Semiconductor Industry in Indonesia: Outlook and Opportunities

As global demand for advanced technology continues to soar, Indonesia is positioning itself as a competitive player in the semiconductor industry. With abundant natural resources, government support, and a strategic location in Southeast Asia, the country offers promising prospects for investors. However, challenges remain, including a high barrier to entry and fierce competition from regional neighbors.

Here’s an in-depth look at Indonesia’s semiconductor industry and its potential.

Also read: Major Industries in Indonesia (Based on Contribution to GDP)

Indonesia’s Semiconductor Industry Outlook

Semiconductors, the backbone of modern technology, power everything from smartphones to satellites. As nations compete to dominate the semiconductor supply chain, Indonesia is making strides to establish its presence in this vital sector.

Indonesia holds significant natural advantages, particularly its rich deposits of silica sand, a critical material for semiconductor production. With an estimated 25.33 billion tons in reserves, the country has immense potential for silicon wafer production. Additionally, Indonesia is a top producer of tin and nickel, materials crucial for semiconductor assembly and packaging processes.

Despite these advantages, Indonesia faces challenges, including a lack of advanced engineering talent and high costs associated with building production facilities. To overcome these, the government has prioritized semiconductor development as part of its Golden Indonesia 2045 vision, aiming to reduce dependence on imports and bolster technological independence.

Semiconductor Business Opportunities in Indonesia

Indonesia’s burgeoning market for electronic devices is driving demand for semiconductors. According to Statista, the Indonesian semiconductor market is projected to grow at a compound annual growth rate (CAGR) of 12.82% from 2025 to 2029, reaching a market value of $2.9 billion.

Key opportunities include:

• Raw Material Processing: The government’s downstreaming policy encourages domestic processing of silica sand and other raw materials, creating opportunities for investors in silicon wafer production.
• Advanced Technologies: Rising demand for AI and IoT devices in Indonesia is increasing the need for smaller, more energy-efficient semiconductors.
• Battery Innovation: With a focus on sodium-ion batteries, Indonesia is exploring synergies between semiconductor and battery production, especially in Riau Islands.

Also read: Indonesia’s Positive Investment List: Opportunities for Investors

Advancing the Semiconductor Ecosystem in Indonesia

Indonesia is actively advancing its semiconductor ecosystem, identifying the industry as a critical economic driver. As Coordinating Minister for Economic Affairs Airlangga Hartarto stated and quoted by Antara, “The semiconductor ecosystem is expected to continue to be developed so it becomes the anchor of the economic engine.”

This vision is supported by recent developments, including an assessment by the Organisation for Economic Co-operation and Development (OECD) of Indonesia’s semiconductor potential in Batam. Additionally, Indonesia has been prioritized as one of seven key countries for semiconductor manufacturing during the Indo-Pacific Economic Framework for Prosperity (IPEF).

Indonesia’s Semiconductor Business Regulations

To attract foreign investment, Indonesia has implemented several policies aimed at simplifying business operations:

1. Omnibus Law (Job Creation Act): Streamlines licensing and reduces bureaucratic hurdles.
2. Downstreaming Policy: Limits raw material exports to promote domestic value addition.
3. Incentives for Strategic Projects: Tax breaks and infrastructure support for semiconductor projects, particularly in regions like Batam and Riau Islands.

However, regulatory inefficiencies and investment risks still pose challenges. The incoming administration is expected to address these issues and foster a more investor-friendly climate.

Examples of Semiconductor Companies in Indonesia

While the industry is still in its infancy, key players and initiatives include:

• Wiraraja Green Renewable Energy and Smart Eco Industry Park in Batam, which aims to localize semiconductor and battery production.
• Collaborative projects supported by global stakeholders such as the OECD and the U.S. CHIPS Act.

These projects highlight Indonesia’s commitment to becoming a major semiconductor hub.

Also read: Top Foreign Investment Sectors in Indonesia

How to Start a Semiconductor Company in Indonesia

Investors looking to enter the semiconductor industry in Indonesia can follow these steps:

1. Understand Market Dynamics: Assess the demand for specific semiconductor applications, such as AI, IoT, and electric vehicles.
2. Partner with Local Stakeholders: Collaborate with Indonesian companies and government agencies to navigate regulations and leverage local expertise.
3. Leverage Government Incentives: Take advantage of tax breaks, streamlined permits, and support for strategic projects.
4. Focus on Human Capital: Invest in training and education to build a skilled workforce for semiconductor manufacturing.

Indonesia’s semiconductor industry presents significant opportunities, driven by abundant resources, government support, and a growing domestic market. However, success will depend on addressing challenges such as talent development, regulatory efficiency, and competition from regional players like Malaysia and Vietnam.

For investors, the key lies in leveraging Indonesia’s unique strengths while fostering collaboration and innovation. As Indonesia continues its journey to becoming a semiconductor powerhouse, it holds exciting potential for those ready to contribute to its growth.

If you are considering starting a semiconductor business in Indonesia, there are a number of resources and support services available to help you get started.

InvestinAsia is among the companies that specialize in aiding you with Indonesia company registration. We boast a team of seasoned experts who can guide you throughout the process of:

• Foreign company / PMA registration in Indonesia
• Indonesia representative office registration
• PT PMDN Set Up
• Virtual office setup in Indonesia
• Business registration number in Indonesia
• Indonesian Business Licenses
• Indonesia Trademark Registration

If you are interested in starting a business in Indonesia, you can start by contacting us for FREE consultation.

Sources:

• The Diplomat
• Statista
• Antara News
• The Prakarsa