With a population of over 270 million and a growing middle class, Indonesia stands as one of Southeast Asia’s largest smartphone markets.
However, Apple’s recent proposal to build a factory in Batam—aimed at supplying 65% of the global market for Bluetooth trackers—was deemed insufficient by the Indonesian government.
Apple’s proposed $1 billion investment to establish an AirTag factory failed to meet the government’s requirements, resulting in a continued ban on the iPhone 16 in Indonesia, the region’s largest economy.
Expectations for Apple’s Investment
Minister of Communications and Digital, Meutya Hafid, expressed hopes for larger-scale investments from Apple following the tech giant’s initial commitment to Batam.
“We expect more significant investment from Apple, especially considering the substantial contributions from other companies. Apple, as a global tech leader, should match those expectations,” Meutya stated during a press briefing in Jakarta on Thursday, according to antaranews.com.
She noted that companies like Microsoft had pledged $1.7 billion in investments in Indonesia, setting a high benchmark for global corporations.
Apple’s Latest Proposal
Previously, the government rejected Apple’s initial proposal for being far below its requirements. On January 6, 2025, Industry Minister Agus Gumiwang Kartasasmita confirmed receipt of Apple’s revised investment proposal.
This step was necessary to grant Apple the certification required to sell the iPhone 16 in Indonesia, as reported by cnnindonesia.com.
“It’s under review. Negotiations are ongoing between our technical team, led by the Director General of ILMATE, and Apple’s team, headed by Nick Amman,” Agus said.
During a meeting on August 7, 2024, Apple proposed meeting local content requirements (TKDN) through innovation, its third investment model. However, the offer did not align with the government’s four key fairness principles:
- Comparative Investment: Apple’s investment must be comparable to what it offers in peer nations like Vietnam and India.
- Industry Benchmarking: Apple’s contributions should match other electronics companies like Samsung ($8 trillion IDR), Xiaomi ($5 trillion IDR), and Huawei.
- Economic Impact: Investments must boost Indonesia’s state revenue through local value creation and reduced reliance on imports.
- Job Creation: The scale of employment opportunities Apple generates locally will weigh heavily in the government’s evaluation.
Apple’s Commitment to Indonesia
Investment Minister Rosan Roeslani revealed Apple’s plans to invest $1 billion (approximately 16 trillion IDR) in Batam for the first phase of its AirTag vendor factory, slated for completion in early 2026.
“Apple is fully committed to building this factory and bringing in other vendors afterward,” Rosan stated after meeting Apple’s VP of Global Policy, Nick Amman, in Jakarta on January 7.
The project is expected to create 2,000 local jobs, with further phases under consideration. Meutya emphasized the need for parallel investments in workforce development to support the factory’s operations.
“Investments in facilities must go hand-in-hand with building human resource competencies,” she added.
The Indonesian government has pushed Apple to adopt its first investment model—building a manufacturing facility. So far, Apple has focused on the third model, establishing initiatives like the Apple Academy, which remain below government expectations.
Why the iPhone 16 Is Still Banned
Indonesia’s TKDN (Local Content Requirements) policy, introduced in 2017, mandates that 40% of all smartphones sold locally must use domestically sourced or manufactured components. This regulation aims to reduce import dependence, boost local manufacturing, and encourage technology transfer.
However, Industry Minister Agus Gumiwang clarified that Apple’s proposed AirTag factory does not align with TKDN requirements.
“AirTags are accessories, not core components of handphones, computers, or tablets (HKT). Based on regulations, they cannot qualify for TKDN certification required to allow Apple to sell the iPhone 16 in Indonesia,” he explained during a press conference, as quoted by benarnews.org.
Challenges for Foreign Investment
Indonesia’s stringent TKDN policies and joint venture requirements have been cited as barriers to foreign investment. Lydia Ruddy, Executive Director of AmCham Indonesia, stated, “These regulations pose significant challenges, especially for companies integrated into global supply chains.”
Additionally, economist Josua Pardede noted that complex licensing, inconsistent regulations, and underdeveloped infrastructure make Indonesia less attractive than neighboring countries like Vietnam or Malaysia.
Despite its large population, Indonesia’s purchasing power for premium products remains limited, whereas Vietnam benefits from proximity to larger markets like China.
For Indonesia to compete more effectively, leveraging projects like Apple’s proposed factory could help bolster its global competitiveness.
Source: cnnindonesia.com, tempo.co, antaranews.com, benarnews.org
Image credit: via Apple
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