because the single largest expense for data centers is cooling. It's electricity. I don't know if you knew this, but the UAE is in a near equatorial desert. So the operational costs will be massive.

And while labor is not a huge component of a data center when it comes to costs, they still don't have the labor force to do even that. So if they do this, they seem to be doing it, it will be very expensive, and it'll just kind of be a feather in their cap. It won't be actually something that a lot of people want to use.