Big L for Apple and Google: Indonesia has blocked iPhone 16 and Pixel sales in Southeast Asia’s largest economy.
Driving the news: With a population of more than 100 million people under the age of 30, both companies have been eyeing Indonesia as a key growth market. Those plans are on pause after falling short of rules that require 40% of phones to be made using local content.
- Companies can do the obvious thing and set up factories in Indonesia, but they can also meet the requirements by developing software or training talent in the country.
Why it matters: Domestic content rules force investment into workforce development and local infrastructure and can reduce reliance on imports, but they have also been criticized by World Trade Organization (WTO) members for restricting access and reducing competition.
- In 2019, some members expressed concerns that such rules in Indonesia, China, Argentina, and Russia violated WTO rules to treat local and imported goods equally.
Bottom line: Foreign direct investment in Indonesia has more than doubled since the rule came into effect in 2017, hitting US$47 billion last year. As Apple and Google weigh their options, rival phone makers like South Korea-based Samsung and China-based Xiaomi are getting ahead.—SB