Saudi Arabia is in talks with Taiwan’s Foxconn, the largest assembler of Apple iPhones, to jointly build a $9 billion factory as it tries to diversify its economy away from oil.
The plant would make microchips, electric-vehicle components and electronics, the Wall Street Journal reported, citing unidentified people. The Saudi kingdom is reviewing an offer from the firm, formally known as Hon Hai Precision Industry, to build it in Neom,
a desert city-state that has faced skepticism as a manufacturing site due to limited logistics and access to power and water.
Saudi Arabia is trying to create an industrial sector as part of a plan by Crown Prince Mohammed bin Salman to reshape its oil-dependent economy as the world turns to renewable energy. Foxconn, meantime, is seeking sites outside Asia as tension rises between the U.S. and China.
Saudi authorities and Foxconn didn’t respond to requests for comment from the Journal.
Riyadh wants the company to guarantee that it would direct at least two-thirds of the foundry’s output into Foxconn’s existing supply chain to ensure it will have buyers and that the project is profitable.
Foxconn wants the Saudis to give large incentives, including financing, tax holidays and subsidies for power and water. They could offer direct equity co-investment, industrial development loans, low-interest debt from local banks and export credits to compete with other jurisdictions that Foxconn might consider.
Besides Saudi Arabia, Foxconn is also talking with the United Arab Emirates about potentially siting the dual-line foundry for surface-mount technology and wafer fabrication there.
Final Saudi approval for the Foxconn deal lies with Prince Mohammed.
The kingdom has struggled to attract foreign investment after Western companies withdrew in the wake of the 2018 killing of journalist Jamal Khashoggi.
Armed with a $500 billion sovereign-wealth fund, Saudi Arabia aims to relocate international supply chains to the kingdom and acquire a market share in supply-chain components, according to the Journal. The strategy has been complicated by its small domestic market, high labor costs and unpredictable operating environment.
In 2019, it took a majority stake in Lucid Motors Inc., which recently inked a deal to open its first manufacturing plant outside the U.S. in Saudi Arabia.
[Wall Street Journal] – Dana Bartholomew
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