Apple Said to Offer $100 Million to Undo Indonesia iPhone 16 Ban

Apple Inc. has increased its offer to invest in Indonesia by almost tenfold, according to people familiar with the matter, in the US tech giant's latest bid to persuade the government to lift its sales ban on the iPhone 16.

The proposal would see Cupertino-based Apple invest almost $100 million (roughly Rs. 844 crore) in Southeast Asia's largest economy over two years, the people said, asking not to be identified because they're not authorised to speak publicly. Apple's previous investment plan of close to $10 million (roughly Rs. 84 lakh) would have involved the company investing in a factory making accessories and components in the city of Bandung, located southeast of Jakarta, Bloomberg News reported earlier.

After Apple submitted its increased offer, Indonesia's Ministry of Industry, which last month blocked a permit allowing the sale of the iPhone 16, is now demanding that the technology behemoth alter its investment plans to focus more on research and development for its smartphones in the country, the people said. The Ministry of Industry hasn't made a final decision on Apple's newest proposal, they added.

Following Apple's initial proposal, the ministry called for senior company executives to meet Minister Agus Gumiwang Kartasasmita. But after flying into Jakarta, Apple's senior executives were told that the minister wasn't available and so they had to meet with the ministry's director-general instead.

Apple and the Ministry of Industry didn't respond to requests for comment.

Apple's new investment proposal came after the Ministry of Industry last month blocked sales of the iPhone 16 on the grounds the US company's local unit hasn't met a 40 percent domestic content requirement for smartphones and tablets.

According to the Indonesian government, Apple has only invested 1.5 trillion rupiah ($95 million or roughly Rs. 801 crore) in the nation via developer academies, falling short of a commitment of 1.7 trillion rupiah (roughly Rs. 907 crore). The Southeast Asian nation has also banned the sale of Alphabet Inc.'s Google Pixel phones because of a similar lack of investment.

Indonesia's hardball tactics appear to be working, with the iPhone 16 ban becoming an example of the pressure new President Prabowo Subianto's government is putting on international firms to increase local manufacturing as it seeks to boost domestic industries.

Indonesia also resorted to such tactics under the administration of former President Joko Widodo, who blocked ByteDance Ltd.'s  TikTok last year to shield its retail sector from cheap Chinese-made goods. This prompted the hugely popular video app to ultimately invest $1.5 billion (roughly Rs. 12,660 crore) in a joint venture with Tokopedia, the e-commerce arm of Indonesia's GoTo Group.

By offering to invest in the country, Apple is seeking to get unfettered access to Indonesia's 278 million consumers, more than half of which are under the age of 44 and tech savvy.

But such strong-arm tactics by Indonesia risk frightening off other firms from scaling up their presence or establishing a footprint in the first place, particularly ones that are looking to decouple from China. It may also jeopardize Prabowo's aim of attracting overseas investments to grow the economy and fund policy spending.

It's unclear as to which companies Apple's proposed investment might go. Apple typically backs assembly or components partners such as Foxconn in various countries, which in turn help produce or supply vital parts for its iPhones and iPads.

© 2024 Bloomberg L.P.

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