Indonesia’s Ministry of Industry has snubbed Apple’s proposal to invest 1.6 trillion Rupiah ($100 million) in an iPhone accessory and component factory, saying it’s not enough to justify lifting a ban on sales of the iPhone 16 in the world’s fourth-most populous nation.
In October, industry minister Agus Gumiwang Kartasasmita declared the handset is illegal to use or import in the nation because it had not been approved for use.
The minister cited Apple’s unfulfilled promises to invest in Indonesia and lack of locally produced components as reasons for the ban.
Under an Indonesian law known as Tingkat Komponen Dalam Negeri, 40 percent of the components and/or labor that goes into a smartphone must be made or performed locally. The requirement covers hardware, software, and development investments, and aims to boost Indonesia’s local manufacturing sector.
“Based on today’s leadership meeting and after studying the proposal proposed by Apple, through a technocratic assessment, the Ministry of Industry considers that the proposal submitted by Apple has not met four aspects of fairness,” explained a statement from Agus issued Monday.
The government rated Apple’s offer as uncompetitive compared to its activities in other countries, as well as rival smartphone brands that operate in Indonesia. The government also feels the offer doesn’t adequately add value or contribute to state revenue, or meet job creation expectations.
State media reported that assessment was made after consideration of the profits Apple makes in Indonesia.
While Apple doesn’t make the list of top five smartphone vendors in Indonesia, according to market analyst firm IDC, it did rank as leader of the premium segment. Rival analyst Counterpoint Research agreed and calculated Apple’s share of the $600-plus phone market to be 40 percent.
While there are some very rich Indonesians, the GDP per capita in Indonesia amounts to $14,100 – putting a premium handset out of reach for much of the population.
Ministry spokesperson Febri Hendri Antoni Arif reportedly claimed earlier this week Indonesia is Apple’s top market, measured by volume, in all of Southeast Asia after it shifted 2.61 million units last year.
The sales were purported to generate an estimated Rp30 trillion ($1.88 billion) for the iCompany – a figure rather larger than its $100 million factory offer.
Febri reportedly asserted earlier this week that Apple needs to offer an extra Rp240 billion ($15 million) in investment to qualify under TKDN.
Agus added on Monday that Apple still needs to fulfill its 2023 investment obligations, which amount to $10 million.
The Ministry suggested that Apple establish a local production facility, which would eliminate the need for the triennial investment negotiations required under the TDKN scheme. ®
