The goal is to draw 50 firms to the kingdom by 2030 and the focus will be on simple chips and manufacturing will be done internationally. Image Credit: Shutterstock

Saudi Arabia launched a new strategy aimed at making itself a hub for semiconductor design as the country looks to develop the industry as a means to diversify its economy away from crude oil.

The kingdom announced the National Semiconductor Hub to develop so-called fabless chip companies that design new semiconductors.

The goal is to draw 50 firms to the kingdom by 2030 and the focus will be on simple chips — rather than cutting-edge and politically-sensitive technologies — and manufacturing will be done internationally, at least in the medium-term, according to Naveed Sherwani, head of the new hub.

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"We're not trying to replace Nvidia or challenge Intel," said Sherwani, who spoke to Bloomberg on the sidelines of the Future of Semiconductors Forum in Riyadh. "We want to do humble beginnings. Once we have built a base, then we can talk."

The initiative underscores the increasing importance of semiconductors for Saudi Arabia as Crown Prince Mohammed bin Salman seeks to tap into new industries that will help the country draw in more revenue from non-oil activities.

The kingdom more broadly is vying for regional leadership in advanced technology, with the hopes of creating data centers, artificial intelligence companies and semiconductor manufacturing.

Alat, an investment firm backed by $100 billion in capital from the sovereign wealth fund, was launched in February with a mandate to invest in building new manufacturing hubs that back those ambitions and to find partners for semiconductors.

Ross Jatou, president of semiconductors at Alat, said the company plans to produce one million wafers by 2030 that will help generate revenue of about $10 billion.

That may set Alat up to eventually be involved in conversations around how new chip design companies in Saudi Arabia can manufacture at home.

For now, the focus for the new hub will be on relocating and establishing new fabless chip firms, according to Sherwani. Three have already signed up for the program and 10 others have asked to join, he said.

The push comes even as US officials have told their Saudi counterparts that they need to choose between Chinese and American technology as they aim to build out the local semiconductor industry. The head of Alat recently said the fund would divest from China if it were asked to do so by the US.

"We want to make this place feel like Silicon Valley," said Sherwani, who is also the chief executive officer of Rapid Silicon, an AI technology solutions provider. "We've freed space. We provide them all kind of incentives for salary, for relocation. In total there are 10 incentives we will provide to anybody that wants to start a company here."

Those include access to capital through a new fund that will be backed by 1 billion riyals ($267 million) in Saudi money. Sherwani said that companies that hire Saudis will also be eligible to have half of those employees' salaries paid for two years.