Saudi fund-backed firm partners with Chinese surveillance maker

By Alexander Cornwell and Pesha Magid

RIYADH (Reuters) -A subsidiary of Saudi Arabia's sovereign wealth fund with ambitions to develop sophisticated technology on Tuesday announced a $200 million partnership with a Chinese surveillance technology company previously sanctioned by the United States.

Alat, a newly formed entity owned by Saudi Arabia's Public Investment Fund (PIF), and Dahua Technology, one of China's biggest surveillance equipment makers, will manufacture surveillance hardware in Saudi Arabia, Alat's new CEO announced at an event in Riyadh.

The joint venture will also manufacture hardware, such as sensors, used in so-called "smart cities" and establish a research and development centre in the kingdom.

Dahua has been banned from receiving products made outside of the United States with American technology since it was placed on an entity list in 2022 by the Biden administration over national security concerns. The U.S. has also banned the import of Dahua technology and has linked its technology to the abuse of China's Uighur minority.

"They are the number two company in the world on what they do. We tested the technology, we looked at it and we're quite happy with it," Alat Chief Executive Amit Midha told Reuters in response to a question about whether there were concerns about partnering with the U.S.-sanctioned firm.

Midha said Alat - which aims to develop hardware like semiconductors rather than software - would ensure it complied with regulations.

"You have to understand the Saudi mindset is that we want to be predictable, and we want to be dependable. This is core," said Midha, a former Dell Technologies executive who took up his post this month.

Alat also announced a $150 million partnership with Japan's SoftBank Group to manufacture advanced robotics in the kingdom. It will also work with U.S. firm Carrier and Saudi's Tahakom.

Riyadh has deepened its cooperation with Beijing on security and sensitive tech amid a warming of political ties - to the concern of Washington.

Emirati company G42, which is developing artificial intelligence, has divested its investments in China and began the lengthy task of pulling out Chinese hardware amid U.S. concerns over its relationship with Chinese businesses.

Saudi Arabia established Alat as part of a broader ambitious strategy to transform the kingdom into an advanced industrial and manufacturing hub as the world's largest oil producer seeks to diversify its economy away from oil sales.

Alat aims to invest $100 billion in the kingdom by 2030, according to a statement by the group. Its ambitions include contributing $9.3 billion to the non-oil economy, creating 39,000 skilled jobs by 2030 and eventually aiming to export its hardware.

"Saudi Arabia is no longer going to buy the technology. It is going to be building the technology," Industry and Resources Minister Bandar Alkhorayef said at the Riyadh event.

(Reporting by Alex Cornwell and Pesha Magid; Writing by Rachna Uppal; Editing by Susan Fenton and Ros Russell)