Expectations from the Apple CEO's Visit

Large international companies prefer Vietnam as their factory location rather than Indonesia.

AFP/HANDOUT/INDONESIAN DEFENCE MINISTRY

Apple CEO Tim Cook visited Indonesia and met with president-elect Prabowo Subianto at the Ministry of Defense office in Jakarta on Wednesday (17/4/2024).

The visit of CEO of Apple to meet President Joko Widodo this week is expected to result in Apple's decision to make Indonesia its manufacturing base for the global market.

Previously, Apple's investment in Indonesia was limited to building Apple Developer Academy in a number of regions, not manufacturing. This means that Indonesia is only a market for one of the largest smartphone manufacturers in the world.

Observers say that Indonesia needs to learn from Vietnam to be able to enter Apple's global supply chain (Kompas.id, 4/17/2024). This statement is not an exaggeration. As a new player, Vietnam has quickly become the new favorite for manufacturing investment in the region after China. Multinational corporations (MNCs) are scrambling to invest in the country.

Some of them even make Vietnam a center for strategic product research and development. With a production of 233.7 million units, Vietnam is the world's seventh-largest producer of smartphones in 2021. 60% of Samsung's global production is produced in Vietnam.

AP/PAU BARRENA

The Apple Vision Pro goggles that produce virtual reality were used by a man at the Mobile World Congress (WMC) event in Barcelona, ​​Spain on February 27, 2024. The Apple Vision Pro was produced by the US technology company, Apple Inc.

Also read: Tim Cook: Apple is considering building a manufacturing factory in Indonesia

Why can Vietnam do it while we can't? Even though President Jokowi himself actively approached the top leaders of MNCs. The President has also expressed disappointment because not one of the dozens of factories that relocated from China - in the midst of the US-China trade war in 2019 - chose Indonesia as their new production base.

Most choose Vietnam. Tesla has finally also chosen Malaysia. The issue is not just Indonesia that is making improvements. Even though now many big investors are committed to investing in new industrial areas in Indonesia, we believe that our potential would be much greater if from the beginning we were more serious in fixing the fundamental weaknesses that we have.

It is crucial for Indonesia to tackle its lagging participation in the global value chain (GVC) across various manufacturing of goods and services. This includes the production of smartphones, other electronic products, and information technology. Aside from its large scale, this industry promises a leap in industrialization and technology mastery.

TUAN HUNG

Apple CEO Tim Cook observes student activities in Hanoi, Vietnam, Tuesday (16/4/2024).

Also read: Indonesia Needs to Learn from Vietnam to Enter Apple's Supply Chain

The global production network has also played a significant role in the economy. More than 25 percent of jobs in ASEAN are related to GVC and more than 25 percent of ASEAN's exports are contributed by electronic products.

Vietnam, Thailand, Cambodia, and Laos have shown rapid growth since 2000, while Indonesia is relatively stagnant. Indonesia's low participation in the Global Value Chain is reflected, among other things, by the fact that only 10 percent of our job fields are related to the GVC. By comparison, Singapore has 50 percent.

Even though MNCs' investment in the Indonesian electronics industry began in the 1980s, until now Indonesia has had difficulty penetrating the global supply/value chain.

The cause of this is that most of Indonesia's electronic production is for the domestic market and not for export. As a result, the local component supplier industry does not grow. Even if there is, it is limited to low-value-added products. Consequently, we are heavily dependent on imported components.

The absence of a strong local component industry has caused us to lag behind in integrating into the global supply chain. Not to mention the investment climate and regulations. It's time for us to improve.