Samsung Electronics Indonesia, subsidiary of the South Korea-based electronics giant, objects to new proposals currently being studied by the Indonesian government. Although in 2015 a regulation was signed by the government that requires local 4G smartphones manufacturers to use at least 30 percent of locally-sourced hardware content for domestically-sold smartphones (effective per January 2017), Indonesia's Industry Ministry recently proposed new rules regarding the mandatory locally-sourced content of both hardware and software for 4G smartphones.
Indonesia's Industry Ministry proposed five new regulatory schemes concerning domestically-produced 4G smartphones in Indonesia. This proposal is currently being studied by the Indonesian government.
• Mandatory 100% of hardware content locally-sourced
• Mandatory 75% of hardware content and 25% of software content locally-sourced
• Mandatory 50% of hardware content and 50% of software content locally-sourced
• Mandatory 25% of hardware content and 75% of software content locally-sourced
• Mandatory 100% of software content locally-sourced
Lee Kang Hyun, Vice President of Samsung Electronics Indonesia, said these new proposals differ markedly from the situation three years ago when the company decided to invest in Indonesia. When the Indonesian government announced in 2015 it would implement a mandatory (30 percent) minimum local content rule for hardware in 4G smartphones Samsung Electronics Indonesia threw its support behind this decision. After all, most of its Indonesia-manufactured smartphones already had local content of 20 percent. The establishment of a new factory in Bekasi (opened in June 2015) would raise the local hardware content to at least 30 percent.
However, the latest proposals not only include rules for higher local content of software, but also the suggestion for a zero percent rule for local hardware content. This is completely contrary to the philosophy of the earlier regulation and would imply losses for those smartphone manufacturers that have invested in hardware production facilities in Indonesia. These new proposals seem to be another example of Indonesia's notorious flip-flop policies.
I Gusti Putu Suryawirawan, Director General of Metal, Machinery, Transportation Equipment and Electronic Industries at Indonesia's Industry Ministry, said the five schemes will be discussed and studied by the government and hopefully it can implemented soon as these new proposals would deepen the domestic smartphone manufacturing industry. He added that not all involved parties will be pleased with the new rules but hopefully a middle way can be found.