Indonesia local content rule for 4G devices can cause stalling import permit in 2017, prompting the growth of markets black as the demand for new technology increases.
coordinating investments Council of Indonesia (BKPM) recently released a mysterious agreement with gadget manufacturer in the United States. The foreign company would put US declined by $ 18 million for a research center in Indonesia. BKPM head Franky Sibarani said the company train human resources in Indonesia to create applications, software and other product designs.
Although the identity of American society gadget is not known, chances are the company covers its paris on the promising smartphone market in Indonesia. The problem is the "investment" is probably less of a voluntary thing, and a pay-to-play chess move imposed by the Indonesian government.
Reports indicate that Apple's request for their final certified smartphone - and therefore available for sale in Indonesia - was filed with the Ministry of Communication and IT. However, a law passed last year may mean that Apple fans in Indonesia have to wait even longer to buy the iPhone OS from local dealers.
In mid-2015, three ministries have signed a joint decree stipulating that to obtain an import permit, embedded mobile devices with 4G technology must have the local content, both hardware and software.
The terms of rule from 1 January 2017, all 4G devices in Indonesia must have at least 30 percent of their components locally. The devices that connect to a network to be sold with a minimum of 40 percent of local content and applications. smartphone brands that do not meet the settlement risk that enabled revoked import.
Smartphone brands have moved to the local content of their devices. ASUS, for example, in partnership with local manufacturing company SAT Nusapersada to assemble some smartphone models just for Indonesia. However, ASUS is still working on ways to meet the requirement of 30 percent.
Other brands that have made efforts to comply with the regulations include Samsung, Lenovo and HTC. Most overseas gadget companies try to increase the levels of local content in Indonesia by the assembly and manufacture in cooperation with local producers gadgets.
However, some foreign companies will inevitably hit a wall trying to comply with government regulations. Secretary General Erajaya Djatmiko Wardoyo stresses that some smartphone brands are facing challenges to achieve economies of scale if they even entertained the idea of establishing a factory in Indonesia.
Erajaya is a leading distributor in Indonesia for brands like Apple, Samsung, LG, ASUS and Lenovo. "The local supply of parts and [manufacturing] is not conducive ecosystem as well," said Wardoyo Indonesia Expat . For this reason, he does not think the regulations will help anyone in the game Jakarta technology equipment.
According Wardoyo, the government should instead focus on incentives to attract brands to locally manufacture. Once the manufacturing ecosystem is mature, that is when a settlement can be implemented, he said. "There should be a grace period of three to five years before the regulation takes effect," he added.
Most global brands gadget produce smartphones using the practices of fast and scalable production line. This is why China has become the global base for the manufacture of the device; plants that produce parts of a smartphone all in geographically nearby locations. This is usually not the case in Indonesia.
The archipelago has long suffered from logistical nightmares, time housing extended to transportation bottlenecks that keep materials stuck in ports for long periods. parts transportation around the nation inevitably leads to sales slow product. For these reasons, industry pros believe import phones remains the easiest and most profitable way to do business.
Wardoyo said barriers associated with the implementation of local plants are sure to make possible respect for certain brands his company works.
Although Indonesia has some local smartphone brands, their products are unable to compete with global brands in the eyes of Indonesian consumers. In addition to distribution, Erajaya also sells its own line of smartphones as the Venera.
"The issue is that local brands 4G smartphones still could not fight against global brands [in terms of performance]," said Wardoyo. If the challenges in bringing 4G smartphones in the country come about as promised in 2017, black markets emerge in Indonesia to meet demand, he said.
Indonesia has become a lucrative market for smartphone business, due to rising consumer class in the country. SIM card penetration has reached more than 120 percent in the nation, which means many consumers have more than one mobile device.
International Data Corporation (IDC) estimates that Indonesia, in the fourth quarter of 2015, smartphone shipments reached 8.3 million units, up 14.4 percent compared to the last year. According to IDC, the slight increase was due to shipping marks for goods prior to import license expiring in 2016. The data said 29.3 million smartphones were shipped in the country in 2015, an increase of more than 17 percent from 2014.
ASUS has risen in the ranks to become a great brand with a 22 percent market share in Indonesia. Reza Haryo, IDC senior market analyst for mobile phones, says the brand shipped more phones as a preventative measure to keep local stock before the expiry of the import license.
ASUS addition, IDC reported that Lenovo has a "strong presence" in Indonesia, with a share of 6.5 percent of the market. Other brands which have significant market shares in the archipelago last year were Samsung with 24.8 percent, with 10.8 percent Smartfren and local business Advan with 9.6 percent.
"Lenovo too started its local production in Indonesia, and telephones A series priced at US $ 100 have been very successful on the market," said Haryo.
IDC numbers show that the majority of Chinese brands of smartphones are already 4G enabled. To meet the increase in 4G smartphones, the Indonesian telecommunications operators are actively promoting their 4G data plans and consolidation deals.
IDC Asia-Pacific research director for mobile phones Kiranjeet Kaur said brands have taken steps to keep their respective places in the Indonesian market. "Despite the uncertainty, sellers were quick to take measures to comply with the regulations so they do not lose in the largest smartphone market in Southeast Asia," said Kaur.
She added that the impact of the regulation on phone transfers will likely prove to be a short-term dilemma. Kaur notes, "the new initiatives are less likely to curb the growth of 4G smartphones in the country long term, and IDC expects 4G smartphones to grow at a growth rate in double figures for the years to come. "
If foreign smartphone manufacturers who are looking to enter Indonesia have done their homework, they might reach the conclusion that the country is still trying to change the rules. For this reason, major brands such as Xiaomi may be reluctant to risk associated with short-lived policy changes.
It is not known how the Indonesian government hopes to enforce such a rule of ambitious local content for all mobile devices only 4G. But one thing is certain: when there is a will there is a way. If this rule is in 2017, Indonesia can expect consumers to pay in the end the price. They will be forced to buy inferior goods at higher prices, or turn to a black market for the latest iPhone.