Apple appears to be nearing a resolution to its ongoing tensions with Indonesia through a proposed $1 billion investment deal that would establish manufacturing facilities in the country.
According to recent reports, Indonesia's President Prabowo Subianto has given initial approval to a plan that would see Apple build two factories in the country. The primary facility, to be located on Batam island, would produce AirTags and eventually account for 20% of global production of the tracking devices. This factory is expected to create 1,000 new jobs initially.
A second manufacturing plant for accessories would be established in Bandung, along with new Apple educational facilities as part of the investment package.
The deal comes after months of back-and-forth between Apple and Indonesian authorities. In October 2023, Indonesia expressed disappointment that Apple had fallen short of previous investment commitments, having invested only 1.48 trillion rupiah ($94.53 million) versus a promised 1.71 trillion rupiah. Subsequent offers from Apple, including a $10 million additional investment proposal, were rejected by Indonesian officials.
The current $1 billion proposal represents a dramatic scaling up of Apple's commitment to the country. While the deal awaits final approval, it could pave the way for lifting Indonesia's iPhone 16 sales ban.
This development follows Apple CEO Tim Cook's April 2024 visit to Indonesia, where he met with then-President Joko Widodo and discussed potential manufacturing partnerships.
The investment may prove strategically valuable for Apple beyond just resolving the current sales ban. With potential tariffs looming on Chinese imports under a possible future Trump administration, diversifying manufacturing locations could help Apple manage costs. However, the economic impact of AirTag production may be limited given the product's low price point compared to devices like iPhones.
For Apple, the $1 billion investment appears to be a reasonable price to maintain access to Indonesia's substantial market while potentially establishing a new manufacturing hub in Southeast Asia.