The Development of the Semiconductor Industry: A New Economic Engine for National Growth

Jakarta, INTI - The Indonesian government is pushing for a new economic engine to accelerate national economic growth, one of which is through the development of the semiconductor industry. In line with the process of accession to the Organisation for Economic Co-operation and Development (OECD), Deputy for International Economic Cooperation, Edi Prio Pambudi, received the Delegation of the OECD Team handling the semiconductor sector on Tuesday (9/07) at the Office of the Coordinating Ministry for Economic Affairs.

"The OECD team will help the Government identify opportunities and challenges in Indonesia in developing the semiconductor ecosystem. This mission visit aims to gain a deeper understanding of Indonesia's semiconductor ecosystem by meeting with various government agencies involved in semiconductor policy making and other stakeholders such as industry players, associations, labor organizations, and civil society," said Deputy Edi.

The OECD team was led by Senior Economist from the Directorate of Science, Technology, and Innovation, Guy Lalanne, along with three other economists. Issues discussed in the meeting largely related to policy, data confirmation, and identification of opportunities and challenges in developing the semiconductor industry in Indonesia.

This visit is part of a fact-finding mission by the OECD to review Indonesia's semiconductor ecosystem. During this mission, the OECD met with various parties involved in semiconductor policy making, and other stakeholders. The four-day meeting in Jakarta was also attended by representatives of Ministries and Agencies, associations, industry players, and educational institutions.

"Indonesia is truly serious about accelerating the development of the semiconductor ecosystem, from upstream to downstream. To achieve this vision, Indonesia is ready to strengthen four supporting pillars of the industry, namely infrastructure, skills/human resources, supply chain, and its supporting environment," said Special Staff to the Coordinating Minister, Prof. Hammam Riza, who is also an Expert Team in the Semiconductor Task Force.

The series of fact-finding mission activities concluded with a field visit to Batam, Riau Islands, to see the potential of the area as a location for semiconductor industry development. The OECD team will conduct an in-depth analysis of Indonesia's semiconductor ecosystem over the next six months.

During the visit, the OECD saw firsthand Batam's great potential to become a semiconductor hub. Batam, with adequate infrastructure and geographical proximity to Singapore, is considered to have a competitive advantage in developing this industry. This is important considering that semiconductors are key components in various modern technologies, ranging from consumer electronics to electric vehicles.

According to data from the Ministry of Industry, the demand for semiconductors in Indonesia is increasing rapidly, especially due to the growing electronics and automotive industries. In 2023, Indonesia's semiconductor imports reached USD 1.5 billion, an increase of 12% from the previous year. This growth indicates a large domestic market potential that needs to be developed so that Indonesia can become not only a consumer but also a producer of semiconductors.

Moreover, the development of the semiconductor industry is also expected to create new jobs and improve local workforce skills. The government has initiated various training and education programs to prepare human resources ready to work in this sector. One flagship program is the collaboration with several universities to open specific majors and semiconductor training.

Deputy Edi Prio Pambudi added, "Collaboration with the OECD will provide us with valuable insights into international best practices in developing the semiconductor industry. With the support of various parties, we are optimistic that we can build a strong and competitive ecosystem."

The importance of developing the semiconductor industry has also been conveyed by President Joko Widodo on several occasions. The President emphasized that this sector is one of the keys to entering the era of Industry 4.0, where technology and innovation become the backbone of the economy. With the development of the semiconductor industry, Indonesia is expected to become a major player in the global market.

As a follow-up step, the Indonesian government also plans to provide fiscal incentives for investors willing to invest in this sector. These incentives include tax cuts, ease of licensing, and infrastructure support. All of this is done to attract more foreign investment and accelerate the growth of the semiconductor industry in the country.

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