Jakarta. Indonesia is seeking closer economic ties with Malaysia’s Sarawak as it accelerates plans to build a domestic semiconductor industry, betting that regional cooperation and downstream processing of its vast mineral resources can help lift growth and position the country in high-value global supply chains.

Chief Economic Minister Airlangga Hartarto said Jakarta wants Sarawak to serve as a mentor as Indonesia pushes into advanced manufacturing — a strategic shift aimed at supporting its ambitious target of 8% economic growth, well above last year’s 5.11%.

“The key economic drivers are in services and high-value-added manufacturing. I think we should learn from Sarawak on the semiconductor industry,” Airlangga said at the Indonesia Economic Summit on Tuesday.

Sarawak has set a goal of developing a holistic semiconductor ecosystem by 2030, which the state government estimates could add RM30 billion (about $7.6 billion) to its gross domestic product. The effort is being led by state-owned SMD Semiconductor, which was established in 2022.

Responding to Indonesia’s interest, Sarawak Premier Abdul Rahman Zohari described semiconductors as a relatively new sector for the state, noting that Penang remains Malaysia’s most advanced chipmaking hub.

In 2021, US chipmaker Intel pledged $7 billion to expand its Penang operations and is now planning an additional $208 million investment to further scale up the facility.

While Sarawak is still building its capabilities, Zohari said SMD Semiconductor is developing what he described as an artificial intelligence–powered chip, with applications ranging from healthcare and automotive systems to aerospace.

“We are waiting for the intellectual property certificate,” he said. “We can use it for health, automotive, and outer space industries. Looking ahead, the world will tilt towards the digital economy. Everything will depend on digitalization, from smartphones to public transportation.”

Minerals-Rich Indonesia Eyes Chip Value Chain
Indonesia’s potential advantage lies upstream, particularly in its vast silica sand resources. A government report in 2021 estimated the country holds about 2.1 billion tons of silica sand potential, including roughly 330 million tons in reserves. Silica is a core input for silicon wafers used in semiconductor chips and photovoltaic modules.

So far, Jakarta’s industrial strategy has leaned more heavily toward solar manufacturing. The government has earmarked a bauxite- and silica-based integrated solar module project — valued at Rp 24 trillion ($1.4 billion) — as one of 18 priority downstream initiatives for 2026.

The semiconductor push comes amid broader efforts to deepen economic ties with Malaysia. Indonesia recorded about $4.5 billion in Malaysian investment inflows in 2025.