Apple Inc (NASDAQ:AAPL) faces challenges in Indonesia as the government deems the tech giant’s proposed $100 million investment insufficient to lift a ban on selling its latest iPhone model. The restriction is tied to regulations mandating that smartphones sold domestically must contain at least 40% locally sourced components.
Indonesia’s Industry Minister, Agus Gumiwang Kartasasmita, stated that Apple’s proposal needs to align with fairness principles, particularly when compared to the company’s more significant investments in Vietnam and Thailand, the Bangkok Post reports.
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Google Pixel phones, manufactured by Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL), are also barred from sales in Indonesia due to similar non-compliance with local component requirements.
Companies typically partner with local suppliers or source parts domestically to meet these rules. Apple, however, still needs manufacturing facilities in Indonesia. Since 2018, it has relied on application-developer academies to partially fulfill local content mandates for older iPhone models.
Minister Agus disclosed that Apple still has an outstanding $100 million investment commitment that was originally set to be fulfilled by 2023. The Indonesian government is pushing for additional investments to extend through 2026. The ministry plans to invite Apple representatives to Indonesia for negotiations to discuss the situation further.
Agus emphasized that Apple must align its investments with the country’s expectations, noting that similar efforts in neighboring countries make Indonesia’s demands reasonable.
The push to increase local content in electronics aligns with Indonesia’s broader strategy to bolster its domestic manufacturing ecosystem and attract equitable foreign investment.
Initially, Apple proposed a $10 million investment to address the shortfall, but Indonesia’s Ministry of Industry rejected the offer, maintaining the sales ban.
Apple’s earlier $10 million plan targeted accessory and component manufacturing but failed to satisfy Indonesia’s regulatory standards.
While Apple has invested $95 million in Indonesia via developer academies, it still falls $5 million short of the 1.7 trillion rupiah ($109.6 million) target.
In October, Morgan Stanley analyst Erik Woodring rated Apple as Overweight with a $273 price target, citing steady iPhone 16 lead times.
Woodring noted that iPhone 16 Pro/Pro Max lead times extended globally, reflecting better supply stability than previous cycles.
Apple’s proactive supply-chain measures helped avoid shortages, balancing iPhone Pro/Pro Max demand and supply earlier than before.
Morgan Stanley forecasts 225 million iPhone shipments in 2024, with a potential 3% revenue upside from more robust September-quarter sales.
Price Action: AAPL stock is up 0.14% at $230.19 at the last check on Monday.
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