Indonesia wins as Apple considers manufacturing iPhones there

Four months since Indonesia banned sales of the iPhone 16 and demanded increasing investment from Apple, it is reported that the company is talking to its suppliers about building the iPhone locally.

Indonesia banned sales of the iPhone 16 in October 2024, shortly after the range was launched. It did so because Apple had fallen short on its commitment to invest in the country, a commitment that had previously exempted it from stringent import requirements.

A series of offers from Apple of direct investment and more creation of its development centers, was followed by a series of rejections by the Indonesian government. Now according to Nikkei Asia, Apple is in talks with its suppliers about potentially manufacturing the iPhone in Indonesia.

There are no further details, but if correct, the news marks a major victory for Indonesia. It also follows the news that Huawei is to manufacture smartphones in the country.

It's still not clear whether Apple could have avoided the ban by fulfilling its original commitment to invest around $110 million in the country. But as well as falling short and only investing $95 million, Apple may also have reached end of an agreement period.

Whatever happened, Indonesia chose to enforce what its government calls a local content quota requirement. Sources vary, but the quota requires companies to locally source between 35% and 40% of components for devices such as smartphones.

Apple has no manufacturing suppliers in Indonesia, though in April 2024, Tim Cook promised to consider local production. Indonesia waited until October 2024 and then banned the then-new iPhone 16 range.

Since then, Apple has made increasingly large offers to the country, starting with a miserly $10 million that wouldn't even have corrected its previous shortfall. After that and a $100 million offer were rejected, Apple reportedly proposed a $1 billion investment — which Indonesia accepted, yet also said was not enough.

That $1 billion offer saw Apple moving some manufacturing to the country's Batam island, but it was manufacturing AirTags. Indonesian Industry Minister Agus Gumiwang Kartasasmita said that this couldn't affect the iPhone 16 ban "because [the factory] has no direct relations [to iPhone components]."

Nonetheless, in late January 2025, Indonesian Investment Minister Rosan Roeslani announced that the country was "within one or two weeks" of resolving the iPhone 16 ban. It's now three weeks since that news, and there has yet to be any official announcement from either Apple or Indonesia.

Creating the manufacturing facilities and associated supply chain to comply with the 35% to 40% quota will be costly, and also take considerable time.

Apple will presumably make it a condition of committing to such manufacturing that the iPhone 16 ban be lifted immediately. Prior to the ban, Apple was predicted to sell 2.9 million iPhones in Indonesia in 2024, meaning it reaches only around 2% of buyers in the country.