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.

He pointed to the United States, China, Taiwan and the Netherlands, each of which dominates critical segments of the semiconductor ecosystem, from advanced chip making and lithography equipment to manufacturing capacity.

Countries are carving out 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, he argued, must identify where it could build a similar strategic advantage.

The Communications and Digital Ministry has submitted drafts of two presidential regulations on AI ethics and a 2026-2029 national AI road map to the State Secretariat, setting broad principles for AI development while seeking to attract investment into talent and infrastructure. 

The documents are expected to set out principles for transparency, accountability, data protection and security while addressing risks ranging from AI-enabled fraud and deepfakes to intellectual property theft and cybersecurity threats. It remains unclear if the regulations will roll out this year.

Read also: Businesses seek AI regulatory clarity as caution hampers investment

But policy alone would not be enough, if the country’s infrastructure gap remains one of its biggest constraints, according to the Centre for Strategic and International Studies (CSIS).

CSIS executive director Yose Rizal Damuri estimated Indonesia would need at least 4.5 gigawatts (GW) of green data center capacity by 2035, up from around 500 megawatt today, a scale-up that would require roughly 10-12 GW of renewable energy generation.

"When we talk about joining the AI 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, as past waves of tech adoption had not translated into dramatic productivity gains or reduced workloads. 

Rather than replacing workers outright, AI was more likely to reshape jobs and change how work was performed, at least in the near term, he said.

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