What does Abu Dhabi want out of Advanced Micro Devices? A way to make money that doesn't involve an oil well.
On Friday, Abu Dhabi's Mubdala Development announced it was buying an 8.1 percent stake in chipmaker Advanced Micro Devices, which could cost it roughly between $550 million and $700 million. Mubdala is a separate organization but it's funded by the government. The emirate, part of the United Arab Emirates, is awash with money thanks to escalating oil prices so it needs to put the money somewhere. But there is also more going on in the deal.
Abu Dhabi, like nearby Dubai and Qatar, has been rapidly increasing its investments in the technology industry as a way to diversify its economic base. Oil is still gushing out of the ground in Abu Dhabi but leaders have acknowledged that fossil fuel supplies will inevitably dwindle. So rather than squander their money on cars and luxury goods, the government (and the investment trusts it owns) is effectively trying to create a version of the white collar economy that exists in North America, Europe, and Japan.
The amazing part is the speed with which the emirate is acting. Last year, it set up Masdar, a $250 million clean tech VC fund. It has already invested heavily in HelioVolt, which wants to make copper-indium-gallium-selenide (CIGS) solar cells, as well as Texas LED manufacturer AgiLight.
MIT is getting involved too. America's storied technology university has agreed to help Masdar build an alternative energy graduate school in Abu Dhabi. The school hopes to start admitting students in 2009.
The graduate school in turn will then encourage students and professors to incubate start-ups in the country. Abu Dhabi has a tiny population. Like Qatar, which has set up a university and incubator complex with help of institutions like Cornell University and Rolls Royce, Abu Dhabi will likely recruit students and professors from across North Africa and Central Asia as well as from the immigrant communities in the U.S. and Europe.
The large investment in AMD will give investment managers and others in the country a way to study the high tech industry up close. The country may not go out and build fabs after this one, but clearly there will be people in the country better educated on how things work in Silicon Valley. One of the major complaints among business people and even government officials in the Middle East is that many of the college graduates who come from these countries don't have much practical experience.
Will it work? It's hard to say. Dubai, which has created an Internet business park and opened its doors to chip makers, has only made a small dent in high tech. But like China, these countries aren't exactly democracies, so they can conduct long-range planning. And the money is going to continue to flow there for the next several decades.