Indonesia Bets on Chips: Partnership with Arm and Ambitions to Rise in the Industry

Indonesia is taking significant steps to develop its own semiconductor industry by partnering with major global players. One of the key collaborators is Arm Holdings, with which the country is discussing a joint project valued at approximately $200 million.

A central part of this cooperation is an agreement between Arm and the Indonesian investment fund Danantara. Under this initiative, around 15,000 local engineers will be trained in chip design, laying the groundwork for a strong domestic talent base in advanced technologies.

Building a comprehensive semiconductor ecosystem is one of Indonesia’s top strategic priorities. The government aims not only to attract foreign investment but also to establish a full-cycle industry-from design to manufacturing. Earlier, authorities signed an agreement involving U.S. companies Tynergy and Essence to launch semiconductor production in the country.

Global companies are showing growing interest in Indonesia due to several advantages. While Taiwan dominates the market with roughly 75% of global chip production, new entrants are not trying to compete directly. Instead, they are seeking alternative locations to diversify supply chains.

In this context, Indonesia could compete with countries like Malaysia, which currently ranks seventh worldwide in semiconductor production. Both nations benefit from a relatively neutral geopolitical stance, allowing them to maintain trade relations with Western countries as well as China and its allies.

Another key advantage of Indonesia is its labor market. The country has a large workforce, and average wages are about four times lower than in Malaysia, making it an attractive destination for cost-efficient manufacturing.

Taken together, these factors position Indonesia as a promising emerging hub in the global semiconductor landscape-unlikely to rival Taiwan’s dominance, but capable of securing a meaningful role in international supply chains.