Indonesia’s Outlook in the Electronic Manufacturing Sector

Indonesia’s Electronic Manufacturing Industry: Potential and Challenges

  • InCorp Editorial Team
  • 12 February 2024
  • 5 minute reading time

The electronic manufacturing industry is a vital part of our modern world. It produces the electronic devices we use daily, such as smartphones and self-driving cars. This industry has grown rapidly and has changed our lives in many ways.

Indonesia’s Electronics Manufacturing Industry Landscape

Badan Pusat Statistik (BPS) data shows that the electronic industry has consistently grown from Q3 2022 to Q3 2023. Over these five quarters, the industry has grown by 12.56%, 7.62%, 12.78%, 17.32%, and 13.68%, respectively. The primary metals industry, flourishing due to the widespread downstream of minerals from natural resources, surpasses this growth record.

In the third quarter of 2023, the electronic industry contributed 8.3% to the manufacturing industry’s overall performance, making it the fourth-largest contributor, following the food and beverage industry, the coal and oil refining industry, and the chemical and pharmaceutical industry.

Potential for Growth and Development in 2024

Indonesia’s Outlook in the Electronic Manufacturing Sector

In 2024, the consumer electronics market in Indonesia will be thriving, gaining a substantial revenue of USD 21.410 million. Projections indicate a steady annual growth of 2.53% (CAGR 2024-2028), underlining the market’s resilience and potential for expansion.

The Telephony segment emerges as the dominant force in the market, contributing significantly with a staggering volume of USD 11.580 million in 2024. This segment underscores the pervasive influence of communication technologies in the Indonesian consumer electronics landscape.

By 2028, the consumer electronics market in Indonesia is expected to reach 267.2 million units, with an estimated growth rate of 2.0% in 2025.

These figures point towards a robust market with a rising demand for electronic devices among the Indonesian populace.

Key Factors Driving this Potential

Taufik Bawazier, Director General of the Metal, Machinery, Transportation Equipment, and Electronics Industry at the Ministry of Industry mentioned that the upstream part of the electronic industry, particularly the supply of raw materials, is still relatively weak. 

As a result, many raw materials are imported from China. Investment and development are needed in the upstream electronic industry. The aim is to achieve import substitution, enhancing this industry’s competitiveness.

Moreover, data from Statista showed that the consumer electronics market is divided into six main categories:

CategoriesDemand Drivers
The Telephony segment encompasses devices like smartphones, feature phones, and landline phones.The growing demand for mobile devices that facilitate communication and provide internet access.
The TV, Radio & Multimedia segment comprises televisions, radios, digital cameras, speakers, and headphones.High-quality and immersive entertainment experiences.
The Computing segment includes laptops, desktops, tablets, and other devices.These products are tailored to meet individuals’ personal and professional computing needs.
The TV Peripheral Devices segment includes smart streaming devices, remotes, and video players.The TV viewing experience and allow individuals to access content from various sources.
The Drones segment involves unmanned aerial vehicles (UAVs) used for personal purposes.High-quality aerial photography and videography drive the drone market.
The Gaming Equipment segment comprises gaming consoles and VR headsets.The increasing popularity of video games and the growing prominence of e-sports.

Challenges to Overcome

The electronic manufacturing industry faces various challenges that require attention and proactive solutions.

1. Infrastructure Limitations

Most of Indonesia’s manufacturing operations are concentrated on the islands of Java and Batam. Due to historically better infrastructure, Jakarta and its surrounding regions are Java’s most crucial areas for electronic manufacturing. 

However, these areas are highly congested, with Jakarta ranking tenth among the most densely populated cities.

2. Development of Skilled Workforce & Knowledge Transfer

Data from Statistics Indonesia (BPS) indicate that most of Indonesia’s population aged 15 and above have completed at least nine years of compulsory education or graduated from junior high school or its equivalent.

The highest educational attainment comes from high school or its equivalent, constituting 30.22% of the population as of March 2023. Meanwhile, the proportion of those who have completed higher education is only 10.15%.

3. Competition & Market Access

The consumer electronics industry is dominated by leading brands such as Apple, Samsung, Huawei, and Sony, especially smartphones, TVs, home appliances, and gaming consoles.

Emerging companies like Xiaomi are gaining ground, especially in the smartphone sector. Tech giants like Google and Meta are also making virtual and augmented reality advancements, adding to the competitive landscape.

Opportunities and Strategies

Presidential Regulation 10/2021 identifies 245 priority industries in Schedule 1, which are eligible for tax and non-tax incentives under the Government Regulation in place of Law 2/2022 (GR 2/2022). 

This regulation supersedes the 2020 Omnibus Job Creation Act and is effective from 2022.

The listed industries span leading sectors: export-oriented manufacturing, capital-intensive enterprises, national infrastructure projects, the digital economy, labor-intensive sectors, and research and development activities. 

Businesses can qualify for these benefits by making a minimum investment of IDR 10 billion (excluding land and buildings), except for technology start-ups in special economic zones exempt from this requirement.

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Invest in the Electronic Industry with InCorp Indonesia

The electronic manufacturing industry presents numerous opportunities for growth and success. However, navigating the various options and knowing where to begin can be daunting. In such a scenario, InCorp Indonesia is an ideal partner to rely on.

As a dependable guide, we can help you achieve success in this exciting field. Our specialized expertise:

  • Company Registration: We expertly navigate the legalities of establishing your electronic business in Indonesia, ensuring compliance and swift entry into this dynamic market.
  • Product Registration: From initial permits to ongoing compliance, we handle the intricate process of securing your products’ market access, saving you time and resources.
  • Industry Knowledge: Our deep understanding of the electronic landscape in Indonesia empowers us to anticipate challenges, identify lucrative opportunities, and guide your strategic decisions.

Don’t let complexities stand between you and the immense potential of these potentials. Contact us for a free consultation today and unlock your path to thriving in this industry.

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

Get in touch with us.

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Frequent Asked Questions

You can transfer the license as long as your current local distributor agrees to change the product license holder. The procedure will be different for each product category. We can only recommend you try to prevent these issues by setting cooperation with a trustworthy partner from the beginning

Before you can distribute your products in Indonesia, you will have to register your product with the BPOM (National Agency of Food and Drugs) and MoH (Ministry of Health). Only an Indonesian legal entity can register the product. If you decide to distribute your product via a local distributor, they will register the product under their entity in Indonesia and become the product license holder. Cekindo can act as your local distributor and register the product under its name.

As their names suggest, the main differences between the three business kinds in Indonesia lie in the businesses and the purpose of their incorporation. Local company owners (PT) must be Indonesian citizens, as even 1 percent of foreign ownership is not allowed. This type of company is not limited to entering any business field, and restrictions on incorporation are not so tight. On the contrary, a foreign-owned company (PT PMA) is open to international investors, but the maximal percentage of foreign shares differs in various business sectors. Contact InCorp to get the most updated information on the Negative Investment List. International investors tend to open representative offices as a first step to understanding the Indonesian market before setting up a limited liability company. This type is used for marketing and promotion activities and needs the right to sell directly and receive income.

Yes, this mainly applies to import and export businesses. Instead of establishing a company, you can use an under-name import service, an importer of record.

It should take between 30 to 45 days.