Indonesia Digital Transformation - Market Share Analysis, Industry Trends & Statistics, Growth Forecasts (2024 - 2029)

Key Highlights

• With the introduction of Industry 4.0 in the manufacturing sector, numerous factories are embracing digital technology to improve, automate, and upgrade the whole process. Industry 4.0 technology, such as robotization, is already commonplace in many enterprises.
• Rapid technological advancement is expected to be accompanied by strong economic expansion. According to the Ministry of Finance, adopting new technologies may boost Indonesia's economy by as much as USD 2.8 trillion by 2040. The use of technology, particularly digital, robotics, and automation, is growing in the country and has a significant influence on many industries, including manufacturing, energy, and housing, driving the demand for the studied market in the country.
• For instance, Indonesia's digital economy is on a rapid growth trajectory, bolstered by the widespread adoption of digital technology and the prominence of platforms like Tokopedia and GoJek. To realize its vision for future cities, comprising "Decent Cities" (comfortable, liveable, and safe), "Greener Cities" (resilient to climate change and disasters), and "Smarter Cities," Indonesia initiated the "Smart City" vision spanning from 2015 to 2045.
• Furthermore, the Ministry of Communication and Informatics in Indonesia unveiled the "Digital Indonesia 2021-2024" strategy, focusing on digital infrastructure, governance, economy, and society. This blueprint outlines Indonesia's policy objectives, implementation strategies, and timelines for its digital transformation, with a key emphasis on ensuring a more balanced distribution of the digital economy across the nation's regions.
• Indonesia's Ministry of Communication and Informatics (MCI) introduced the "Roadmap Indonesia Digital 2021-2024," designed to propel the nation's digital evolution. The roadmap is structured to facilitate a more even economic landscape, leveraging technology, digital connectivity, and innovation.
• However, the Indonesian digital transformation market is witnessing a demand for more skilled human resources. According to a World Bank Report, technology graduates of the nation frequently fall short of the industry norm, and there will be a shortage of 9 million ICT professionals in the period between 2015 and 2030. In addition, internet and technology business needs more and better facilities in terms of quantity and quality. There is a gap in Indonesia's infrastructure for both internet and energy.

Indonesia Digital Transformation Market Trends

Increase in the adoption of big data analytics and other technologies in Indonesia

• Indonesia has increasingly embraced IoT solutions to enhance business processes and elevate its cities, making them smarter, safer, and more efficient. The government's robust support for smart city initiatives is a key catalyst for this surge in IoT adoption. Indonesia's smart city endeavors are channeled into five core areas: smart mobility, building and environment, industry, health, and governance. Given the evident advantages, the country's IoT expenditure was set for a significant uptick.
• A joint study by Google, Temasek, and Bain & Company forecasted Indonesia's digital economy to surpass USD 124 billion by 2025. The Indonesian government actively promoted digital adoption among its 64 million MSMEs, urging them to embrace a 'Go Digital and Go Global' mindset. Their ambitious target was to have 30 million MSMEs digitally onboarded by 2024.
• Additionally, the landscape of physical IoT devices, spanning from cars and home appliances to factory robots and sensors, was set to revolutionize various aspects of Indonesian life, from healthcare to transportation. Concurrently, the demand for AI and machine learning experts surged, especially in sectors like banking, e-commerce, medicine, space exploration, and translation.
• Moreover, Indonesia's significant investments in 5G and IoT were poised to reshape the country's connectivity paradigm. The advent of 5G was anticipated to have far-reaching implications across industries, particularly in bolstering immersive services like augmented reality, streaming, and gaming. Ericsson's research suggested that within two years of the 5G networks' commercial launch, an estimated five million Indonesian smartphone users could opt for 5G services. As of September 2023, Indonesia's mobile network boasted a median download speed of nearly 24 Mbps, with upload speeds averaging around 13.33 Mbps. Furthermore, the recorded peak download speed for Indonesia's 5G network in May 2023 surpassed 166 Mbps.
• Indonesia stood out as a frontrunner in harnessing IoT's potential. The technology reshaped healthcare spending, industrial productivity, and corporate expenses. Notably, industries like manufacturing, agriculture, and natural resources collectively contributed 50% to Indonesia's GDP, stood to gain the most from IoT applications.

Manufacturing is Expected to be the Fastest Growing Market

• Indonesia is a notable industrial manufacturer that extensively embraces automation in its sectors. Manufacturing plays a significant role in a nation's GDP, with Indonesia's manufacturing sector contributing more than 18.67% to its economic output in 2023, making it the primary contributor. The substantial manufacturing activities in Indonesia are expected to bolster the demand for the market under examination.
• In 2023, Statistics Indonesia reported that Indonesia's manufacturing sector contributed approximately IDR 3.9 quadrillion to the country's GDP. Over the past decade, this sector has consistently held the position of being Indonesia's primary GDP contributor while also emerging as a pivotal investment destination and a major job creator.
• According to local economic studies, it has been determined that micro, small, and medium enterprises (MSMEs) constitute more than 99% of all business entities in Indonesia, with the food and beverage sector accounting for at least 44% of these enterprises. Consequently, the increasing adoption of technology in the region's manufacturing sectors will significantly augment market prospects. As an illustration, the Indonesian government is actively encouraging the local food and beverage industry to embrace digital advancements and transition towards the utilization of technological innovations as an integral component of the national Making Industry 4.0 industrial strategy.
• Moreover, the increasing region's automotive industry and the adoption of automated technologies in the manufacturing hubs are expected to drive the market. According to the local automotive industry association Gaikindo, new vehicle sales in Indonesia increased by 3% to 101,048 units in March 2023, compared to 98,536 units sold in the same period last year. Moreover, the existence of vendors already offering robotic technology is expected to create a significant impact on the market's growth. For instance, Hyundai Robotics is presently operating its first industrial robotic automotive facility in Indonesia, and the utilization of UR3 Cobots at JEIN, a producer of car audio-visual and navigation equipment, will be a noteworthy impetus for market growth.
• A study conducted by the Journal of Science and Technology Policy Management has revealed that the implementation of Industry 4.0 will enhance the manufacturing sector in Indonesia. Several companies constantly try to drive significant automation technologies and create substantial market demand in the region's manufacturing sectors. For instance, in August 2023, Rockwell Automation, the company specializing in industrial automation and digital transformation, announced its inaugural ROKLive Jakarta event. This event aims to showcase the advantages of adopting automation and digital transformation as crucial catalysts for efficiency, sustainability, and expansion within the manufacturing industry. Such activities would enhance the market opportunities for many vendors in the region.

Indonesia Digital Transformation Industry Overview

• In April 2024, Neura Robotics and OMRON Robotics and Safety Technologies Inc. unveiled a strategic partnership. Their joint goal is to transform the manufacturing landscape by integrating cognitive robots into factory automation. These robots harness cutting-edge AI to elevate efficiency, flexibility, and safety standards. The collaboration paves the way for many new applications, from intricate assembly tasks to detailed quality inspections and adaptive material handling processes.
• In April 2024, Microsoft unveiled its plans for a monumental USD 1.7 billion investment over the next four years in Indonesia. This investment will primarily focus on bolstering the nation's cloud and AI infrastructure. In addition, it aims to provide AI skilling opportunities to a staggering 840,000 individuals and offer support to Indonesia's burgeoning developer community. The Minister of Communications and Information Technology of Indonesia underscored the pivotal role of Microsoft in propelling Indonesia toward its ambitious vision, Golden Indonesia 2045.

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