14 DAY TRIAL // Like China, Indonesia is one of those fast-growing mobile markets that tech giants are very closely monitoring.
According to research firm Canalys, less than a third of the country’s population currently owns a smartphone, which is a much lower rate than China where smartphone penetration already reached the 80% threshold.
But because of the country’s fast growing economy, a rise of interest in smartphone purchasing is anticipated and companies like Apple and Samsung are keeping a watchful eye on the opportunities presented by the market.
"Made in Indonesia" smartphone law in the making
However, as a report coming out of Reuters suggests, the tech giants’ efforts to infiltrate the Indonesian market might be hindered by a new law which stipulates that tablets and smartphones sold in the country must have at least 40% of their parts produced locally within the country’s borders.
The regulation might be introduced as soon as January 1, 2017, and naturally the prospect of such a law being imposed raised serious concerns in the United States.
It seems things are quite serious, as the report mentioned the office of the U.S. Trade Representatives (USTR) has already raised the issue with Indonesian authorities and multinational forum, claiming the regulation might end up violating international laws.
While Apple will be struggling the most if the law goes through, Samsung has already put a backup plan together. The Korean tech giant has already opened a factory near Jakarta last year, when it has begun producing smartphones.
On the other hand, Apple’s supplier Foxconn is also trying to find some middle ground with the Indonesian government which should include an investment for manufacturing smartphones within the country’s borders.
Is the Indonesian smartphone manufacturing industry ready to fly solo?
The so-called “Made in Indonesia” law is due to be finalized in March. The regulation was prompted by President Jako Widodo’s pledge of building a sustainable economy which is not based on consumerism but on local production.
The installment of the law is expected to help companies snatch more than $4 / €3.5 billion in annual smartphone sales.
However, it should be taken into account that the country’s smartphone manufacturing industry is barely one year old, so concerns are raised over the fact that Indonesia doesn't have a viable supply chain yet which is need to support smartphone production.