Indonesia is hooked on Huawei
Huawei dominates Indonesia’s telecommunication network infrastructure. It won over Indonesia mainly through cost competitiveness and by generating favour through capacity-building programs and strategic relationships with the government, and telecommunication operators.
But Huawei’s dominance poses risks. It constrains Indonesia’s digital sovereignty and limits its strategic autonomy. To remain in control, Indonesia must take the issue of dependence seriously and incorporate strategic considerations in telecommunications decision-making.
Indonesia’s digital transformation is largely driven by the private sector, especially telecommunications operators. These operators depend on network equipment from foreign vendors. So foreign vendors serve as the backbone of national connectivity—and Huawei has long been recognised as a major player.
In 2019, then Indonesian minister of communication and information technology, Rudiantara, acknowledged Huawei’s significant role in the country’s telecommunications sector. The CFO of telecommunications operator XL Axiata echoed this, estimating that 60 to 70 percent of the industry relied on Huawei.
However, while Huawei is omnipresent in Indonesia’s digital infrastructure, the level of its market share has long remained unclear.
ASPI now has evidence of Huawei’s extensive dominance in Indonesia’s telecommunication equipment market. Based on an overview of major capital expenditure by some of Indonesia’s key telecommunications operators—XL, Indosat and Smartfren—we have found that 70 percent of their network equipment in 2024 came from Huawei. Information from Telkomsel, Indonesia’s largest telecom operator, was unavailable, but our finding still confirms that Huawei is a dominant provider of telecommunications network equipment to Indonesia. It has gained this position at the expense of older suppliers, including Ericsson, Nokia and Alcatel.
Vendors’ market share of operators’ major capital expenditure. Source: XL Axiata, Indosat OH and Smartfren financial statements. ZTE data annualised from Smartfren financial statements.
Technical and commercial considerations determine vendor selection in Indonesia. On the technical side, factors such as product lifecycle and the use of artificial intelligence play a significant role. Commercially, operators focus on costs, including payment terms.
Huawei’s cost competitiveness stems from state subsidies from the Chinese government, including tax breaks and support for research and development. These allow Huawei to offer competitive commercial terms, undercutting rivals. It can also provide competitively priced network maintenance services, as shown in its outsourcing agreement with XL Axiata.
Beyond costs, Huawei has also been able to win influence by offering a wide range of extra support, especially in the form of capacity-building. For instance, it has supported key government agencies—including the presidential palace, National Cyber and Crypto Agency and the military—by providing them with cybersecurity training.
Huawei has also established training centres and organised cybersecurity workshops at major Indonesian universities and vocational schools. Furthermore, Huawei actively cultivates relationships with influential policymakers and politicians by inviting them to Huawei headquarters and signing capacity-building agreements. A prominent official frequently engaged is Luhut Pandjaitan, a powerful political figure in the cabinet of former president Joko Widodo who now serves as chair of President Prabowo Subianto’s National Economic Council.
The Indonesian government has minimal involvement in vendor selection. Although laws exist on personal data protection and cybersecurity, there is no regulatory framework for assessing vendor dependency risks in the telecommunications sector or for assessing risks of vendors to national or economic security. Under the Science Act, the Ministry of Research and Technology can audit strategic technologies such as energy and agricultural technologies. However, there is limited public evidence of such audits occurring. This regulatory vacuum leaves Indonesia vulnerable to overdependence on a single foreign telecommunications vendor.
At the macro level, Huawei’s dominance exposes Indonesia to geopolitical risk. As the tech rivalry between the United States and China intensifies, Huawei—as well as ZTE—remains subject to restrictions in many Western economies. So Jakarta’s access to technology from Western countries could be limited and exacerbated by Huawei’s entrenchment in existing 4G infrastructure. Simply, Jakarta’s dependence on Huawei jeopardises its strategic autonomy: it has no real options.
At the micro level, Huawei’s market power puts operators at a significant disadvantage in negotiations; they’re simply price takers. Being reduced to price takers strips operators of their bargaining power: they are left vulnerable to the prospect of inflated costs dictated by Huawei, as switching vendors is complex and financially burdensome, creating a lock-in effect for next generation digital infrastructure. This effect could result in higher capital expenditure for operators, with costs passed on to consumers. Ultimately, Indonesians may face higher service prices, as their access to digital services becomes increasingly dependent on a single company.
These risks will escalate with the rollout of 5G. Unlike previous generations, 5G will underpin critical applications at the enterprise level, where any security lapse could have severe consequences. Now that Indonesia is so involved with Huawei, real alternatives are scarce. This not only has technical or commercial consequences, but it will also have political ramifications, where Indonesia’s strategic autonomy could be compromised. Hence, it is essential for the government to take a more active role in overseeing vendor selection and managing the risks associated with dependency on a single supplier.