JAKARTA (TheInsiderStories) – Apple supplier Pegatron Corp., planned to invest up to Rp15 trillion (US$1.04 billion) to build a factory in Batam Island, an Indonesian ministry official said on Tuesday (05/28). The new factory to produce chips for Apple smart-phones in the country.

The Taiwan manufacturer made the pledge in a signed letter to the Indonesian government, in which it said the chips would be produced in partnership with Indonesian electronics company PT Sat Nusapersada Tbk (IDX: PTSN), according to Deputy Minister of Industry Warsito Ignatius as reported by Reuters.

At the beginning, he said, Pegatron making household appliances with Sat Nusapersada at Batamindo Industrial Park Batam in this month. Pegatron has traditionally not made chips for smart-phones.

In December 2018, Apple was said to be looking to shift production of older iPhones to Pegatron in an effort to avoid losing billions in revenue as a result of its patent dispute with Qualcomm.

That dispute has since been resolved, however rising trade tensions between the United States (US) and China has put manufacturers in both countries on alert. Pegatron has assembly plants in China, which suggests its pledge of Indonesian investment could be a contingency plan.

According to the report, the new Indonesian factory might also be used to produce MacBook components, although that operation “would not be in the short term,” Ignatius said.

A report in May 2018, tipped Pegatron to pick up orders from Apple to produce a MacBook powered by an ARM processor, although the information it was based on may have been misconstrued with the Touch Baron Apple’ MacBook Pro, which is already powered by an ARM-based T1 chip as a companion processor.

Apple said in 2017 that it had no plans for Macs powered solely by ARM chips, rather than Intel processors. The news about Pegatron as Apple’ assembly partner will move some of its products to Indonesia already blown since December last year.

At that time, Pegatron highlighted the decision was taken under pressured from US – China’ trade war, labor wage increases, and labor shortages. However, Pegatron will only move the production of non-Apple products, including set-top boxes (devices that convert video content to TV signals) and other smart devices that have been hit by US rates.

At that time, Pegatron’ investment in the factory is expected to start operations in mid-2019. The company planned to rent a factory and employ around 10,000 workers.

Pegatron had previously considered other countries, including Vietnam for the plant’s location, due to the existing electronic supply chain development by the Samsung Electronic smartphone assembler there. However, investment in Batam, Indonesia, can be quicker than Vietnam.

Pegatron is the second-largest electronics manufacturer in Taiwan. Its total assets exceed $14 billion. The companies businesses are in motherboards, desktop PCs, notebooks, wireless systems, game consoles, TVs, and others. While most sales revenue comes from smart-phones and other communications devices.

In December 2017, Pegatron held $39.34 billion revenue with $482.63 million net income. Meanwhile, its unit China’s Pegatron Corp. has around $1 billion revenue each year.

Besides Pegatron, other Chinese companies such as Wistron, Quanta Computer, and Compal that assemble Apple products, also plan to leave China, following the trade tensions.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com