Speaking at an AI workshop hosted by the Indonesia Fintech Society (IFSoc), Nezar said Indonesia still contributed little beyond hosting factories, despite sitting on vast reserves of critical minerals needed for semiconductors and AI hardware.

"We are nowhere in the global supply chain […] We have the manufacturing plants, but the higher-value components and materials are still imported,” Nezar said on Tuesday, recalling a visit to PT Infineon Technologies Batam, the local subsidiary of German semiconductor manufacturer Infineon Technologies.

Read also: Govt under pressure from US Big Tech as AI rules near launch

While Southeast Asia’s largest economy had spent years promoting downstream processing, much 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.

Basic but high-value components, such as gold bonding wire used in chip packaging, were still sourced overseas, he pointed out, illustrating how little of the semiconductor value chain the country could control and contribute to.

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"Today, geopolitics is about creating technological choke points. The countries that control the supply chains are those that create choke points,” the deputy minister added.

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