The world No 38 Indian, who had beaten the higher-ranked Yun Hu of Hong Kong and Korea's Wan Ho Sun in the previous rounds, was beaten 10-21, 15-21 by the Incheon World Junior Championships’ silver medallist.
The 20-year-old Indian hardly threatened Sugiarto and lost the first game tamely.
In the second game too, it was the Indonesian all the way though Srikkanth levelled the scores at 15 after trailing from the start.
Once the Indonesian forged ahead at 16, he reeled off five straight points to take the game and clinch a place in the semi-finals.
On Thursday, Saina Nehwal, P V Sindhu and P Kashyap were shown the door in the second round.
Image: K. Srikanth
Photograph: Stanley Chou/Getty Images
Saina, Sindhu crash out of Malaysian Open
China's Li rules herself out of the 2016 Olympics
Easy for Sindhu, Kashyap; qualifier Pardeshi stuns Murgunde
Sindhu the new star as Saina endures title drought
Saina, Sindhu advance in Malaysia Open