Chip Giants Flock to Open Factories Near Indonesia, What's the Reason?

Jakarta, CNBC Indonesia - Taiwanese technology companies are flocking to relocate their semiconductor factories to Singapore. Most recently, Taiwan’s second-largest chip manufacturing contractor, United Microelectronics Corporation (UMC), announced the production of silicon photonic wafers at its facility in Singapore. UMC’s move aims to meet the demand for high-speed optical interconnectivity from AI and hyperscale data centre networks. UMC is collaborating with SILITH Technology, a local chip design firm. 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. The resulting products are designed to channel data using light, providing exceptionally high speed, low latency, and power efficiency for data centres and AI. Prior to UMC, other Taiwanese technology companies also expanded in Singapore. This development is turning Singapore into a regional hub for the global semiconductor supply chain. One such company is Vanguard International Semiconductor Corporation, a chip manufacturer backed by TSMC. Vanguard partnered with Netherlands-based NXP Semiconductors to build a factory with an investment of US$7.8 billion. The wave of investment in Singapore’s semiconductor industry occurs as the country, Indonesia’s neighbour, anxiously awaits electricity supply from Indonesia. Indonesia and Singapore actually signed a memorandum of understanding (MoU) regarding electricity exports from Indonesia to Singapore last year. Minister of Energy and Mineral Resources (ESDM) Bahlil Lahadalia stated last week that the Indonesian government is still negotiating, particularly regarding the price. ‘And that is part of a unified agreement we signed last year. So, regarding electricity to Singapore, the process stages are ongoing, but we are still negotiating the price, and our regulations stipulate that the price is determined by the government. We want a win-win, mutually beneficial outcome,’ Bahlil explained at the State Palace on Monday (6/7/2026). ‘But I think there will be a meeting point soon. We want everything to have benefits that are win-win for both parties. (Currently) it’s not win-win. I feel it’s not win-win at the current price.’ Minister of Investment and Downstreaming, who is also CEO of Danantara, Rosan Perkasa Roeslani, spoke about Indonesia’s plan to export electricity to Singapore. The export capacity could reach 3.4 Giga Watts (GW) over several years. Rosan conveyed that Danantara will act as the exporter, in cooperation with Singaporean companies Keppel Electric, Sembcorp Industries, and Singapore Energy Interconnections. ‘We, as the Indonesian company, will [develop the electricity]. Keppel and Sembcorp are the off-takers. Yes, because they are also state-owned enterprises,’ Rosan explained at the State Palace on Monday (6/7/2026).