T

he government is finalizing a scheme that offers vendors five possible options to calculate the percentage of local content for 4G-ready smartphones ahead of the implementation of the mandatory 30 percent local content rule early next year.

A top official with the Industry Ministry said the ministry was conducting simulations on five possible scenarios to make sure that they would be smoothly implemented.

'€œThe first scenario for content calculation on hardware has already been carried out, while simulations for scenarios on both hardware and software are still underway,'€ said I Gusti Putu Suryawirawan, director general for metal, machinery, transportation equipment and electronic industries.

The government currently applies a mandatory 20 percent local content requirement for 4G-enabled smartphones, the content calculation is solely based on the hardware. The minimum local content requirement for 4G smartphones, locally abbreviated TKDN, will be raised to 30 percent next year in an attempt to boost the local component industry and make Indonesia a production base.

Both the Industry Ministry and the Communications and Information Ministry have said both software and hardware will be taken into account to determine the local content percentage.

To meet the local content requirement, smartphone makers will be allowed to choose one of five calculation scenarios. The first option: The calculation is fully based on the hardware. Second, calculation is 75 percent based on hardware and 25 percent based on software. Third, calculation is 25 percent based on hardware and 75 percent based on software. Fourth, calculation is based evenly on hardware and software and fifth, the calculation is based fully on software.

Detailed regulation on the matter, however, has not yet been issued.

International Data Corporation (IDC) Indonesia senior market analyst Reza Haryo said the different options would benefit smartphone vendors as they could look for various routes to comply with the local content requirement.

'€œHowever, the uncertainty confuses some local and global vendors,'€ he said.

'€œIn the absence of certainty about how to calculate the local content element, vendors that are considering setting up local manufacturing businesses will not invest heavily.'€

Reza also argued an option allowing vendors to meet local content requirements only through software would spark a reaction from local manufacturers that had already put in a great deal of investment.

Under the current 20 percent local content rule, smartphone makers like South Korean electronics giant Samsung and local brand Polytron are already in compliance with the regulation and have their own manufacturing bases in the country.

In June last year, Samsung inaugurated a factory in Bekasi, West Java, with total production capacity of around 1.5 million phones and tablets a year.

Indonesia'€™s growing number of smartphone users and its ambitious drive to cover the nation with 4G/LTE network will likely continue to attract smartphone vendors.

Smartphone shipments into the country surged by 17.1 percent year-on-year to 29.3 million units last year, with 8.3 million shipped in the fourth quarter alone, according to IDC'€™s data.

Samsung gained 24.8 percent of the total smartphone market, followed by Taiwanese brand ASUS (15.9 percent) and local brand Smartfren (10.8 percent).