Less than an hour later, in another big surprise, titleholder Lin Dan succumbed 21-13 21-13 to 13th-seeded South Korean Park Sung-hwan.
Lin won the world title in 2006, 2007 and 2009 and the Olympic gold medal in Beijing in 2008 when there was no world championship.
Park told a media conference “I've gone to the next level in badminton with this result.”
Lin would only say “I made too many mistakes and paid a heavy price for it.”
The run of upsets continued when India's Saina Nehwal, seeded two in the women's singles, lost 21-8 21-14 to Chinese sixth seed Wang Shixian.
“I was trying to be more quick around the net but somehow my movement was very, very slow and I was feeling too tired today,” said Nehwal.
There was disappointment too for the home crowd when Chinese-born Pi Hongyan, who plays for France, lost 21-13 21-15 to third seed Wang Xin of China.
Chong Wei's defeat continued his poor record at world championships and Olympic level but confirmed Hidayat's renaissance after he had slipped in the rankings in recent years.
The Malaysian top seed went into the match on a high after some fine displays in earlier rounds and with a 9-5 career head-to-head against his fifth-seeded Indonesian opponent.
However, a nervy start handed Hidayat the advantage with Chong Wei's touch at the net unusually suspect. He rallied a little from 9-15 to 12-15 but after that it was Hidayat's game.
RARE ERROR
Chong Wei was more of his old self in the second set but nerves returned in the third.
Hesitancy round the net was compounded by a service fault, a rare error in badminton.
He led 8-5 and 10-8 but once Hidayat squared at 12-12 it was downhill all the way for the unhappy Malaysian.
Malaysia have never won a gold medal at a world championships since the tournament was inaugurated in 1977.
Chong Wei's cause on Friday was not helped by a back problem sustained on Thursday.
“It's quite painful,” he told reporters. “I felt better when I woke up this morning but I pulled it again during the match.”
Modest Hidayat, 29, put his win down to luck, saying “I feel good both physically and mentally.
“Chong Wei wants the world championship because he's never got the big title, only the Super Series and the All England. But he's still young and can wait until next year.”
In Saturday's semi-finals, Hidayat meets Park and second seed Peter Gade of Denmark plays China's Chen Jin, seeded four.
Gade beat Japan's Kazushi Yamada 21-19 21-12 and Chen came from behind to defeat Hsuan Yi Hsueh of Taiwan 22-24 21-5 21-13.
Malaysia still have a chance of gold thanks to their top-seeded pair in the men's doubles, Koo Kien Keat and Tan Boon Heong.
They battled past seventh-seeded South Koreans Jung Jae-sung and Lee Yong-dae 23-25 21-13 21-14 to reach Saturday's semi-finals. - Reuters
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