November 3, 2022

JAKARTA – As the government pushes for the establishment of a semiconductor center in the country, experts and foreign government officials have welcomed the ambition, as the sector has become a fundamental part of the modern world.

Mark Goldsack, director of UK defense and security exports, told the Jakarta Post on Wednesday that deciding whether Indonesia should produce its own microchips was a balancing act.

“We all need an indispensable minimum, an irreducible minimum of things that we can control ourselves. […] “Do we need to manufacture all the microchips needed to support the automotive industry? No, we don’t. “Do we need enough to manufacture the number of vehicles essential to the economy? Yes, we do,” he said.

Goldsack pointed out that as a major automaker, it makes sense for Indonesia to have semiconductor production onshore, at least to meet minimum needs.

However, he stressed that a thorough assessment of the domestic supply chain was equally important as the option of trade and partnerships was always there to strike the balance. “We live in a globalized world, none of us can produce everything we need ourselves. So the trick is to be very clear where you can’t accept the risk, [and take] and where you can accept the risk,” Goldsack said.

“Everyone will always want to produce it and no one can produce everything. So you’re on a scale, and you [have to] figure out where you are on that scale and it will depend on your other economic needs,” he added.

Indonesia’s Coordinating Economy Minister Airlangga Hartarto, speaking in public last week, called on the United States to invest in the archipelago country’s semiconductor industry.

“I think we have to recognize that Indonesia is able to complete China’s supply chain. Indonesia has the market, the investment climate [and we] have strong comparative advantages, particularly in the steel industry [and] digital environment, including semiconductor raw materials,” Airlangga said on October 25.

From a geopolitical perspective, Indonesia’s desire to attract US investment in semiconductors is considered bold by experts, given the country’s close ties to China.

Notwithstanding the economic consequences, this course of action can be seen as a good political balance, according to Dafri Agussalim, an international relations expert from Gadjah Mada University (UGM).

“We can also say that it is Indonesia signaling to China that we have a strong negotiating position,” Dafri said, pointing out how Indonesia is profiting from the ongoing “chip war” between the two superpowers. keeping the two close.

Bank Permata’s chief economist, Josua Pardede, meanwhile agreed that the move was just to fill the gaps created by global supply chain disruptions following the impending trade wars.

“Investors should think about moving their semiconductor production out of China in hopes of escaping the impact of a trade war. Indonesia should seize this opportunity by inviting US investors who are planning to exit the Chinese market,” Josua said.

He went on to say that whatever the potential windfall, the government should not forget that building a semiconductor center was very capital intensive as it required more advanced technology and had a relatively low impact on the absorption of Indonesian labor, so the road ahead was long.

A costly ambition

For his part, Jazi Eko Istiyanto, professor of electronics and instruments at UGM, confirmed that a semiconductor industry is an expensive investment due to its advanced and rapidly changing technology that requires updating. regular level.

Despite this, Jazi said it was not entirely impossible for Indonesia, as India, a country he considered not far from Indonesia in terms of development, managed to have its own integrated circuit (IC) design manufacturing plant, which had released its own processor named Shakti.

Jazi explained that a non-manufacturing option was more economically efficient, as the American company Advanced Micro Devices (AMD) did by outsourcing its IC manufacturing to the Taiwan Semiconductor Manufacturing Company (TSMC) of Taiwan while doing all the design. Yet this option, Jazi explained, was not without its own problems, such as a sudden glut or shortage of chips as is currently happening, which reduces market share.

However, Jazi said the biggest obstacle to building a semiconductor industry in Indonesia would be the talent in the sector.

“I see that professors and students have little or no interest in the design of integrated circuits. Generally everyone is more interested in software [design] because it promises more [money]said Jazi, explaining that human development in the sector was lagging behind and needed government intervention.