Apple Inc. has submitted a proposal to invest close to $10 million in Indonesia, aiming to expand its product manufacturing footprint in the country.
The US tech giant’s move comes as it negotiates to reverse the Indonesian government’s recent ban on sales of its newest iPhone model.
Indonesia’s Ministry of Industry blocked the iPhone 16 from the market last month, citing Apple’s failure to meet a 40% domestic content requirement.
Apple’s latest proposal includes establishing a manufacturing facility in Bandung, southeast of Jakarta, through partnerships with its suppliers, according to sources, who requested anonymity from Bloomberg.
This factory would produce accessories and components for various Apple products.
The ministry is currently reviewing Apple’s investment plan, which remains tentative and could still undergo changes. A decision is expected shortly, although neither Apple nor the Ministry of Industry responded to requests for comment.
Some context
Indonesia’s government reported that Apple has so far invested approximately 1.5 trillion rupiah ($95 million) in the country through initiatives like developer academies, falling short of its promised 1.7 trillion rupiah.
As part of the crackdown, officials are also urging major e-commerce platforms, including Tokopedia and TikTok, to remove listings for iPhone 16 devices or face potential legal repercussions.
Indonesia has previously demonstrated a firm stance in trade policies, attempting to compel foreign companies to bolster local production.
Earlier this year, the government imposed sweeping import restrictions on items ranging from electronics to chemicals, pressuring companies to expand domestic manufacturing.
The move sparked discontent within the business community, with established manufacturers like LG Electronics Inc. raising concerns about disruptions to component supplies essential for local production.
This latest dispute highlights the challenges Indonesia faces in balancing trade protectionism with the need to attract foreign investment.
Despite Indonesia’s efforts to position itself as a regional manufacturing hub, the sector’s contribution to GDP has declined, dropping from 21.1% in 2014 to 18.7% last year.
What to know
The iPhone 16 ban is also a component of President Prabowo Subianto’s strategy to protect domestic industries by mandating foreign companies to meet local content requirements.
- Alongside Apple, Alphabet Inc.’s Google Pixel has also faced restrictions for similar reasons.
- These actions continue tactics employed by former President Joko Widodo’s administration, which included blocking Chinese technology companies, like ByteDance Ltd., from the local market.
- ByteDance later invested $1.5 billion in a joint venture with Tokopedia to meet local demands.
- While Apple’s proposed investment is relatively modest, securing access to Indonesia’s youthful, tech-savvy market of 278 million consumers could prove lucrative.
- However, Jakarta’s assertive approach could deter potential investors, particularly as companies seek alternatives to China.
- Prabowo’s administration may ultimately find itself balancing the immediate advantages of local investments against the broader risk of discouraging international interest essential for Indonesia’s economic ambitions.
