Key Points
- - Apple's CEO, Tim Cook, is considering manufacturing operations in Indonesia to diversify its supply chain and reduce dependence on China.
- - Cook expressed interest in investing in Indonesia during a meeting with President Joko Widodo, highlighting the country's "infinite investment capacity."
- - Apple has already diversified its manufacturing centers to include countries like Vietnam and India, reflecting a growing trend among tech companies.
- - Challenges faced in China during the COVID-19 pandemic have accelerated the search for alternative manufacturing bases.
- - Indonesia has implemented local content requirements and threatened tariffs to attract foreign companies, and the Minister of Industry suggests component manufacturing as a potential collaboration opportunity.
- - Expanding manufacturing outside of China aims to mitigate risks and tap into emerging markets as significant consumers of electronic products.
Apple's CEO announced that the company is evaluating the possibility of manufacturing in Indonesia.
During his recent visit to the country, Tim Cook, the CEO of the well-known technology brand, expressed interest in expanding its global production network to include the fourth most populous country in the world.
The Visit to Indonesia
In a recent visit to Indonesia, Apple's CEO, Tim Cook, held a meeting with President Joko Widodo, where he expressed the company's willingness to "consider" the possibility of establishing manufacturing operations in the country. This statement falls within the framework of the tech company's efforts to diversify its supply chain and reduce its dependence on China, amid trade tensions between the United States and China and vulnerabilities exposed by the COVID-19 pandemic.
Cook indicated the tech giant's interest in exploring the feasibility of investing in the country, highlighting the "infinite investment capacity" in Indonesia and the confidence of the most well-known producer of iPhones in the Indonesian market.
The iPhone manufacturer's diversification strategy has included countries such as Vietnam and India, which have emerged as key manufacturing centers for the conglomerate. Vietnam, in particular, has become one of the largest manufacturing centers for the conglomerate outside of China, producing items such as the MacBook, iPad, and Apple Watch. The tech entity has doubled cellphone production in India over the past year, reaching approximately 14% of its total iPhone production in the country, according to Bloomberg. This shift towards other manufacturing centers reflects a growing trend among tech companies to diversify their supply chains to mitigate risks.
Manufacturing operations in China have faced challenges, especially during the peaks of the COVID-19 pandemic, which significantly impacted production at the firm's main iPhone factory, operated by its assembly partner Foxconn. This situation has catalyzed the search for establishing alternative manufacturing bases, as CNBC points out.
Why Indonesia?
In response to foreign investment drivers, Indonesia implemented local content requirements and threatened tariffs on imports of expensive consumer products, a tactic that has proven successful in attracting foreign companies. To date, it has met these requirements through investments in developer academies in Indonesia. Cook's recent statement during his visit to Jakarta reflects the pressure from Indonesia's president to not only invest in the education sector but also in manufacturing.
Indonesia's Minister of Industry, Agus Gumiwang Kartasasmita, has suggested that the country would be satisfied if it initiates component manufacturing in Indonesia, which could integrate the country into the company's global supply chain. This proposal indicates an openness to different forms of industrial collaboration that could benefit both parties, as reported in Business Insider.
The interest in expanding its manufacturing outside of China responds to a need to diversify its production to mitigate risks and seize new opportunities in emerging markets. Cook's visit to Indonesia and Vietnam suggests a recognition of these markets not only as production centers but also as significant consumers of electronic products.
