Indonesia government requires all fourth generation (4G) FDD LTE smartphones use 30 per cent of the local components starting from January 2017. The requirement for the same will be 40 per cent for 4G TDD-LTE starting from 2019.
Communications and Information Technology Minister Rudiantara signed a ministerial decree about the local content requirement on July 3rd.
“Through this policy, we want to increase the value and brand-ware and increase value creation of Indonesian producers. This policy is also expected to help reduce our current account deficit,” Rudiantara said.
Rudiantara had recently said that there are 800 smartphone variants in Indonesia such as products made by Apple, Samsung, Xiaomi and Polytron. In 2015 the smartphone users in the country are estimated to have reached $3 billion through legal market and higher at $5 billion if black or illegal market is included.
Communication and Information Technology ministry, Trade and Industry ministries will release a joint circular letter giving directions to the producers for implementing the rule, he added.
In 2014, the total import of iPhones to the country was 321,015 units with a total value of $157 million, far below that of Samsung with 13 million units worth $1.42 billion, according to data from the Industry Ministry.
Industry Minister Saleh Husin added the use of local components not only for the hardware but also for software, is part of the government’s plans to reduce import of cell-phones. He said through the policy reforms in the past, the country has reduced import of cell-phone from 70 million units in 2012 to 54 million units in 2014 (dropping by 23 per cent).
As of now, Saleh said, 16 cell-phone brands are produced in Indonesia and utilise an average of 20 per cent local content.
Samsung Electronics Indonesia vice president Lee Kang Hyun was quoted by The Jakarta Post daily that he was hopeful that his firm would reach the required content level.
Last month, Samsung inaugurated a factory in Bekasi, West Java province. It has the capacity to produce up to 1.5 million phones and tablets per year.
iPhone, which previously opposed the government’s plan to impose the local content regulation, eventually stated that it would comply with the regulation, according to Saleh. The US trade representative had previously raised concerns that the new regulation would block the expansion of tech giants such as Apple in the country.
Local producer PT Hartono Istana Teknologi, the brand holder of Polytron, expects that the effectiveness of the new regulation would help boost sales of its 4G smartphones.
Santo Kadarusman, the public relations and marketing manager of Hartono Istana Teknologi, said that his firm would add a new production line this month to bring total annual capacity to 3.6 million units in anticipation of surging demand for Polytron’s 4G phones.
Meanwhile, Chinese brand Xiaomi, stated that it was still waiting for clarity on the exact mechanics of the regulation and that it would work closely with the Indonesian government. “To this extent, we’ve already started talks with partners to explore the possibility of local assembly in order to meet the local content quota for 4G smartphones,” said Xiaomi general manager for Southeast Asia, Steve Vickers.