Market potential: Prabowo attends an event in Jakarta. The government is pursuing annual investment growth of 10% over the next five years, including through building up the chipmaking industry, key to achieving Prabowo’s 8% economic growth target. — AP
JAKARTA: The United States is keen to take part in the development of Indonesia’s semiconductor industry following the recent reciprocal tariff trade agreement between the two countries, Coordinating Economy Minister Airlangga Hartarto says.
“To continue industrial downstreaming, with the signing of the trade agreement, the United States has begun to show interest in developing Indonesia’s semiconductor industry.
“We are currently preparing the ecosystem,” Airlangga told a press conference last Friday.
President Prabowo Subianto struck a trade pact with US President Donald Trump following a phone negotiation, resulting in a reduction of US-imposed tariffs on Indonesian exports from 32% to 19%.
Jakarta has committed to purchasing US$34bil worth of US goods and to easing non-tariff barriers, including local content requirements for US firms, according to a joint statement on the “framework” for the prospective agreement published on the White House website on July 22.
Despite the trade deal, the senior minister emphasised that Indonesia would seek ways to reduce reliance on the US market, one of the country’s largest export destinations.
Indonesia plans strategic moves to expand its export reach into non-traditional markets, such as Africa and the Middle East, he added.
Airlangga noted that developing the semiconductor industry was part of the government’s downstreaming push in the technology sector to accelerate national economic growth.
He said in December that the government would pursue an average annual investment growth of 10% over the next five years, including through building up the chipmaking industry, which is considered key to achieving President Prabowo’s ambitious 8% economic growth target.
At that time, Airlangga urged an end to reliance on exporting commodities and raw materials, stressing that the country must instead push investment into the semiconductor industry.
However, he acknowledged intense competition in the global chip manufacturing sector, noting that the United States and European countries viewed China’s dominance in the supply chain as a “wake-up call”.
Countries such as the United States and Japan have already begun to co-invest in the semiconductor industry, he added.
Airlangga highlighted one potential downstreaming programme involving the utilisation of silica sands, which is the raw material for silicon wafers, and are the building blocks of semiconductor chips as well as photovoltaic modules, commonly known as solar panels.
This means its processing could support two different manufacturing industries.
He pointed out that such industries have already been established in Kendal, Central Java and Gresik, East Java.
“Semiconductors are crucial, because in the future with the digitalisation era, there will be no equipment without semiconductors, whether it’s in appliances or automobiles, even motorcycles,” he noted.
In 2023, Indonesia began drafting a road map to develop the silica industry as a starting point for building a domestic semiconductor industry.
The road map covers six strategic aspects: A review of Indonesia’s resources, the actors involved, existing and required manufacturing technology, policies, human capital and the market potential, both domestic and foreign.
However, experts have noted that some Asean peers are far ahead in the race for semiconductor investment, with chip companies viewing Vietnam and Malaysia as “more optimal” production bases. — The Jakarta Post/ANN
