Apple is set to make a significant investment of US$1 billion in Indonesia, marking a pivotal shift in the tech giant’s engagement with Southeast Asia’s largest economy. This investment comes in response to Indonesia’s strict Tingkat Komponen Dalam Negeri (TKDN) policy, which mandates a 40 percent local content requirement for smartphones sold in the country. Recently, Indonesia imposed a ban on the sale of the iPhone 16 due to Apple’s non-compliance with these regulations.
Initially, Apple proposed a US$100 million investment to build an accessory and component plant to address the TKDN requirements. However, this proposal was rejected by the Indonesian government, which deemed it insufficient to meet the 40 percent local content threshold. Recognizing the importance of the Indonesian market and the growth potential, Apple revised its commitment to US$1 billion. The new investment will establish a full-scale manufacturing plant to produce essential components locally.
Indonesia’s TKDN Policy: An overview
The TKDN policy is Indonesia’s local content regulation aimed at bolstering domestic manufacturing and reducing reliance on imports. For smartphones, this requirement is set at 40 percent, compelling companies to source a significant portion of their components locally. This policy extends across various sectors, including electronics, automotive, telecommunications, and renewable energy, with the overarching goal of fostering local industries, creating jobs, and attracting foreign investment into the manufacturing sector.
Apple’s sales in Indonesia: A fast-growing market
Indonesia presents significant growth potential for Apple, despite its relatively modest market share compared to competitors. As of October 2024, Apple held nearly 12 percent of the mobile phone market in Indonesia, marking a slight increase compared to the previous year. This growth indicates a steady rise in Apple’s presence since 2015, despite trailing behind Android competitors such as Oppo, Samsung, Xiaomi, and Vivo.
Apple’s investments in Indonesia and regional comparisons
Apple’s commitment to invest US$1 billion in Indonesia represents a significant escalation of its presence in Southeast Asia. This investment addresses regulatory challenges stemming from Indonesia’s TKDN policy and aims to lift the current iPhone 16 ban. The funds will be used to establish a manufacturing plant dedicated to producing components for Apple products, ensuring compliance with the 40 percent local content requirement.
Previously, Apple’s investments in Indonesia were limited to non-hardware initiatives. Since 2018, Apple has operated three Developer Academies in Jakarta, Surabaya, and Batam, focusing on training local app developers. While these academies contribute to skill development, they do not satisfy the TKDN policy for hardware. The new manufacturing plant aims to bridge this gap and solidify Apple’s foothold in Indonesia.
In comparison, Apple has made substantial investments in neighboring Southeast Asian countries. In Vietnam, Apple has invested US$15.4 billion in 35 facilities, reflecting the country’s favorable regulatory environment and supply chain readiness. Thailand’s established electronics ecosystem has attracted over US$24 billion in Apple investments, focusing on components like the Apple Watch and MacBook. These strategic investments have allowed Apple to diversify its supply chain and reduce dependency on China amid geopolitical tensions and supply chain disruptions.
By committing to a US$1 billion investment in Indonesia, Apple aims to replicate its success in Vietnam and Thailand while addressing specific regulatory challenges. This investment not only ensures compliance with Indonesia’s TKDN policy but also strengthens Apple’s regional supply chain resilience. Additionally, it positions Indonesia as a competitive alternative for tech manufacturing, fostering economic growth, job creation, and technological advancement.
In conclusion, Apple’s US$1 billion investment in Indonesia signifies a strategic response to local regulations and underscores the importance of Southeast Asia in Apple’s global operations. By aligning with the TKDN policy, Apple can secure its market position, contribute to Indonesia’s industrial development, and strengthen its regional manufacturing network.