Malaysia and Indonesia pursue tech ambitions amid AI investment surge
Rising investment in chips and data centers creating new opportunities across Southeast Asia, but Malaysia and Indonesia must strengthen local expertise to capture more of economic gains
By Mushfiq Ahmed
KUALA LUMPUR, Malaysia (MNTV) — Malaysia and Indonesia are seeking to turn the global artificial intelligence boom into a lasting economic advantage, attracting billions of dollars in semiconductor manufacturing and data center investments while facing a critical question: can foreign capital create high-skilled jobs, stronger domestic businesses and homegrown technological capabilities?
The two Southeast Asian economies are benefiting from companies diversifying their supply chains amid intensifying strategic competition between the United States and China.
Growing demand for AI computing power has accelerated investment in semiconductors, electronics and data centers, positioning the region as an increasingly important destination for technology companies.
ASEAN’s foreign direct investment inflows rose 8% to $226 billion in 2024, even as global FDI fell 11%, according to the ASEAN Investment Report 2025. The growth was partly driven by the AI boom and rising demand for semiconductors and data center infrastructure.
“Semiconductor and data centres are becoming a new growth pillar of Southeast Asian economies,” Dr. Maria Monica Wihardja, fellow and co-coordinator of the Media, Technology and Society Program at the ISEAS-Yusof Ishak Institute, told MNTV.
Malaysia has emerged as a major destination for data center investment, particularly in Johor, which benefits from its proximity to Singapore and the development of the Johor-Singapore Special Economic Zone.
Indonesia is pursuing a similar strategy in Batam, where Nongsa Digital Park has become a focal point for digital infrastructure investment. Its location near Singapore offers access to regional connectivity and international business networks.
According to UNCTAD’s Global Investment Trends Monitor No. 50, data centers accounted for more than one-fifth of global greenfield investment values in 2025. Malaysia attracted $4 billion in data center investment, placing it among the world’s top 10 recipients.
The expansion could generate opportunities beyond construction and equipment installation. Data centers require electrical engineers, network specialists, cybersecurity professionals, software developers and technicians to operate and maintain complex infrastructure.
Semiconductor investment could also support employment in chip manufacturing, testing, packaging, equipment maintenance and research. As companies move toward more sophisticated operations, demand could increase for chip designers, materials scientists, process engineers and specialists in advanced packaging.
For local businesses, the opportunity lies in supplying components, engineering services, software, maintenance and other specialized products to multinational companies.
From manufacturing capacity to technological capability
Wihardja told MNTV that much of ASEAN’s semiconductor investment remains concentrated in lower-value assembly, packaging and testing operations.
Malaysia has ambitions to move into higher-value activities, including integrated circuit design, advanced packaging, specialized fabrication facilities and research and development. Indonesia faces a larger gap in developing the capabilities needed to progress beyond assembly, packaging, testing and early-stage design activities.
Moving up the value chain would allow both countries to capture more economic returns from technological development rather than relying primarily on manufacturing processes and technologies developed elsewhere.
Achieving this transition will require investment in education, technical training and research, alongside stronger links between universities, vocational institutions and industry.
Graduates will need skills in electrical and electronic engineering, computer science, semiconductor process technology, automation, data analytics and AI development.
Existing workers will also require opportunities to upgrade their skills as factories and digital infrastructure become more automated.
Wihardja stressed the importance of strengthening links between multinational corporations and small and medium-sized enterprises, including technology startups.
Multinationals can help smaller firms secure seed funding, scale production, reach customers and navigate regulatory requirements. Collaboration could enable local businesses to develop products and services that become part of regional and global technology supply chains.
She also highlighted consolidation as a way for smaller businesses to pool limited resources and share facilities, while effective competition policies would help prevent dominant companies from shutting emerging businesses out of the market.
Without such measures, investment could produce modern industrial facilities without creating a sufficiently broad base of domestic technological expertise.
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