Apple Inc. is proposing a significant investment of nearly $10 million in Indonesia, aiming to resolve a sales ban on its latest iPhone model, the iPhone 16. The investment would be directed toward establishing a new facility in Bandung, located southeast of Jakarta, in collaboration with Apple’s existing suppliers. This facility would focus on producing accessories and components for Apple products, according to sources familiar with the discussions.
The proposal has been submitted to Indonesia’s Ministry of Industry, which imposed the ban last month, citing Apple’s failure to meet the country’s 40% local content requirement for smartphones and tablets. As a result, the sale of the iPhone 16 was blocked in the country. The ministry is currently reviewing Apple’s plan, although no final decision has been made, and adjustments to the proposal may still occur.
Apple has not publicly commented on the matter, nor has Indonesia’s Ministry of Industry responded to inquiries.
The ban on iPhone 16 sales is part of a broader effort by Indonesia’s government, under President Prabowo Subianto, to encourage foreign companies to ramp up local manufacturing. The country has also taken similar actions against other tech giants, including blocking the sale of Google’s Pixel phones due to unmet local content requirements.
This strategy of using regulatory pressure to promote domestic manufacturing isn’t new in Indonesia. Under former President Joko Widodo’s administration, for instance, the government also forced ByteDance, the parent company of TikTok, to invest $1.5 billion in a joint venture with Tokopedia after the company’s services were impacted by trade restrictions.
Currently, Apple has no standalone manufacturing operations in Indonesia, relying instead on local suppliers for component production. A relatively modest investment of $10 million could provide Apple with more favorable market access in the country, which has a population of 278 million, over half of whom are young, tech-savvy consumers.
However, some critics argue that Indonesia’s aggressive approach could deter other foreign companies from expanding or establishing a footprint in the country, especially those seeking to diversify away from China. While the government hopes the new policy will boost local manufacturing, it risks undermining its broader economic goals by potentially discouraging investment.
Apple’s commitment to investing in Indonesia remains under scrutiny. The company has pledged to invest 1.7 trillion rupiah (about $95 million) in the country, but it has fallen short of that target, contributing just 1.5 trillion rupiah so far, primarily through developer academies. Additionally, the Indonesian government has reportedly asked e-commerce platforms like Tokopedia and TikTok to remove listings for the iPhone 16 or face legal consequences.
Indonesia’s trade policies have faced criticism for their unpredictability. Earlier this year, the government introduced import restrictions on thousands of products, including tech components like MacBook parts and tires. These curbs, meant to pressure foreign companies to invest in local production, sparked backlash from both domestic and international businesses, including established manufacturers like LG Electronics, which complained about supply chain disruptions.
Despite Indonesia’s push for greater manufacturing investment, the country’s local industry has struggled to gain momentum. In fact, manufacturing’s contribution to Indonesia’s GDP has declined over the past decade, from 21.1% in 2014 to just 18.7% in 2023.