Indonesia Re-Enters the Semiconductor Chat With ARM, The UK, and a $125m Piggy Bank
Indonesia once had a semiconductor foothold and lost it. Now it’s back with ARM. Baby steps, big headlines, and a long road ahead.
Indonesia has unveiled its latest attempt to join the global semiconductor race; a race that has been running for about fifty years, and the leaders are a little more than just ahead.
The headline is US$125 million (yes, million with an “m,” not “b”) to build a “semiconductor ecosystem” in partnership with the UK and Arm, the British chip-design giant. This announcement has generated the usual patriotic enthusiasm… and quiet panic among anyone who has ever priced a cleanroom, an EDA license, or a single piece of advanced manufacturing equipment.
To be fair, you have to start somewhere. You cannot catch a train you never run toward. And if Indonesia is going to be late, it might as well be late with a plan.
And as Indonesian industrial policy has proven for decades, something is usually better than nothing. Unless that something is a regulation banning automation in semiconductor factories, which is, in fact, a thing we once did.
The Deal, in Plain English
Let’s frame this deal properly, because the public narrative has ranged from “Indonesia builds chip foundry” to “We will dethrone TSMC by 2030.”
Indonesia is not building a world-class fab. It is not ordering EUV machines. It is not assembling a secret 3nm production line in a warehouse behind a toll road exit. Indonesia is buying a starter kit.
What does the starter kit include?
Chip design IP licences from Arm, reference designs, and training from Arm.
There will be some design centres, some EDA tools, and some scholarships.
This is not nothing. In fact, for a country that currently imports most of its chips and lacks a deep design bench, this is a reasonable first move. It is how you create the beginnings of local capability without burning tens of billions of dollars.
But it is not “catching up” in the way politicians love to say it. Malaysia, Singapore, and Vietnam are not waiting around while Indonesia boots up its first chip design program. They are expanding packaging capacity, pulling in billion-dollar investments, and building industrial ecosystems that have momentum.
And Arm? Arm is doing what Arm does best. It sells the picks and shovels to anyone who wants to mine the future. For Arm, this deal is a revenue line item, a handshake, and a press release. Indonesia gets a ladder. Arm gets paid for supplying it.
Indonesia Had Chips Once. Then Didn’t.
Indonesia was once a legitimate player in the semiconductor supply chain in the 1970s and 1980s. Global names like Fairchild Semiconductor, National Semiconductor, and Monsanto operated here, running back-end facilities focused on assembly, testing, and packaging. Indonesia was not designing chips or fabricating wafers. We were doing the essential, labor-heavy work that turns tiny pieces of silicon into something you can actually ship and sell.
Then something very Indonesian happened: policy.
In the mid-1980s, the Manpower Ministry decided it would protect jobs by banning automation in semiconductor plants. Because semiconductors were classified as labour-intensive, they should remain labour-intensive. Robots would reduce headcount, therefore robots were bad. It was a commitment to preserving employment in an industry that survives by doing the opposite.
Fairchild, faced with the choice between modernizing or stagnating, chose a third option: leaving. They relocated to Malaysia, where they understood that you cannot freeze an industry in place and expect it to compete. Malaysia welcomed automation, built industrial parks, created incentives, and turned that moment into a long-running advantage.
By 1986, factories were closing, jobs were disappearing, and Indonesia’s semiconductor momentum was gone.
We did not respond with a new strategy.
We did not rebuild the ecosystem.
We did not invest in skills or domestic suppliers.
We simply accepted the outcome and moved on, as if chips were a temporary trend and not the foundation of modern life.
What’s Different This Time (And What Isn’t)
Now, decades later, Indonesia is once again eyeing the semiconductor stage with the spirit of a nation announcing, “We have learned our lesson,” while also hoping nobody asks which lesson.
To be fair, there are real differences this time, and they matter.
Indonesia is not pretending it will build a world-class fab with pocket change and national pride. The plan is framed around “ecosystem” and “design;” a refreshing acknowledgment that US$125 million will not buy even half an EUV machine.
The focus on human capital and chip design is actually rational. Design is cheaper than fabrication. It is scalable. It is portable. It is the one part of the value chain where you can spend tens of millions and still plausibly get results.
Automation is now allowed. It took forty years, but Indonesia has finally embraced the concept that productivity matters. Robots are not evil. They are, in fact, how the industry works.
But some things do remain exactly the same.
Indonesia is still talking about “catching up” while neighbors compound advantages. Malaysia is stacking multi-billion-dollar expansions. Vietnam is pulling in major packaging investments. Singapore continues to host serious wafer manufacturing. Indonesia is arriving with US$125 million and an optimistic smile.
We still risk building everything on foreign anchors. Arm, foreign universities, foreign industrial park partners. All useful. All necessary. All capable of leaving if the incentives shift.
We’re still assuming “start small” will naturally lead to “grow big.” It can, but only if Indonesia does the hard work for a decade straight: education reform, stable policy, infrastructure, and long-term funding. Historically, Indonesia prefers announcements.
Can Indonesia Produce Chip Talent?
Indonesia is extremely good at producing scale. \
We can create thousands of factory operators at breathtaking speed.
We can staff an industrial park, run three shifts, and still have enough people left over to form a committee about staffing industrial parks.
This is not an insult. It is a real capability. It is also, historically, where we tend to stop.
But semiconductor talent is not just “more workers.” It is a different species entirely.
IC designers,
Verification engineers,
Process technologists,
These roles are trained through years of math, physics, discipline, and the kind of stubborn curiosity that survives failure after failure. They also require tools, mentors, and an ecosystem where someone can grow from junior to senior without leaving the country.
The current pipeline looks like this.
ICDeC trains about 50 students at a time.
In a few years, that might become a few hundred.
Impressive… until you remember the numbers that serious semiconductor clusters produce.
And then comes the predictable part.
The very talented ones will go to Singapore, Taiwan, the US, or the UK.
Most will stay abroad unless Indonesia creates serious career paths at home.
Right now, if you’re an ambitious Indonesian semiconductor engineer, you ask yourself:
“Should I build my career in Indonesia, or go somewhere that actually has chips?”
Unless Indonesia builds enough local industry to absorb and retain this talent, these training programs risk becoming a beautifully funded export scheme. Indonesia pays to create capable chip engineers, and then other countries hire them.
So What Does This Mean, Really?
This deal does mean Indonesia will develop a small but real chip design capability. Not the kind that changes global supply chains overnight, but a handful of teams who can actually build something beyond a demo. Some Indonesian students will learn RTL, verification basics, and how to think in systems, instead of graduating into a national economy where the default technical career path is “write a mobile app and hope the funding round arrives.”
It also means Indonesia will finally be in the room when semiconductor conversations happen, rather than watching from outside while neighbors collect the investments, the supply chain density, and the talent.
Most importantly, it is better than nothing. It is a restart, not a revolution. If the public expects miracles, it will declare failure the moment reality arrives. If the public expects a long road, it might tolerate the boring work required to walk it.
Now, what this deal does not mean is equally important.
It does not mean Indonesia is catching up in any meaningful competitive sense.
It does not mean fabs are coming.
It does not mean tens of thousands of high-level engineering jobs appear overnight.
It does not mean Malaysia, Vietnam, and Singapore suddenly stop compounding their advantages.
It does not mean Indonesia has solved policy volatility simply by signing an MoU.
So is it still worth doing? Yes. Absolutely. Because the alternative is doing nothing, and Indonesia has already tried that for decades.
Indonesia is late, underfunded, and inconsistent. But it is also huge, young, and hungry. It has market scale, raw materials, and partners who actually understand the industry. This deal will not make Indonesia a semiconductor powerhouse. But it could make Indonesia less dependent, slightly more competent, and more prepared for the future.
Indonesia’s new semiconductor push is a restart, an overdue correction, and an acknowledgement that maybe chasing away global chip manufacturers in the 1980s was not the masterstroke of job protection we once imagined.
Will this US$125m Arm partnership change the region?
No. Southeast Asia’s semiconductor map is already being redrawn by billion-dollar factories, packaging campuses, and data center investments that make this deal look like a budgeting typo.
Will it change Indonesia?
Possibly, if the country treats it as what it actually is: a foundation layer. A small attempt to build design capability, train a limited number of engineers, and stop being completely absent from a supply chain that powers everything from phones to fighter jets.
The real test is what happens afterward.
Do the programs scale?
Do the labs stay funded?
Do graduates find real jobs locally?
Sometimes countries do not need a miracle. Sometimes they just need the discipline to not sabotage themselves. If Indonesia can manage that, this modest reboot might actually matter.
At StratEx - Indonesia Business Advisory we help clients understand how talent pipelines, capability building, and policy alignment will shape Indonesia’s future tech economy. Contact us to navigate Indonesia’s human capital landscape so you hire right and develop strategically.