Chip Giants Flock to Open Factories Near Indonesia, What's the Reason?
Jakarta, CNBC Indonesia — Taiwanese technology companies are racing to relocate their semiconductor plants to Singapore. Most recently, Taiwan’s second-largest chip manufacturing contractor, United Microelectronics Corporation (UMC), announced it would produce silicon photonic wafers at its Singapore facility.
UMC’s move aims to meet demand for high-speed optical interconnectivity from AI and hyperscale data centre networks. UMC is collaborating with SILITH Technology, a local chip design company. The Singapore facility is targeted to begin production within the next 18 months.
UMC also plans to open its 12-inch silicon photonics platform for consumer product development starting in 2027.
Silicon photonics is a technology that combines optical components and electronic circuits on a single chip. Its products are designed to transmit data using light, delivering exceptionally high speeds, low latency and power efficiency for data centres and AI.
Before UMC, other Taiwanese technology firms had also expanded into Singapore. These developments have established Singapore as one of the regional hubs for the global semiconductor supply chain.
One of them is Vanguard International Semiconductor Corporation, a chip manufacturer backed by TSMC. Vanguard has partnered with the Netherlands’ NXP Semiconductors to build a plant with an investment of US$7.8 billion.
Singapore needs electricity
The wave of investment in Singapore’s semiconductor industry comes as the country neighbouring Indonesia anxiously awaits electricity supplies from Indonesia. Indonesia and Singapore actually signed a memorandum of understanding (MoU) on electricity exports from Indonesia to Singapore last year.
Minister of Energy and Mineral Resources Bahlil Lahadalia said last week that the Indonesian government is still in negotiations, particularly over pricing.
“That is part of the package we signed last year. Regarding electricity to Singapore, the staged process is underway, but we are still negotiating the price and our regulations — indeed, pricing sits with the government. We want a win-win that benefits both sides,” Bahlil explained when met at the State Palace on Monday (6 July 2026). “But I think a meeting point will come soon. We want everything to be beneficial, win-win for both parties. It’s not win-win yet, in my view, not with the current price.”
Minister of Investment and Downstream Industry as well as Danantara CEO Rosan Perkasa Roeslani also spoke about Indonesia’s plan to export electricity to Singapore, with export capacity potentially reaching 3.4 gigawatts (GW) over several years.
Rosan said Danantara would act as the exporter, working with Singaporean companies Keppel Electric, Sembcorp Industries and Singapore Energy Interconnections.
“We, as the Indonesian company, will develop the electricity. Keppel and Sembcorp will be the off-takers — after all, they are also state-owned enterprises,” Rosan explained when met at the State Palace on Monday (6 July 2026).