BACKGROUND
The Domestic Component Level (“TKDN”) is a policy established by the Government of the Republic of Indonesia to reduce dependence on foreign or imported goods. TKDN is also intended by the Government of Indonesia to create widespread employment opportunities for Indonesian citizens.
Recently, the American technology giant Apple has faced issues regarding the licensing of its latest product, the iPhone 16, due to problems in obtaining a TKDN certificate. Essentially, the TKDN policy applies universally to all companies, including Apple, which sells its products in the Indonesian market. Apple’s difficulty in obtaining a TKDN certificate arises from its failure to fulfill its investment commitment, and its latest products do not meet the requirement of at least 40% domestic component usage.
The calculation method applied to electronics and telecommunications aims to encourage the use of domestic components such as batteries, screens, chips, and other components related to electronic and telecommunications assembly.
The Ministry of Industry, representing the Indonesian Government, has asked Apple to invest at least $160,000,000 (one hundred sixty million US dollars). However, Apple has opted for three different schemes or innovation schemes to fulfill its obligations under the Domestic Component Level regulation. This investment commitment will be implemented from 2025 to 2028.
DOMESTIC COMPONENT LEVEL (TKDN) CALCULATION
Based on Minister of Industry Regulation No. 29 of 2017 concerning Provisions and Procedures for Calculating the Domestic Component Level Value for Mobile Phones, Handheld Computers, and Tablet Computers (Ministerial Regulation No. 29/2017) and Minister of Industry Regulation No. 22 of 2020 concerning Provisions and Procedures for Calculating the Domestic Component Level Value for Telematics Electronic Products (Ministerial Regulation No. 22/2020), the assessment of TKDN considers various factors, as follows:
- Local raw materials used in mobile phone components, referring to the proportion of raw materials sourced domestically;
- Labor employed by manufacturers to produce products intended for sale in the Indonesian market;
- Manufacturing processes conducted domestically;
- Technology developed and applied in Indonesia;
- Investments made by the relevant manufacturer, specifically in the form of capital investments for product manufacturing.
Furthermore, Article 3 of Ministerial Regulation No. 22/2020 states that TKDN calculations depend on product type, specifications, and category. Article 4, paragraph (2), of Ministerial Regulation No. 22/2020 classifies digital telematics and electronic products based on the following criteria:
- Manufacturing aspect: 70%
- Development aspect: 30%
Meanwhile, Article 4, paragraph (3), of Ministerial Regulation No. 22/2020 outlines that non-digital electronic and telematics products are calculated as follows:
- Manufacturing aspect: 80%
- Development aspect: 20%
Additionally, Article 3, paragraph (2), of Ministerial Regulation No. 29/2017 states that TKDN calculations are based on manufacturing, development, and applications. Article 4 of Ministerial Regulation No. 29/2017 further details the calculation as follows:
- Manufacturing aspect: 70%
- Development aspect: 20%
- Application aspect: 10%
CHALLENGES IN TKDN IMPLEMENTATION
TKDN is based on the need to strengthen the national economy and support the independence of domestic industries. The background of the TKDN policy is explained through several key aspects, including economic, industrial, and trade conditions in Indonesia.
Indonesia faces a major industrial challenge due to its reliance on imported products, from raw materials to production processes. This dependence results in a trade balance deficit, where more goods are imported than exported, weakening the rupiah’s exchange rate and hindering domestic economic growth. In particular, the assembly and sale of mobile phones often violate TKDN regulations, including investment, manufacturing, and technology aspects.
CONCLUSION
The Domestic Component Level (TKDN) is a crucial aspect of industrial development in Indonesia, particularly in reducing imports and creating broad employment opportunities.
The legal basis for TKDN policy includes Law No. 3 of 2014 on Industry, further regulated by Ministerial Regulation No. 29/2017 and Ministerial Regulation No. 22/2020, which specifically address TKDN requirements for mobile phones.
To optimize TKDN policy in Indonesia, a more comprehensive approach is needed. The government must strictly monitor developments in manufacturers related to TKDN compliance. Strengthening TKDN policies will also significantly impact Indonesia’s trade market.
