By: Rahmat Wahyu Fajar *)
The government’s push for investment in the semiconductor industry and silica downstreaming represents an important marker of a shift in the direction of national economic development. Amidst the global economic slowdown, geopolitical uncertainty, and fragmented international supply chains, Indonesia has not chosen a defensive stance but has instead taken strategic steps by building a foundation for high-tech industries. This policy reflects the understanding that long-term economic resilience and growth can no longer rely on raw material exports but must be supported by technological mastery, increased added value, and active integration into the global industrial ecosystem.
President Prabowo Subianto’s discussion with the Red and White Cabinet regarding strengthening the automotive and electronics sectors through the development of the semiconductor industry demonstrates that this agenda is a strategic priority for the country. Cabinet Secretary Teddy Indra Wijaya emphasized that the chip industry is projected to become the basis of Indonesia’s future industry. This step aligns with changes in the global industrial structure, where semiconductors are a vital component for nearly all strategic sectors, from electric vehicles and consumer electronics to data centers and even the national digital transformation. Without adequate domestic capacity, dependence on chip imports has the potential to create a structural vulnerability for the national economy.
Indonesia’s advantage in developing the semiconductor industry is inextricably linked to its availability of strategic natural resources. Silica sand, or quartz, the primary raw material for silicon for semiconductors, is widely distributed throughout Indonesia. For years, this potential has been underutilized, with much of it exported in raw or semi-finished form. Through a downstreaming policy expanded to the semiconductor sector, the government is attempting to change this outdated pattern. Silica downstreaming aims not only to increase economic added value but also to strengthen the independence of the national industry within the global technology supply chain.
The significant investment commitment from a consortium of American and German companies on Galang Island, Riau Islands, demonstrates that government policy is beginning to translate into concrete trust from global investors. Plans to build semiconductor facilities, high-tech glass manufacturing, wafer production, and solar cells within the National Strategic Project framework demonstrate that Indonesia is seen as competitive as a strategic manufacturing base. Walter William Grieves, President Director of PT Quantum Luminous Indonesia, believes this project has the potential to significantly contribute to national economic growth, reinforcing the argument that the semiconductor industry is not just an industrial project, but an instrument of long-term economic transformation.
The government’s role in creating regulatory certainty is a key factor in realizing these strategic investments. Minister of Investment and Downstream Development Rosan P. Roeslani’s affirmation of streamlined licensing through a risk-based business licensing system demonstrates the government’s commitment to building a conducive business climate. The integration of licensing through the OSS (Online Business Access) and the special authority of the Batam Free Trade Zone Authority (BP Batam) in strategic economic zones reflect the government’s efforts to reduce bureaucratic barriers that have often hampered investment. In the context of global competition, speed and certainty in licensing are crucial competitive advantages.
At the macro policy level, Coordinating Minister for Economic Affairs Airlangga Hartarto has consistently positioned semiconductors as part of the national downstreaming and industrial transformation agenda. President Prabowo’s approval of the initial funding allocation for semiconductor ecosystem development cooperation with the UK, including collaboration with Arm, underscores the government’s strategic approach to catching up on technological advancements. This collaboration demonstrates that chip industry development focuses not only on manufacturing but also on mastering design, research, and global technology standards.
The government’s recognition that the semiconductor industry’s primary challenge lies in the quality of its human resources is a key element of this agenda. Collaborations with international universities, strengthening research centers, and integrating vocational programs and technology transfer into investment projects demonstrate that semiconductor industry development is designed systematically and long-term, rather than on an ad hoc basis.
Furthermore, investment in chips and silica downstreaming has strategic implications that extend beyond the industrial sector. The semiconductor industry has the potential to create high-quality jobs, accelerate technology transfer, and enhance national export competitiveness. In the long term, this policy contributes to Indonesia’s efforts to escape the middle-income trap by building an innovation-driven economic base. With a large domestic market and rapid digital economic growth, Indonesia has the structural capital to make the development leap it has been delaying.
The momentum the government is currently building must be maintained through consistent policies, cross-sector coordination, and disciplined implementation. The success of the semiconductor agenda is measured not only by the establishment of factories or the magnitude of investments, but by Indonesia’s ability to build an integrated, adaptive, and globally competitive industrial ecosystem. Within this framework, investment in chips and silica downstreaming should be seen as a visionary step by the government to position Indonesia beyond simply being a technology market to becoming an active and relevant player in the global economy based on technology and innovation.
*) Industrial Policy Observer
