The sixth seed, beaten in the first round last year by China's Lin Dan, appeared listless as he fell to Santoso in only 40 minutes.
Santoso faces a quarter-final clash on Friday against Malaysia's top-seeded Lee Chong Wei, who overcame a second-set lapse to beat Poland's Przemyslaw Wacha 21-5 15-21 21-8.
In the women's singles, third seed Zhu Lin of China battled into the quarter-finals with an 11-21 21-17 21-16 victory over Hong Kong's Zhou Mi.
Liu is the highest seed left in the women's draw.
China's top-seeded player Xie Xingfang withdrew from the tournament because of injury while her second-seed team mate, Zhang Ning, lost 21-14 21-17 to South Korean Hwang Hye-youn in the first round on Wednesday.
