Apple to Offer Extra Indonesia Investment to Remove iPhone Ban

The plan would involve Apple investing in a factory in Bandung, southeast of Jakarta.

By Faris Mokhtar, Bloomberg News | Updated: 7 November 2024 16:36 IST

Apple to Offer Extra Indonesia Investment to Remove iPhone Ban

Photo Credit: Reuters

Apple has only invested IDR 1.5 trillion ($95 million) in Indonesia

Highlights

Apple has submitted its proposal to the Indonesia's Ministry of Industry
Last year, Indonesia blocked China’s ByteDance Ltd.
Apple doesn’t have any standalone factories in Indonesia

Apple has proposed investing almost $10 million (roughly Rs. 84 crore) to make additional goods in Indonesia, according to people familiar with the matter, as it seeks to have the country's ban on sales of its latest iPhone removed.

The plan would involve Apple investing in a factory in Bandung, southeast of Jakarta, in partnership with its list of suppliers, the people said, asking not to be identified because they're not authorized to speak publicly. The facility would make products such as accessories and components for Apple gadgets, the people said.

Apple has submitted its proposal to the nation's Ministry of Industry, which last month blocked a permit allowing the sale of the iPhone 16 on grounds the US tech giant's local unit hasn't met a 40 percent domestic content requirement for smartphones and tablets.

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The ministry is deliberating on the proposal, which isn't final and may be subject to change, and is expected to reach a decision shortly, the people said.

Apple didn't respond to a request for comment. The Ministry of Industry also didn't respond to a request for comment.

Indonesia's iPhone 16 ban is the latest example of the pressure new President Prabowo Subianto's government is putting on international companies to boost local manufacturing as it seeks to protect domestic industries. The Southeast Asian nation has also banned the sale of Alphabet's Google Pixel phones because of a similar lack of investment.

The moves are a continuation of similar tactics used under former President Joko Widodo's administration. Last year, Indonesia blocked China's ByteDance Ltd. in a bid to shield its retail sector from cheap Chinese-made goods, prompting the hugely popular video service to ultimately invest $1.5 billion (roughly Rs. 12,653 crore) in a joint venture with Tokopedia, the e-commerce arm of Indonesia's GoTo Group.

Apple doesn't have any standalone factories in Indonesia and like most multinationals, partners with locally based suppliers to make components or finished goods. An investment of close to $10 million (roughly Rs. 84 crore) would be a relatively small price for Apple to pay for freer access to Indonesia's some 278 million consumers — more than half of them under the age of 44 and tech savvy.

While Indonesia may view Apple's additional investment — should it transpire — as a win, its strong arm approach risks deterring other companies from scaling up their presence or establishing a footprint in the first place, particularly firms that are looking to pivot away from China. It may also jeopardize Prabowo's aim of attracting overseas investments to grow the economy and fund policy spending.

According to the Indonesian government, Apple has only invested 1.5 trillion IDR ($95 million and Rs. 8,013 crore) in the nation via developer academies, falling short of its commitment of IDR 1.7 trillion. Officials have also requested that e-commerce players Tokopedia and TikTok take down iPhone 16 sellers on their platforms, or risk legal action.

Indonesia has exhibited haphazard trade policies before.

Earlier this year, the government imposed import curbs on thousands of products — from Macbooks to tires to chemicals — to force foreign companies to scale up manufacturing. But the move ignited a furore among the business community, including players with a long-established manufacturing presence in the country such as LG Electronics, which complained it couldn't import certain components to make washing machines and televisions.

Despite Indonesia's repeated calls for international companies to boost manufacturing, its local industry is languishing. Manufacturing as a proportion of gross domestic product slipped to 18.7 percent last year from 21.1 percent in 2014.

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