The United Arab Emirates (UAE) has sought to become a globally competitive economy since its founding in 1971. The country’s oil wealth and forward-thinking approach has allowed it to progress toward this goal through capital-intensive economic initiatives, social programs and legal reforms.
The UAE’s leadership considers economic diversification a necessity in order to protect the country’s economy from oil-price fluctuations and to diversify sources of income. Sheikh Zayed bin Sultan Al Nahyan, the founder of the UAE and ruler of Abu Dhabi until his death in 2004, believed that “future generations will be living in a world that is very different from that to which we are accustomed. It is essential that we prepare ourselves and our children for that new world.” This diversification is needed as public sector employers have become saturated, with some ministries spending as much as 92% of their budgets on salaries. Given these factors, Sheikh Zayed announced his intention to transition the country from an energy-based economy to a knowledge-based economy, dependent not on natural resources but on competitive, highly educated human capital.
To achieve this goal, the Abu Dhabi government established the Mubadala Development Company in 2002. This 100% government-owned investment vehicle is intended to act as a catalyst for economic diversification. Since its founding, Mubadala has invested in multiple industries, including aerospace, healthcare, information and communications technology, oil and gas, real estate and infrastructure and renewable energy. In 2008, the company also helped to launch the Advanced Technology Investment Company (ATIC) as a means of entering the advanced technology sector.
ATIC has focused its investment on semiconductors — silicon wafers that act as the brains of every electronic device. “The semiconductor industry is exactly the industry [Abu Dhabi’s] leadership was looking for — highly knowledge intensive, globally competitive, highly productive and integrated into the global economy,” ATIC’s CEO Ibrahim Ajami said in an interview. In 2008, ATIC and Mubadala agreed to invest jointly in Advanced Micro Devices (AMD), a leading semiconductor company, as part of a joint venture designed to create a new semiconductor manufacturer out of AMD’s former manufacturing arm in Dresden, Germany. The new company became known as GlobalFoundries. A year later, ATIC acquired Singapore-based semiconductor manufacturer Chartered Semiconductor and integrated its operations into GlobalFoundries to create the world’s first globalized semiconductor fabricator. After steadily increasing its stake in the company, ATIC bought out AMD and took a 100% share in GlobalFoundries in March 2012.
In 2012, ATIC and GlobalFoundries opened a new foundry, Fab 8, in Malta, New York. The US$4.6 billion fabrication plant is the world’s most advanced semiconductor production facility. It currently employs more than 1,300 workers and plans to expand to at least 1,600 by year’s end. To develop a pool of potential employees for these positions, GlobalFoundries created training programs at more than 17 local community colleges. At the same time, the company invested in advanced semiconductor research and development in the New York region, partnering with IBM and members of its chip development alliance to expand new chip technology at the College of Nanoscale Science and Engineering at the University at Albany, New York. As a result of these and other initiatives, Forbes ranked the Albany-Schenectady area, where Fab 8 is located, as the fourth best city for jobs in America in 2012.
The ability to invest in a capital-intensive industry at a time of global financial constraints has enabled ATIC and GlobalFoundries to realize strong growth in market share. However, ATIC’s investment in the semiconductor industry targets more than just financial returns. Jobs in this industry are in line with the types of employment opportunities the UAE government has been aiming to create for its citizens: stable, well-paid, semi- and high-skilled labor jobs, as well as managerial, design and engineering positions.
ATIC and GlobalFoundries would like to replicate their economic impact in New York at home in the UAE. In 2010, less than two years after GlobalFoundries’ founding, ATIC’s Ajami announced the future establishment of a production facility for state-of-the-art, 300-mm silicon wafers in Abu Dhabi and revealed the company’s intention to make GlobalFoundries and this facility the “nucleus” of a new local technology cluster.
In February 2011, Mubadala announced that it would fully acquire ATIC. This acquisition gives ATIC access to the additional resources and capital “needed to drive the creation of innovative industries for the benefit of Abu Dhabi and the UAE,” according to a statement by Mubadala COO Waleed Al Muhairi. However, both ATIC and the UAE government as a whole recognize that investment in human capital is a prerequisite for success.
Human Capital Development
To prepare for the development of a high-tech cluster and a GlobalFoundries manufacturing facility in Abu Dhabi, ATIC and other local entities have developed a range of human capital initiatives, from primary and secondary school education to vocational training and graduate studies. Each program aims to motivate Abu Dhabi’s young population to pursue careers in science and technology and to give them the knowledge and skills to do so.
Beginning in 2009, ATIC partnered with the Abu Dhabi Education Council (ADEC) to create the Al Nokhba (“the elite”) program, which helps undergraduate and master’s level science and engineering students pursue careers in the semiconductor industry. This program initially selected 20 students studying science or technology at local universities for a summer internship program at GlobalFoundries’ Dresden fabrication facility. It provided a rare opportunity for these interns to gain experience with applied sciences and manufacturing. In 2010, the program grew to 60 students — half men and half women — and was expanded to include the Al Nokhbascholarship, which funds undergraduate or graduate studies for students in the Al Nokhbaprogram.
This effort has already produced results. One former Al Nokhbastudent has invented a new way of integrating microchips into prosthetic limbs, giving the disabled increased mobility. Another graduate, now working at GlobalFoundries full-time, has invented a microchip-powered device that airports may distribute to the elderly or those with known illnesses. In an article published in The National, Khaled Al Shamlan, ATIC’s executive director of strategy and operations, observed that “the drive of the young talent in the Al Nokhba program, their hard work and active engagement in the learning process, as well as the genius displayed by those who have gone on to innovate after graduation, is the exact embodiment of what we hope to achieve through our human capital program.”
Al Nokhbais only one of ATIC’s many human development programs. To increase the pool of students studying science at the undergraduate and graduate levels, ATIC introduced Techquest in 2012. This program targets eighth- and ninth-grade Emirati students and is designed to expose them to potential careers in science and technology. “Our program presents a remarkable opportunity to spark an interest in science amongst this nation’s future technology leaders,” Hanan Harhara, manager of human capital at ATIC, noted in a press release. “We are presenting a snapshot of the different subjects and career options related to [science, technology, engineering and math] through insightful lectures, hands-on workshops, collaborative group activities and fun field trips.”
The outreach and promotion of science continues for students at the high school level. Working with ADEC and the American University of Sharjah, ATIC runs the “Summer of Semiconductors” program for ninth through twelfth grade students. This program exposes the students to modern applications of science and technology through lectures, workshops, group activities and field trips. Students in the ninth and tenth grades choose between studying the uses of and production processes for semiconductors or building a robot in preparation for the World Robotics Olympiad. Eleventh and twelfth grade students choose between a focus on microelectronics, such as semiconductors, and a multidisciplinary course covering a range of fields, including microelectronics, robotics and gaming.
At the post-secondary level, in addition to the Al Nokhbascholarship program, ATIC has spearheaded a vocational program at the Abu Dhabi Polytechnic Institute that offers students with a secondary school degree a chance to obtain a higher diploma in semiconductor technology. The company has also teamed with the Masdar Institute in Abu Dhabi to create a master’s in microsystems degree program. As part of this program, ATIC plans to build a small “clean room” to give degree students and researchers exposure to the environment in which semiconductors are produced.
The Role of Women at ATIC
ATIC has also made substantial investments in developing its staff of female employees. Involving qualified women in previously male-dominated divisions, such as finance and technology, is the first step in creating a more equal work environment. As a result of this supportive work environment, many female employees report high job satisfaction and view opportunities at government-owned enterprises such as ATIC as a way to fulfill their responsibilities as citizens of the UAE.
The move to support female professionals reflects the UAE’s broader support for women. In an interview, the late Sheikh Zayed noted: “If we lose our female population, we lose half our economy.” The UAE constitution stipulates that women are equal to men in all facets of professional life. In addition, the UAE Federal Labor Law has an equal pay clause, stating “a woman shall be paid the same wage as a man if she performs the same work.” The desire to create a more cohesive society, diversify household incomes and promote women’s involvement led Abu Dhabi’s Economic Vision 2030, a long-term roadmap for economic development in the emirate, to emphasize the role of women. The Vision affirms that “the government wishes to maximize participation of women in the workplace.” Women are also being integrated into political life through appointments to the Federal National Council — a gradual process intended to allow society to adjust to the presence of female politicians. Of the 40 current council members, eight are women.
While female employees at ATIC admit to facing occasional gender bias and negative societal pressure, many of them agree that firm and government policies have been supportive of their efforts. However, they do see a need for society to change its mentality, and they understand it may take generations for this to happen. Their ability to focus on the larger, long-term goal for Abu Dhabi and the government’s tangible actions has allowed them to channel their frustrations into hope and optimism for a better future.
The outcome of Abu Dhabi’s investment in the global semiconductor industry and in the development of local human capital is unclear. In a 2012 filing, Mubadala reported that ATIC and its main asset, GlobalFoundries, had an accumulated deficit of US$1.12 billion at the end of 2011 and also had losses in the previous two years. In addition, the government-investment company could not guarantee that ATIC would be profitable in the near future.
While the government continues to invest in establishing a semiconductor-technology hub within the emirate, construction of the Abu Dhabi fabrication facility, originally set to open in 2015, has been postponed, reportedly due to the uncertain global economic outlook. At the same time, Ahmed Al Bloushi, senior member of the R&D unit at ATIC, has reported that there is no rush to open the foundry. “We will wait until the time is right and the local population is ready to work in these jobs,” he said in an interview.
The announcement of the fabrication plant has also caused a geo-strategic stir. Given the importance of semiconductors to military and other strategic technologies, security analysts in the U.S. and elsewhere, who were interviewed for a Fox News story, have raised flags about the prospect of a large portion of the world’s supply being produced in the volatile Middle East.
Given these factors, it is impossible to say when or if Abu Dhabi’s vision of becoming an Arab Silicon Valley will be realized. However, it is clear that ATIC has already had an impact on life in and outside Abu Dhabi. Worldwide, GlobalFoundries manufactures more than 17% of worldwide contract-manufacturing chips. At home, the company has begun to change mindsets, not only among Abu Dhabi’s youth through its outreach initiatives, but also among the company’s own employees. GlobalFoundries’ professional culture and aspirational goals have inspired its employees. “After working at ATIC, I could work anywhere,” said Marwa Abdul-Rahman, an Emirati associate in ATIC’s mergers and acquisitions department. “The experience here is unparalleled in the UAE.”
Originally published by Knowledge@Wharton January 2, 2013 as part of The Lauder Global Business Insight Report 2013: Building Blocks for the Global Economy.