Negotiating with one of the largest companies in the world doesn’t sound easy, but that’s precisely what Indonesia has been doing for the past few weeks with iPhone maker Apple. The backstory here is that the country required smartphones that are sold domestically to be made of at least 40% locally manufactured parts.
In October, Indonesia halted sales of Apple's iPhone 16 due to its non-compliance with the regulation requiring domestically sold smartphones to include a minimum of 40% locally produced parts.
Because of that, Apple has plans to invest $1bn in a new manufacturing plant in Indonesia, focusing on producing smartphone components and other products. Apple attempted to counter the ban by proposing a US$100 million investment to build an accessory and component plant, but this offer was insufficient to reverse the decision.
Apple used to circumvent the country's requirement that 40% of the components in phones be made locally. That's not a practical requirement for any country, and the government seemed to know it because it allowed Apple to qualify to sell iPhones thereby launching developer centers instead.
During Apple CEO Tim Cook’s visit earlier this year, former Indonesian president Joko Widodo urged Cook to establish a manufacturing plant. However, Cook reportedly made no commitments.
While the move follows Indonesia’s crackdown on foreign production, it fits a trend: Over the past few years, Apple has diversified its supply chain to reduce reliance on China. For instance, the iPhone 16 is currently manufactured in Brazil, India, and China. Many AirPods models are also assembled in Vietnam.