Apple faces sales ban and plans to invest $100 million to set up a factory

Apple (AAPL) failed to meet the Indonesian law requiring smartphones to reach a 40% localization rate, resulting in the ban on sales of its latest iPhone 16 series. According to the Indonesian government's confirmation on November 20, Apple has submitted a factory plan to the Indonesian government and plans to invest US$100 million to build a parts factory in West Java. Indonesian Ministry of Industry spokesperson Febri Hendri Antoni Arif said that the government will hold a meeting in the near future to discuss and accelerate the implementation of the investment case.

Historically, insufficient investment scale has affected product sales

Since 2018, Apple has established the Apple Developer Academy in Indonesia, providing diverse courses including programming, marketing and project management, with a cumulative investment of approximately US$99 million. Although this move has strengthened the cultivation of local scientific and technological talents, it has not directly increased the proportion of localized iPhone production. According to Indonesian laws and regulations, manufacturers can achieve the 40% localization rate through direct investment.

Apple originally promised to invest 1.7 trillion Indonesian rupiah (about 108 million US dollars) in Indonesia, but because the funds were not fully available, the localization ratio of the iPhone 16 was only 35%. As its product origin certification (TKDN) failed to be renewed within the validity period, the Indonesian government issued a sales ban on October 25, causing significant market pressure on Apple.

Indonesia regulates the market and strengthens domestic manufacturing capabilities

Indonesia is Southeast Asia's largest economy, and its policies stipulate that smartphones must contain 40% locally produced parts or materials before they can be sold on the market. Enterprises can choose direct investment methods to meet standards. The core purpose of this regulation is to encourage international companies to establish supply chains in Indonesia and promote the growth of local manufacturing and related employment opportunities.

The Indonesian market is very attractive to Apple. The area has a large young population and the penetration rate of smart phones is rising rapidly. To this end, Apple chose to set up a factory to solve the ban on sales and plans to set up West Java as a base for the production of parts. Once the investment case is officially approved, Apple's manufacturing and sales in Indonesia will be further integrated and is expected to expand its market share.