According to reports, Apple is considering establishing local iPhone manufacturing in Indonesia to lift the ban on the new iPhone 16 series in that nation. This comes after the iPhone 16 was banned from sale for four months, forcing the tech titan to look at domestic production options.
Apple Insider reports that they are negotiating with suppliers on how to set up local production in Indonesia.
Indonesia had earlier granted permission to circumvent stringent import rules if the firm promised to invest in domestic production. But after it defaulted on its initial investment promise, Apple was in for a tough time. Even after making several promises to raise investment, ranging from $10 million to $100 million to a last offer of $1 billion, the government held its ground.
Major Victory for Indonesia’s Tech Production Goals
If Apple goes ahead with local iPhone manufacturing, it would be a huge victory for Indonesia. Already, Huawei has pledged to produce cell phones in the region. The government of Indonesia has been pushing for increased funding for indigenous technology production. Perhaps this action by Apple would be consistent with Indonesia’s overarching strategy to boost domestic smartphone production and promote technological advancement here.
However, it is not certain that Apple might have been able to avert the ban by just honoring its initial investment commitment of $110 million. The company was only able to invest $95 million when the deadline arrived, which quite possibly led to the imposition of the sales ban. The strict ‘local content quota’ legislation in Indonesia, which requires 35–40% of a smartphone’s content to be local, made it difficult for Apple to achieve the requirements in addition to the investment failure.
Apple Is Hesitant to Fulfill Indonesia’s Strict Requirements
With no iPhone manufacturing vendors in Indonesia, they also faced difficulties meeting the local content criterion. Although CEO Tim Cook had pledged in April 2024 to consider local production, Indonesia’s patience expired in October, leading to the prohibition of iPhone 16 models. Apple has tried to negotiate since the ban began with a $10 million proposal that was refused by the government.
Apple’s follow-up $100 million offer was also not what Indonesia was hoping for. Later, Apple finally made a $1 billion investment plan, which was accepted by the Indonesian government but still fell short in some respects. As a part of this agreement, Apple started shifting some of its manufacturing to Batam Island, albeit only AirTags and not iPhones. Indonesian authorities clarified that unless the Batam plant was utilized for iPhone manufacturing, the ban would continue.
What’s Next for Indonesia?
Late in January 2025, Indonesian Investment Minister Rosan Roeslani suggested that an end to the iPhone ban was near, with a possible breakthrough within weeks. Three weeks later, however, there has been no word officially from either Apple or the Indonesian government.
Establishing local iPhone production will take a lot of time and money. Apple will have to fulfill the local content requirement by establishing new supply chains and manufacturing facilities. In return for agreeing to local production, Apple will probably demand the immediate removal of the iPhone 16 ban. Before the ban, Apple was estimated to sell 2.9 million iPhones in Indonesia during 2024, commanding merely around 2% of the market share. Apple will be keen to regain its place, but whether Indonesia would accept these conditions is doubtful.
