Indonesia lags Malaysia and Singapore for chip investments – is it too little, too late?

Indonesia recently accused Malaysia and Singapore of undermining its plans to become a major semiconductor player

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Competition for semiconductor investments is hotting up across Southeast Asia. Photo: Reuters

Published: 2:00pm, 22 Jun 2024

Indonesia faces significant hurdles to realise its aim of becoming a major semiconductor player alongside Malaysia and Singapore as it does not have a coherent strategy to develop advanced chipmaking facilities, analysts say.

Competition for semiconductor investments is fierce across in Southeast Asia as tech giants seek new sites to manufacture high-end chips that power the modern economy, from electric vehicles to mobile phones. The race has accelerated as the US-China tech war continues to fuel concerns in many countries over disruptions to global supply chains.

Last month, Indonesia’s Coordinating Economic Minister Airlangga Hartarto accused Singapore and Malaysia of using environmental and social concerns to undermine Jakarta’s efforts to develop the country’s semiconductor industry.

“Singapore and Malaysia are unhappy, that’s why [their] non-governmental organisations keep causing a ruckus so that Indonesia does not enter the semiconductor industry,” he said at a university seminar on economic growth in Jakarta.

Indonesia had been poised to become a major semiconductor component manufacturer, but investors shifted their focus to Malaysia instead because of Jakarta’s regulations, Airlangga claimed without providing further details. As a consequence, he said Indonesia must now work towards regaining the semiconductor investments it had “lost”.

One country that Indonesia could target to grow its semiconductor industry is China, which has expressed interest in producing chip components in the proposed Beijing-backed economic zone on Indonesia’s Rempang island, near Batam.

The project was thrust into the spotlight last year when Indonesian leader Joko Widodo secured a US$11.5 billion investment from Chinese glass producer Xinyi to build a quartz sand processing plant in Rempang.