JAKARTA: Indonesia risks being left behind in the global artificial intelligence (AI) race unless it captures more value in its supply chains, Deputy Communications and Digital Minister Nezar Patria has warned.
Speaking at an AI workshop organized by the Indonesia Fintech Association, Nesar said that despite Indonesia having huge reserves of critical minerals needed for semiconductors and AI hardware, it has yet to contribute much beyond hosting factories.
“We are nowhere in the global supply chain. We have manufacturing plants, but higher-value parts and materials are still imported,” Nezar said, recalling a visit to PT Infineon Technologies Batam, the local subsidiary of German semiconductor maker Infineon Technologies, on Tuesday.
Although Southeast Asia’s largest economy has spent years promoting downstream processing, many of the materials and components used in semiconductor manufacturing are still imported before being assembled locally, leaving much of the industry’s value creation overseas.
He noted that basic but expensive components, such as gold bonding wire used in chip packaging, are still sourced from abroad, showing how little the country has control over and contribution to the semiconductor value chain.
“Today, geopolitics is about creating technological choke points. The country that controls the supply chain is the country that creates the choke points,” the deputy minister added.
He cited the United States, China, Taiwan and the Netherlands as controlling key areas of the semiconductor ecosystem, from advanced chip manufacturing and lithography equipment to manufacturing capacity.
He argued that countries have established strategic positions in the global AI race by specializing in different segments of the value chain, from chip materials and advanced manufacturing to infrastructure, and Indonesia needs to identify where it can build similar strategic advantages.
The Ministry of Communications and Digital has submitted two Presidential Regulations on AI Ethics and a draft National AI Roadmap 2026-2029 to the National Secretariat.
It is trying to attract investment in human resources and infrastructure while setting the basic principles for AI development.
The document is expected to set out principles for transparency, accountability, data protection and security, while addressing a range of risks, from AI-powered fraud and deepfakes to intellectual property theft and cybersecurity threats.
It is still unclear whether this regulation will be introduced this year.
But policy alone will not be enough if the country’s infrastructure gap remains its biggest constraint, according to the Center for Strategic and International Studies (CSIS).
CSIS Executive Director Jose Rizal Damri estimated that Indonesia will need at least 4.5GW of green data center capacity by 2035.
This is an increase from the current approximately 500MW, a scale-up that would require approximately 10GW to 12GW of renewable energy generation.
“When we talk about bringing AI into the supply chain, we also have to think about renewable energy,” Yose said.
He added that the economic impact of AI may take longer than expected because past waves of technology adoption have not led to dramatic productivity gains or workload reductions.
Rather than completely replacing workers, AI is likely to reshape jobs and change the way work is done, at least in the short term, he said. — Jakarta Post/ANN
