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

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 proposed deal has sparked outrage among civil society and non-governmental groups, as thousands of the island’s residents are expected to be displaced to make way for the project.

In April, the Coordinating Ministry for Economic Affairs said it would intensify efforts to develop the semiconductor industry as a key growth driver in line with Indonesia’s vision to become an advanced economy by 2045 on the 100th anniversary of its independence.

The fiercest competition to woo semiconductor giants is expected to come from Indonesia’s two immediate neighbours.

“I offer our nation as the most neutral and non-aligned location for semiconductor production, to help build a more secure and resilient global semiconductor