Apple is in talks with its suppliers about potentially manufacturing iPhones in Indonesia, which would mark a victory for the government in its attempts to force the tech giant to make more substantial investments in exchange for access to the Indonesian market.
According to a report late yesterday by Nikkei Asia, Apple is exploring the possibility of setting up a manufacturing facility for the handsets in Indonesia as part of its strategy to lift a government-imposed sales ban on its latest models.
As the Nikkei report notes, this “would mark Apple’s first-ever iPhone production in the Southeast Asian nation, where it has almost no supply chain ecosystem.” It would also “significantly boost Indonesia’s efforts to create jobs and elevate its tech manufacturing industry.”
It would also mark a victory for Indonesia’s government, which back in October banned the sale of Apple’s new iPhone 16 handsets, which were released globally in September, on the grounds that the tech giant had failed to fulfill its local content requirements. These rules, which require certain smartphone handsets to contain at least 40 percent locally manufactured components, are designed to force foreign companies to make substantial investments that transfer technology to Indonesia and create high-quality jobs. Jakarta has also banned the sale of Google’s Pixel smartphone on the same grounds.
In response to the October ban, Apple has held several rounds of talks with the Indonesian government to see how it might fulfill the Indonesian requirements. Apple initially moved in with a low-ball offer to invest $100 million in building an accessory and component manufacturing plant in the country. But the Indonesian government said that this was insufficient to reverse the iPhone 16 ban, with one minister comparing the proposal to Apple’s much more substantial investments in neighboring Vietnam and Thailand.
Apple then promised to invest $1 billion, including in an AirTag production facility on the island of Batam, which is expected to begin operations in 2026. While Indonesia welcomed this, it said that this was also not enough to reverse the iPhone ban, with Industry Minister Agus Gumiwang Kartasasmita pointing out that AirTag production “has no direct relations” with the manufacturing of iPhones.
The Nikkei report did not include many details about the Apple investment, and even if it is confirmed, building factories and shifting sophisticated supply chains is likely to take some time. As Apple Insider noted, the tech giant “will presumably make it a condition of committing to such manufacturing that the iPhone 16 ban be lifted immediately.”
Whatever the conditions, the report suggests that Indonesia has been successful in using its considerable leverage – it is both the world’s fourth-most populous nation and its fourth-largest mobile market – to extract concessions from one of the world’s most powerful companies.
Apple has a lot of reasons to play ball, given the risk of ceding an important market to its rivals. As of last month, China’s Oppo was the most popular smartphone brand in Indonesia, with a share of 19.14 percent of the market. This was followed by South Korea’s Samsung (17.95 percent) and the Chinese brands Xiaomi (15.53 percent) and Vivo (14.52 percent). Apple made up just 7.3 percent of sales in January, down from 12.8 percent in October, when the ban on the latest iPhone was imposed.
As Hilman Palaon noted last month in an article for the Lowy Institute’s Interpreter blog, Chinese smartphone manufacturers like Oppo, Vivo, and Xiaomi “have become market leaders in Indonesia by establishing local manufacturing operations,” aligning themselves with the government’s domestic production requirements. Huawei, too, recently announced that it would be releasing its smartphones in Indonesia beginning in March, and “appears to be meeting Indonesia’s requirements by partnering with a local manufacturing firm,” according to Apple Insider.
Apple has seemingly recognized the reality that if it wants to play ball in Indonesia, it has to do so according to the government’s rules.