Indonesian nationalism takes a bite out of US Apple

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

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

Officials say 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 per cent at the start of next year. But 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,” Sudev Bangah of International Data Corporation (IDC), a consumer technology market research firm, told AFP. 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 reportedly refused in May to exempt Apple from rules stating foreign single-brand retailers must buy at least 30 per cent 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 Asus, Lenovo, Oppo and Blackberry -- which used to dominate in Indonesia but has seen its market share obliterated -- have also taken steps to fulfil 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 hi-tech components are still being imported.

But 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.