Korean Electronics Companies in Indonesia and Future Cooperation

The reorganization of global value chains and surging producer demand for alternatives to China are making Indonesia an attractive hub of global production for electronics companies. The Comprehensive Economic Partnership Agreement (CEPA) recently signed by South Korea and Indonesia have has created a favorable business environment for the two economies, and Korean electronics firms are expected to increase their investments in Indonesia. Although Korean electronics companies have been producing consumer electronics like DVD players and set-top boxes in Indonesia since the 1990s, interest and investment in the country dwindled over the years as Internet protocol television (IPTV) and over-the-top (OTT) media services grew in popularity. But the Indonesian government’s requirement stipulating that electronics manufacturers must source certain parts locally (TKDN) was extended to smartphones and TVs in the 2010s. This reignited a drive by Korean electronics companies to increase their investments and ramp up production in Indonesia. In this paper, we demonstrate why Korean electronics companies should utilize more local Indonesian suppliers, and argue that the Korean government should provide Korean companies and investors with a comprehensive strategy and guidelines for investment, helping and guiding Korean companies and investors toward achieving mutually beneficial partnership with their Indonesian counterparts.