Despite a billion-dollar promise from Apple to enhance Indonesia’s economy, the iPhone 16 continues to be banned from sale in the country.
Initially, Apple had its offers of $10 million and later $100 million turned down by the Indonesian government, leading to a substantial $1 billion manufacturing proposal that aligned with the government’s financial expectations.
Current Developments
Governments in populous nations are becoming increasingly astute in negotiating for benefits before allowing Apple access to their markets, often stipulating substantial investments in exchange.
For instance, India notably postponed the establishment of Apple stores until the tech giant committed to extensive manufacturing in the region.
Initially, Indonesia sought a more modest investment of $109 million for a developer academy and an additional $10 million for manufacturing. However, when these goals fell short, the government significantly increased its demands by prohibiting the sale of the iPhone 16 and requiring a much larger investment.
Apple’s first $100 million proposal was deemed insufficient, and the government subsequently requested a billion-dollar manufacturing investment. Recent reports confirm that Apple has agreed to these terms, with plans for extensive AirTag production.
Billion-Dollar Proposal Denied
Despite Apple’s acceptance of the requested investment, Reuters reveals that the government persists in prohibiting the iPhone 16 from being sold—citing a peculiar requirement.
The government now explicitly demands that Apple manufacture iPhone components within the country; AirTags do not qualify.
Minister Agus Gumiwang Kartasasmita stated that Apple had secured a deal to construct a facility producing its AirTag tracking device on Batam island, near Singapore, but such production does not meet the criteria for a locally made iPhone part.
“There is no basis for the ministry to issue a local content certification that would allow Apple to sell the iPhone 16 because (the facility) has no direct connection,” he elaborated, insisting that only phone components will be considered.
DMN’s Perspective
Indonesia is clearly adopting a firm negotiating stance. The government could have threatened to halt iPhone sales unless Apple complied with its terms, potentially initiating the ban during negotiations to illustrate its seriousness and expedite the process. Instead, the ban was set as an initial action.
The country’s desire for a significant investment from Apple isn’t surprising. With a population of 284 million, Indonesia ranks as the fourth most populous nation globally, trailing only China, India, and the USA. Observing India’s successful pressure on Apple for substantial manufacturing commitments, Indonesia evidently believes it merits a fair share of investment for market access.
However, one might question the reasoning behind its insistence on specific production. A billion dollars dedicated to AirTag manufacturing is similar to a billion dollars spent on iPhone component production. My hypothesis is that Indonesia is strategically playing a high-stakes game—securing the AirTag facility commitment first, then leveraging the iPhone situation to extract even greater investment.
In the end, Indonesia is likely to prevail. Whether or not it secures an additional billion dollars, with the potential market of iPhone 16 consumers on the line, Apple will undoubtedly offer a more lucrative deal.
Photo by Alim on Unsplash
FTC: We use income earning auto affiliate links. More.
