Batam is emerging as a global manufacturing hub as companies move production from China amid the ongoing US-China trade war, attracted by the island's strategic location, tax incentives, and young workforce. (06/08)

The shift has encouraged more manufacturers to establish operations in Batam as businesses diversify their supply chains in response to trade tensions.

Global Manufacturers Shift Production to Batam

Chinese toy manufacturer Dongguan Welson Plastic Hardware Products, which supplies Walt Disney and Crayola, is among the companies expanding to Batam.

In July, its Indonesian subsidiary, Welson Group Indonesia, opened the company's first factory outside China.

The factory will produce more than 30 novelty products for Disney theme park gift shops, including Cinderella pumpkin carriage popcorn holders and figurines of Olaf from Frozen and Sulley from Monsters, Inc.

"We had no choice but to diversify," Welson general manager Andy Yao said during a recent visit to Batam.

"If we stayed in China, we risked losing orders."

Yao said the company began looking for a new manufacturing location after customers requested supply chain diversification following the tariffs introduced by US President Donald Trump in April 2025. He also said production costs in China had become more expensive.

Before choosing Batam, the company evaluated Malaysia, Thailand, Cambodia, and Vietnam. Yao said he was initially unfamiliar with Batam before an acquaintance recommended the island. Welson signed a lease three months after visiting Batam in July last year.

According to Yao, Batam's location, only a 40-minute ferry ride from Singapore, makes shipping more efficient and allows customers to travel easily for factory audits.

He also said that more than half of Batam's population is under 30 years old, providing a large labour pool.

Welson plans to employ 300 workers initially and increase the workforce to 600 by the end of 2027.

Batam's free trade zone status was another important factor because companies can import raw materials and machinery without tax and export finished goods without export duties.

According to the article, Batam's exports have more than doubled since Trump's first presidency in 2017, reaching around US$19.6 billion by 2025.

Investment and Economic Growth Accelerate on the Island

The article said Batam has recorded stronger economic growth than Indonesia since the pandemic, supported by manufacturing, exports, and investment.

Batam's gross domestic product grew 6.8% in 2025, compared with Indonesia's national growth rate of 5.1%.

In the first quarter, Batam's economy expanded 5.8%, slightly higher than the national growth rate of 5.6%.

The article also noted that more than 80% of Batam's electricity comes from natural gas, according to Mardika Parama, director for energy, climate and resources at BowerGroupAsia Indonesia.

Parama said Batam is also less exposed to natural disasters because it is located outside the Pacific Ring of Fire.

The article said Apple has built an AirTag factory in Batam that produces 70% of the company's global AirTag supply. Oracle, Hong Kong-based Gaw Capital Advisors, and Firmus Technologies have also invested in cloud infrastructure and data centres on the island.

In June 2025, Indonesia's investment ministry established a permanent office in Batam to facilitate investment and respond to companies' needs.

In July, President Prabowo Subianto discussed plans with local leaders to accelerate Batam's development, including expanding international ports to reduce logistics costs and improve export competitiveness.

"Batam's strongest marketing tool is the experience of companies already operating there," Parama said.

"If investors genuinely benefit from setting up on the island or sourcing through Batam, they will say so. In global investment circles, that kind of word travels fast."

Batam Builds Its Digital Economy While Facing Regional Competition

The article said Batam's business development began in the early 1970s when Pertamina established the island as a logistics base for offshore oil and gas operations.

Over time, Batam expanded into manufacturing, tourism, and the digital economy.

Citramas Group developed Nongsa Digital Park, one of Batam's five special economic zones, which now includes film production facilities, digital businesses, and data centre developments.

The article said Infinite Studios has been used to produce television series such as *Westworld* and films including *Monkey Man*. Productions created there have also been streamed on Netflix, HBO, and Apple TV.

Citramas Group chief executive Mike Wiluan said attracting international partners to Batam was difficult in the early years.

"Everyone was just trying to imagine what is this. And it's almost like a figment of the imagination until they come and see," Wiluan said.

The article said all land allocated for data centres at the 188-hectare Nongsa Digital Park has been occupied by companies including DayOne Data Centers Singapore and BW Digital, while other companies remain on the waiting list.

Batam continues to compete with Malaysia, Thailand, and the Johor-Singapore Special Economic Zone for investment in manufacturing and digital industries.

The article said Apple and IBM operate digital technology academies in Nongsa, while Infinite Studios provides free animation training for local residents.

Batam's per capita income in 2025 was higher than Jakarta's, while the unemployment rate declined to 7.6% from 11.8% in 2020.

At Tunas Prima Industrial Estate, Luxshare Precision Industry has hired at least 2,000 local workers at Apple's AirTag factory and plans to increase that number to 6,000 in the coming months, according to people familiar with the matter.

The estate is 60% occupied, while Tunas Group's two other industrial estates are fully occupied.

"I don't think Trump is aware that he may have boosted Batam's rise," Chrispin Andereas, head of business development at Tunas Group, said.

"Not just Batam but much of South-east Asia has benefited from supply chain disruptions. This trend is here to stay."

PHOTO: DETIK FINANCE

This article was created with AI assistance.

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