Indonesia Missing From Global Semiconductor Map, Lili Yan Ing Says

JAKARTA, Investortrust.id — Indonesia remains absent from the global semiconductor map as of Thursday, Jan 15, 2026 in Jakarta, leaving Southeast Asia’s largest economy far behind regional peers due to weak foreign investment inflows and slow structural reform, a gap that risks limiting its role in future digital and industrial supply chains. The shortfall persists despite Indonesia’s population size, natural resources, and rising strategic importance in the global economy.

Singapore has already entered the second stage of the semiconductor industry, contributing about 5 percent of global wafer fabrication output, while Malaysia has become a global hub for assembly, testing, and packaging, accounting for roughly 11 percent of worldwide activity. Indonesia, by contrast, has yet to secure a meaningful position across the three main stages of the semiconductor value chain.

“Indonesia has not yet entered any of the three core stages of the semiconductor industry, but the country’s potential remains very large,” said Lili Yan Ing, Secretary General of the International Economic Association, during the Global and Domestic Economic Outlook 2026 forum at Menara Kadin Indonesia. “The question is whether we can turn that potential into real participation.”

She said the semiconductor industry is among the most complex and strategic in the world, with a value chain divided into chip research and design, wafer fabrication, and assembly, testing, and packaging. Each stage demands different levels of capital, technology, and human resources, making it difficult for most countries to master the entire chain.

The first stage, chip research and design, relies heavily on skilled engineers and specialized electronic design automation software, but requires relatively limited physical investment compared with wafer fabrication. “This stage is knowledge intensive, and the value added is extremely high because design determines performance and differentiation,” Lili said.

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Wafer fabrication represents the most capital intensive and technologically demanding stage, with individual fabrication plants requiring investment that can reach tens of billions of US dollars. “Countries that control wafer fabrication effectively control the heart of the semiconductor industry,” she said. “Without wafers, there are no chips, and without chips, the digital economy simply cannot function.”

The third stage, assembly, testing, and packaging, is more labor intensive and less capital heavy, making it an entry point for many developing economies. Malaysia has successfully positioned itself in this segment, while Indonesia’s participation remains limited.

Indonesia does have a foothold in the downstream segment through facilities such as Infineon’s operations in Batam, which focus on chip assembly and testing for global markets. Lili described this presence as “a door into the semiconductor industry, but not yet the room where most of the value is created.”

Upstream, Indonesia has also begun supplying strategic raw materials, including selenium produced at the PT Freeport Indonesia smelter in Gresik, as well as abundant reserves of silica and tin. “These are important assets, but they will not automatically translate into industrial leadership,” Lili said.

She argued that Indonesia’s main constraint is its weak ability to attract foreign direct investment, with FDI accounting for only about 1.2 percent of gross domestic product, the lowest ratio in ASEAN in 2025. Singapore records an FDI to GDP ratio of roughly 27 percent, while Vietnam stands at about 4.2 percent.

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“In the current global environment, countries are fiercely competing for investment,” Lili said. “Governments cannot continue with business as usual. Structural reform and a credible, predictable investment climate are no longer optional.”

Geopolitical tensions between the United States and China have driven a reallocation of global value chains, pushing FDI flows into ASEAN up by around 47 percent compared with pre trade war levels. However, most of that capital has gone to Singapore, Malaysia, Thailand, and Vietnam, leaving Indonesia on the sidelines.

Beyond semiconductors, Lili said the digital economy will remain ASEAN’s primary growth engine, with its value projected to reach $300 billion in 2025 and potentially $1 trillion by 2030. Indonesia, she warned, remains overly dependent on e commerce and digital payments.

“Digitalization and artificial intelligence must move into productive sectors such as agriculture, manufacturing, health care, and education,” she said. “Otherwise, the gains will be shallow and uneven.”

She added that digital transformation depends heavily on reliable and affordable energy, noting that renewable energy accounts for only about 26 percent of ASEAN’s energy mix, far below the global average of 40 percent. “The green energy transition is not a choice,” Lili said. “It is a necessity to lower costs and raise efficiency.”

On domestic policy, Lili praised President Prabowo Subianto’s focus on human capital development, including the concept of the People's School, but said reforms must be universal and centered on teacher quality, curriculum, and labor market relevant skills.

She was sharply critical of the Free Nutritious Meal (MBG) program, citing survey results showing that fewer than 4 percent of students reported needing free lunches. “It makes no sense for the state to provide free meals to middle income families,” she said. “The program should be tightly targeted, with a budget of no more than Rp 8 trillion, and focused on those who truly need it.”

Closing her remarks, Lili said Indonesia’s success in strategic industries such as semiconductors will depend on the government acting as a facilitator rather than a dominant player. “Without real reform and policy consistency,” she said, “Indonesia’s vast potential will remain just that, potential.”