Apple likely to invest over $1 billion for 2 factories in Indonesia to lift iPhone 16 ban

Apple is reportedly gearing up to invest over $1 billion in Indonesia to resolve a ban on iPhone 16 sales. The proposed deal includes building two factories in the country, with the promise of boosting local production and employment. Sources have told The Information that Indonesia’s President Prabowo Subianto has greenlit the plan, with the expectation of further investment from the tech giant in the future.

The first factory is set to be located on Batam Island, focusing on manufacturing AirTags and employing an initial workforce of 1,000 people. This facility is projected to produce 20% of the global AirTag supply, though the timeline for reaching this milestone remains unclear. Additionally, tax and import benefits provided by the location could offer Apple significant financial advantages. The second factory, planned for Bandung, will handle accessory production and establish educational facilities, cementing Apple’s presence in the region.

Many hurdles for Apple

Apple’s relationship with Indonesia has been marked by a series of setbacks. The company previously committed to investing 1.71 trillion rupiah ($109.6 million) but fell short with an investment of only 1.48 trillion rupiah ($94.53 million). Efforts to bridge the gap with an additional $10 million investment were swiftly rejected by the Indonesian government, as were subsequent offers, including a $100 million proposal for R&D centres and developer academies.

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The negotiations gained momentum following Apple CEO Tim Cook’s visit to Indonesia in April 2024, during which he met with then-President Joko Widodo and expressed interest in expanding manufacturing partnerships. Despite this, earlier attempts to resolve the investment shortfall fell through, leading to the current $1 billion deal.

Shifting manufacturing strategies

Apple’s latest move aligns with its broader strategy of diversifying its manufacturing operations. The investment in Indonesia may prove less costly than paying tariffs on goods imported from China, as proposed by US policies. Manufacturing AirTags, Apple’s most affordable product, may not yield immediate high returns, but the long-term benefits of maintaining access to the Indonesian market outweigh the costs.

Moreover, Apple’s success with iPhone assembly in India demonstrates the potential for significant gains through regional manufacturing partnerships. While the new deal doesn’t currently include plans for a research and development centre, the proposed developer academies and factories are expected to strengthen ties between Apple and Indonesia.

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Unlocking market access

By investing heavily in local production, Apple is aiming to secure its foothold in the Indonesian market while sidestepping potential import tariffs. The $1 billion investment represents a strategic effort to navigate regulatory challenges and maintain the company’s competitive edge. Although the road has been bumpy, Apple’s latest commitment could pave the way for renewed growth and collaboration in Southeast Asia.