Apple Inc. (AAPL.US) invests $1 billion to enter new market: Indonesia lifts iPhone 16 ban.

According to sources familiar with the matter, Indonesia and Apple Inc. (AAPL.US) have reached an agreement to lift the ban on the iPhone 16 series in the country, paving the way to end a five-month long tug-of-war. This dispute forced the American tech giant to increase its promised investment in Indonesia to $1 billion. Sources said that the Indonesian Ministry of Industry, responsible for enforcing the ban, is expected to sign a memorandum of understanding with Apple Inc. as soon as this week. The Ministry of Industry will hold a press conference and plan to quickly issue licenses allowing the sale of the iPhone 16. This agreement brings an end to the dispute that started in October last year. At that time, Indonesia refused to issue sales permits for Apple Inc.'s latest devices, citing the company's failure to comply with local manufacturing requirements for smartphones and tablets. Apple Inc. then promised to invest $1 billion in Indonesia, and President Joko Widodo instructed ministers to accept this proposal. However, the Ministry of Industry unexpectedly maintained the ban last month, seeking more favorable conditions. In addition to the $1 billion investment, Apple Inc. also promised to provide local people with product research and development training, enabling them to develop similar software and design their own products. This move aims to appease the Indonesian government, which has been pushing for Apple Inc. to establish research facilities in the country. One source said that innovative investment will be carried out through projects outside of existing Apple Inc. academies. Sources said that Apple Inc. currently has no plans to produce iPhones in Indonesia. Although the two parties have reached an agreement on the terms for lifting the ban, Indonesia has a history of backing out of deals, so this transaction could still fall through. Apple Inc. and the Indonesian Ministry of Industry did not immediately respond to requests for comment. Sources said that despite the unexpected breakdown of the agreement in January, negotiations are still progressing positively. Last week, Minister of Industry Agus Gumiwang Kartasasmita announced that Apple Inc. has settled a $10 million debt owed to the government for non-compliance with local rules from 2020 to 2023. This deal is a victory for Indonesia, as its tough strategy has worked, successfully persuading a large foreign company to increase investment, develop products in Indonesia, and promote local manufacturing, rather than just using it as a sales center. The Indonesian government had previously stated that Apple Inc.'s investment in Indonesia was only about $95 million. This agreement also comes at a timely moment for President Widodo. The image of a major US tech giant conceding to his government may help bolster his position domestically. Previously, his policy reversals had caused confusion and damaged his reputation. Additionally, his plan to cut spending on employment and scholarships had sparked protests lasting several days last week. For Apple Inc., this deal allows them to enter Indonesia's vast consumer market at a time when sales in the Chinese market are slowing down. Despite not being among the top five smartphone brands in Indonesia, over half of the country's 278 million population is under the age of 44 and tech-savvy, presenting an opportunity not to be missed. Apple Inc.'s $1 billion investment plan includes establishing a factory in Batam to produce AirTags. According to previous reports, the US company will bring in Luxshare Precision Industry (002475.SZ) to operate this factory, which will ultimately account for 20% of global AirTags production. Part of the investment proposal will also be used to establish a factory in Cikarang, about a three-hour drive southeast of Jakarta, to produce other types of accessories, while also providing funding for Apple Inc. academies that will offer training in programming and other technical skills for students.