Indonesia and Apple Inc. have reached an agreement to lift the ban on iPhone 16 sales, according to sources familiar with the negotiations. This development marks the conclusion of a five-month dispute that compelled the American technology company to increase its investment commitment in Indonesia to $1 billion.
The Ministry of Industry, which oversees the enforcement of the ban, is expected to finalize a memorandum of agreement with Apple within the week. Sources indicate that a press briefing will be conducted, and the ministry plans to issue a permit for the sale of iPhone 16s at the earliest opportunity.
This resolution follows a conflict that began in October when Indonesia denied a permit for the sale of Apple's latest device, citing non-compliance with local manufacturing regulations for smartphones and tablets. In response, Apple pledged a $1 billion investment in Indonesia, a proposal that President Prabowo Subianto instructed his ministers to accept. However, last month, the Ministry of Industry unexpectedly maintained the ban while seeking improved terms.
In addition to the $1 billion investment, Apple will also focus on training local talent in research and development related to its products, enabling them to create similar software and design their own products. This initiative is expected to satisfy the government, which has been advocating for Apple to establish R&D facilities in Indonesia.
The investment in innovation will be conducted through programs distinct from the existing Apple academies, according to one source.
Currently, Apple has no immediate plans to manufacture iPhones in Indonesia, as noted by the sources.
Although both parties have agreed to the terms for lifting the ban, there is a history of Indonesia reversing decisions, which leaves the deal's finalization uncertain.
Neither Apple nor Indonesia’s Ministry of Industry has responded to requests for comments.
The unexpected last-minute cancellation of the deal in January caught many off guard, although discussions had been progressing positively, according to sources. Recently, industry minister Agus Gumiwang Kartasasmita revealed that Apple had resolved a $10 million debt owed to the government for failing to adhere to local regulations from 2020 to 2023.
A Victory for Prabowo
This agreement represents a significant achievement for Indonesia, demonstrating the effectiveness of its assertive strategies in persuading a major foreign corporation to increase its investment in local production rather than merely utilizing the country as a sales outlet. Previously, the government indicated that Apple had invested approximately $95 million in Indonesia.
The timing of this deal is particularly advantageous for Prabowo. The image of a prominent US technology firm conceding to his administration could enhance his domestic reputation, which has suffered due to several policy reversals that have caused public confusion. Additionally, his proposal for extensive budget cuts, which jeopardized jobs and scholarships, led to several days of protests last week.
For Apple, this agreement opens the door to Indonesia’s vast consumer market at a time when its sales in China are experiencing a downturn. Although Apple does not rank among the top five smartphone brands in Indonesia, the country’s population of 278 million, with over half under the age of 44 and technologically adept, presents a valuable opportunity.
Apple's $1 billion investment plan includes establishing a facility on Batam Island to manufacture AirTags, devices that help users track their luggage, pets, or other items. The company is collaborating with one of its major suppliers, Luxshare Precision Industry Co. (002475.SZ), to manage the plant, which is expected to contribute to 20% of the global AirTags production, as reported by Bloomberg News.
Additionally, part of the investment will be allocated to creating a facility in Bandung, located about three hours southeast of Jakarta, for the production of various accessories, as well as funding Apple academies that will provide students with essential technology skills.