Indonesia to lift iPhone 16 ban as Apple secures investment agreement

After five months of "difficult" negotiations, US tech giant Apple has reached an agreement with the Indonesian government, allowing its latest smartphones to be sold in one of Asia's largest markets. Previously, the Indonesian government banned the marketing and sale of the iPhone 16 in October of last year because Apple failed to meet the requirement of 40% localization rate for mobile phone components. This agreement marks a significant step forward for Apple's presence in the region.

According to a memorandum of understanding signed on Wednesday, Indonesian Industry Minister Agus Gumiwang Kartasasmita said that Apple has committed to establishing a semiconductor research and development center in Indonesia, which will be "the first such facility in Asia." A statement from the Indonesian Ministry of Industry said that Apple's investment and innovation plan for 2025 to 2028 has been approved, paving the way for further collaboration.

Under the plan, Apple will build two factories: one in Bandung, West Java, to produce accessories, and another on Batam Island near Singapore, worth $150 million (approximately A$238 million), to produce AirTags. AirTags are tracking devices sold by Apple to locate items such as users' wallets or keys. Indonesian Minister of Investment and Downstream Industries Bahlil Lahadalia said in mid-January that the Batam Island factory is expected to supply 65% of the world's AirTags and is scheduled to be completed in early 2026.

Kartasasmita said that the long negotiations with Apple were "very difficult." According to CNBC Indonesia, the iPhone 16 will be available for sale "as soon as possible." Apple Indonesia said in a statement to Agence France-Presse: "We are excited to expand our investment in Indonesia and can't wait to bring all of Apple's innovative products, including the all-new iPhone 16e series, to our customers." This signals a strong commitment from Apple to the Indonesian market.

Previously, Apple proposed investing $100 million in accessory and component factories in November of last year, but was rejected by the Indonesian government on the grounds that the proposal was "not in accordance with the principle of fairness." Kartasasmita referred to Apple's larger investments in neighboring Vietnam and Thailand. Subsequently, Apple committed to investing $1 billion in an AirTag factory in January of this year, but still failed to finalize negotiations. These negotiations highlight the Indonesian government's push for more substantial investment.

Indonesia is the largest economy in Southeast Asia, with approximately 48 million middle-class consumers, but the country does not have an official Apple Store. Nevertheless, analysts say that Indonesia has surpassed Thailand as the largest iPhone market in the region. Apple CEO Tim Cook visited Indonesia last year to explore investment in the country and ways to move the supply chain out of China. This visit underscores the importance of the Indonesian market to Apple's global strategy.

James Guild, a trade expert at the International Islamic University of Indonesia, said that in recent years, Indonesia has deployed "the same trick" by banning TikTok, blocking Netflix, and refusing to export nickel "until they get investment terms that are seen to be more in the national interest." Dr. Guild said: "You should expect that we're going to see more of this, where they're using market access to get more concessions from foreign investors." This strategy reflects Indonesia's assertive approach to attracting foreign investment.

Dr. Guild also pointed out: "If American tech companies—like Tesla or Apple or whoever—are unwilling to invest in Indonesia, Chinese companies will and already have. Indonesia is leveraging that to demand and often get more favorable investment terms." But he said it is unclear whether this is beneficial to the Indonesian economy in the long run. Shortly after banning the sale of the iPhone 16 last year, Indonesia imposed a similar ban on Google Pixel devices. These actions highlight the government's focus on securing favorable terms for the country.

In January of this year, the Indonesian anti-monopoly agency ordered Google to pay a fine of approximately 202 billion Indonesian rupiah (approximately $20 million) for monopolistic practices. The agency found that the Google Play Store, which has a market share of approximately 93% in Indonesia, forced users to pay up to 30% for Google Play Billing, a higher rate than other payment systems. Despite the ban on the sale of iPhone 16 phones, the Indonesian government allowed these devices to enter Indonesia in non-commercial trade. Authorities estimate that as of October 2024, 9,000 iPhone 16 devices purchased abroad had entered the country for personal use.