JAKARTA — Indonesia and Apple Incorporated have reached an agreement to lift the country's ban on iPhone 16s, concluding five months of negotiations and prompting Apple to raise its investment commitment to $1 billion. This resolution, which involves signing a memorandum of agreement, sets the stage for iPhone 16 sales to resume soon, following the Ministry for Industry's endorsement.
The dispute began last October when Indonesia refused to issue the required permit for Apple's latest device under domestic manufacturing regulations. Apple responded by pledging to invest $1 billion, which Indonesian President Prabowo Subianto advocated, urging his ministers to accept the offer. Although the Ministry of Industry upheld the ban last month due to demands for more favorable terms, negotiations continued steadily.
According to sources familiar with the discussions, the new deal entails Apple's commitment not only to financial investment but also to local capabilities development. Apple will provide training for Indonesian experts on research and development, helping them create similar software and design their products. This innovation investment will surpass existing Apple academies and aims to develop local expertise.
While Apple currently has no immediate plans to manufacture iPhones locally, this deal offers significant reassurance to Indonesia’s government, which has emphasized the need for research and development facilities. The government's push reflects its desire for foreign companies like Apple to invest more substantially than just selling products within its borders.
Adding to the complexity of talks, Apple recently settled a $10 million debt owed to the Indonesian government for failing to comply with local regulations between 2020 and 2023. This financial settlement represented another bargaining chip for the government as negotiations progressed.
The agreement is viewed as beneficial for President Prabowo, whose administration faced scrutiny after multiple policy reversals led to public confusion. The prospect of Apple, a major US tech player, yielding to government pressure provides political leverage he can wield amid local unrest surrounding recent spending cut proposals.
For Apple, re-entrance to the Indonesian market, home to about 278 million people, is appealing, especially as sales growth has plateaued in China. Despite being outside the top five smartphone brands in Indonesia, the demographic consists largely of tech-savvy young people, making it an attractive prospect.
Apple's investment is also expected to involve establishing production facilities on the island of Batam for AirTags—devices used for tracking personal items—which are anticipated to comprise about 20% of global production for the company. A secondary facility near Bandung will manufacture various accessories and expand educational initiatives.
This agreement appears to be a turning point for both Indonesia and Apple, signaling potential shifts toward local production and technology education. Though both parties are optimistic, it's important to note Indonesia's history of renegotiation; past deals have faltered unexpectedly. Nonetheless, the foundations laid by this new agreement may yield transformative growth opportunities across Indonesia's tech sector.