Mon, Oct 24, 2016 - Page 16 News List

Indonesian nationalism takes a bite out of Apple


Apple Inc is battling to gain a foothold in Indonesia after nationalistic regulations hit the US tech giant’s efforts to compete in the booming emerging market against Samsung Electronics Co and other rivals.

The iPhone 6S and 7 are yet to be released in Southeast Asia’s top economy as Apple struggles to fulfill requirements that phone makers must have 20 percent “local content” for 4G handsets sold in the nation.

South Korea’s Samsung has been able to meet the demands and gain a share of the market in Indonesia — a nation of 255 million people, with an army of young consumers — more than 25 times bigger than Apple.

Officials said the regulations that came into force this year are aimed at supporting the growth of the local manufacturing industry, which lags behind its Asian peers, and plan to raise the local content requirement to 30 percent at the start of next year.

However, to critics, it is just the latest example of misguided nationalistic rules that hamper, rather than help, business in Indonesia, which is ranked 109th on the World Bank’s ease of doing business index.

The new rules “force companies to rethink the entire supply chain and that is expensive for them to do,” International Data Corp’s (IDC) Sudev Bangah said.

Apple has encountered problems in other emerging markets, notably India where the Silicon Valley giant is facing roadblocks in its quest to open stores instead of selling products through third-party retailers.

The Indian government in May reportedly refused to exempt Apple from rules stating foreign single-brand retailers must buy at least 30 percent of their parts locally to open their own outlets.

In Indonesia, meeting the local content rules has been easier for Samsung, as it already had factories in the country, and has added assembly lines to the plants to carry out the final stages of production.

Other competitors, including Asustek Computer Inc (華碩), Lenovo Group Ltd (聯想), Oppo Mobile Telecommunications Corp (歐珀移動) and BlackBerry Ltd — which used to dominate in Indonesia, but has seen its market share obliterated — have also taken steps to fulfill the government’s demands.

However, officials admit that so far the rules are not boosting Indonesia’s phone manufacturing industry as they had hoped.

Firms have met the demands by getting local vendors to supply simple parts, such as boxes, manuals and chargers, and high-tech components are still being imported.

However, Apple, which makes most of its handsets in China, has not yet met the requirements. Its iPhone 6S was never released in Indonesia while the 7, currently being rolled out globally, seems unlikely to hit the country’s shops any time soon.

Still, government officials pushing the new scheme appear unfazed.

“With the local content requirement, we hope the component industry can grow,” said Dini Hanggandari, an official overseeing communications technology at the industry ministry, adding that smartphone imports had in recent years contributed to Indonesia’s negative trade balance.

Indonesia is attractive for phone makers and more than 30 million handsets are expected to be shipped to the nation this year, according to IDC, but Apple’s share of the smartphone market has been languishing at under 1 percent.

Nevertheless, the tech giant is not ready to give up, recently pledging an investment of US$45 million to open app development centers in several Indonesian cities in a bid to meet the requirements, according to a proposal submitted to the government by Apple.

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