The UAE could be squeezed in a US-China tech tussle

Wam

During President Donald Trump’s second term, due to start in January, Gulf countries could face increasing pressure to adopt US technology. 

The US is expected to promote its semiconductor and artificial intelligence products heavily in the hope of outpacing China in global markets and securing dominance in the tech race.

In the current climate the US has to walk a fine line between increasing GCC uptake of its chips and software while ensuring the Middle East does not become a technological back door for China.

In 2022 the US imposed restrictions on the sale of AI chips to China, a decision that adversely affected several US companies, including processor designers Nvidia and AMD.

These restrictions dealt a significant blow to Chinese technology companies, limiting their access to advanced semiconductor manufacturing equipment essential for producing high-performance AI chips.

Last week it was reported that the world’s largest contract chipmaker TSMC (Taiwan Semiconductor Manufacturing Company) plans to stop selling certain AI chips to Chinese companies. TSMC seems to be acting preemptively to avoid clashes with the incoming US administration.

While Trump’s return to the White House is generally regarded as positive news for the Arab Gulf states, the upcoming issue of chips and technology could be a thorny one.

As a transactional leader focused on deals, Trump aligns well with the monarchies in the Gulf, whose influence stems in part from commercial statecraft. 

The UAE, in particular, has evolved from a small state on the periphery of the Middle East into a major regional player, leveraging power and influence through strategic investments.

But the next few years could bring into play potentially fraught US-UAE diplomatic challenges around technology.

Trump is likely to encounter resistance from Abu Dhabi’s leaders, who are acutely aware of their leverage

One of the only clearly established principles of the Trump administration is the need to contain China, both strategically and economically. This great-power competition, especially in the high-tech sector, puts the UAE in a more challenging position than other GCC states.

The UAE has formed strategic partnerships in Chinese technology with tech companies, data centres and engineers. Driven by its ambition to become a global leader in AI by 2031, the UAE has mobilised its sovereign wealth funds and state-owned companies to invest billions in its burgeoning high-tech sector. 

As a result the UAE has become an important hub in a highly interconnected tech ecosystem that, for now, lacks any single dominant player.

The Trump administration is likely to push partners harder than previous administrations for strategic separation from China, particularly regarding critical national infrastructure and technology. 

The new president may seek to disrupt global technology ties, framing the choice as a stark one: “You are either with the US or against it.”

These binary choices may clash with the UAE’s vision, which views the tech sector not only as a growth area to diversify beyond hydrocarbons but also as a means to position itself as a globally relevant centre. 

The UAE’s tech investments are part of a broader strategy to create interdependence, with the aim of channelling global data and capital flows in the tech industry through the country.

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More than anything, the UAE views data as a future global currency. Therefore, its tech strategy is built on unrestricted growth and connectivity, rejecting binary East-versus-West perspectives – an approach that aligns with Beijing’s outlook as much as Abu Dhabi’s.

Trump is thus likely to encounter resistance from Abu Dhabi’s leaders, who are acutely aware of their leverage within this interconnected ecosystem. 

The UAE wields substantial financial resources to invest in AI and data technology ventures, not only in Silicon Valley but also across Asia, including China.

That said, the UAE has a credible track record of bargaining, even with major powers. It may choose to leverage its position to pivot further toward China if Washington proves inflexible.

April’s G42 deal with Microsoft, which mandated the disentanglement of parts of Emirati infrastructure from Chinese networks, could be seen to illustrate the limits of US coercive power in this area. 

Despite G42 itself cutting ties with Chinese partners, numerous companies within the Emirati tech ecosystem have continued their collaborations with Chinese technology companies, engineers and data centres. 

The UAE has leveraged its rising status to persuade Washington that it would be wise to give it some leeway, lest Abu Dhabi fully shift its focus to China.

It remains to be seen how Trump, the self-proclaimed “deal maker”, will react to the possibility of being outmanoeuvred by a Gulf state.

Dr Andreas Krieg is an associate professor at the School of Security Studies at King’s College London. He is also founder of the London-based risk consultancy firm MENA analytica