Why Indonesia, Why Batam, Why Now: Indonesia Is The Latest Asian Country To Ramp Up Toy Manufacturing & Has It’s Very Own Electronics Hub In Batam
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Indonesia has been quietly manufacturing Toys for at least forty years. When Hong Kong's toy sector was booming in the 1980s, a lot of that production landed in Indonesia. Some of it never left. The country has run an export trade surplus in toys for five consecutive years, exported somewhere around USD 610 million in 2024, up about fourteen percent year on year, and sends roughly half to sixty percent of that to the United States. There are north of two hundred manufacturing businesses in the sector employing tens of thousands of people. Depending on whose numbers you believe, a very large share of the world's dolls are assembled there. Mattel has had significant capacity in Indonesia for years, including doll and die-cast production. This is not an emerging story. It is an under-reported one.
And it is picking up pace. In October 2025 Early Light International, the largest toy manufacturer in the world, broke ground on a USD 34 million facility in the Kendal Special Economic Zone in Central Java, with a stated target of around 10,000 jobs. When the biggest contract manufacturer on the planet commits capital to a market, that tells you more than any market report does. Meanwhile Indonesia's trade ministry has been openly briefing that it wants the country to be a global toy production hub rather than just a consumer market, and pointing at LEGO as its case study, because LEGO product has started being made in Batam.
Once your product contains a printed circuit board, a microcontroller, a motor, an LED array, a speaker or any wireless connectivity, your list of viable Indonesian locations collapses very quickly to one – Batam.
The tariff argument, and why the usual version of it is too simple
Everybody trots out the same line about the US-China trade war and China plus one. It is true as far as it goes, but it is dated, and if you use it in front of a sophisticated buyer in 2026 you will look like you stopped reading the news three years ago.
Here is where things actually stand. The reciprocal tariff regime that dominated 2025 headlines was struck down by the US Supreme Court in February 2026. A flat Section 122 surcharge filled the gap for a while and then expired in late July. Indonesia and the United States signed a reciprocal trade agreement in February 2026 that set a 19 percent rate, and the legal foundation for that class of agreement is now itself contested. Rates have moved several times this year and will move again. Anyone quoting you a specific percentage as though it is settled is not being straight with you.
What has not moved, and this is the point, is the structural gap. China-origin goods carry Section 301 duties that exist entirely independently of whatever emergency or reciprocal regime happens to be in force. Those duties have survived every legal challenge and every policy reversal since 2018, and in July 2026 they were extended again with an additional forced-labour action layered on top. Whatever the baseline does, Chinese origin costs more than Southeast Asian origin, and it has done consistently for eight years across two administrations.
That is the durable insight. The mechanism that captures it is the Certificate of Origin. Manufacture in Indonesia with sufficient local transformation and your goods certify as Indonesian, not Chinese, and they are priced accordingly at the US border. You are not betting on any particular tariff number holding. You are betting that the differential persists, and that bet has been correct for a long time now.
There is a second-order benefit that gets less attention and probably deserves more. Retail buyers in the US and Europe are increasingly asking suppliers direct questions about origin concentration. Having a non-China line on your capability deck is becoming a commercial asset in its own right, separate from the duty saving. It shortens conversations that used to be awkward.
Batam: The Indonesian Manufacturing Hub Most People Miss
Indonesia is enormous and disparate, but most of it is not relevant to you. If you are making plain plush or basic moulded plastic, Central Java is cheaper and you should look there.
Batam is a different proposition entirely, and it exists for a specific reason. The island sits about twenty kilometres off Singapore, close enough for a ferry crossing that takes under an hour. It has operated as a free trade zone for more than three decades, built originally as an export-oriented electronics platform, and electronics and electrical equipment consistently dominate its non-oil and gas exports. It hosts EMS providers, PCB fabricators, precision engineering firms, injection moulders and testing facilities in genuine density. Global semiconductor and consumer electronics supply chains already run through it.
That density is the whole argument. If your bill of materials includes a PCBA, you do not want to be trucking boards across Java. You want your board house, your moulder, your assembly line and your EMC test lab within a short drive of each other, because that is what turns a twelve-week engineering change into a three-week one. Batam gives you that. Very few places in Indonesia do.
The Singapore relationship compounds it. Plenty of companies run a twinning model, keeping design, engineering management, finance and regional commercial functions in Singapore while volume production sits in Batam. Your engineering director flies into Changi, not Jakarta, and is on the factory floor the same morning. For international brands already carrying a Singapore regional office, this is close to frictionless. For those that are not, it is still a much easier sell to senior staff than most alternatives.
LEGO's own published supplier list includes a supplier operating from Batamindo Industrial Park in Batam, and Indonesian trade officials have confirmed that LEGO product is now being produced on the island. Whatever the exact scope of that arrangement, a company with LEGO's quality regime does not put its name near a location that cannot hold tolerance.
Batam: The labour question, told straight
Batam's municipal minimum wage for 2026 is Rp 5,357,982 a month, up 7.4 percent on 2025, which works out at roughly USD 320 depending on where the rupiah sits. This is clearly much lower than current labour rates in China.
But lower labour costs is not the only point. What Batam actually offers is a different thing: a workforce that already knows how to do electronics manufacturing. Three decades of an export-oriented electronics cluster has produced a supervisory and technical layer that understands SMT lines, IPC standards, ESD control, statistical process control and the documentation discipline that export customers demand. You are not training that from scratch. You are hiring it.
The island also draws workers from across Indonesia rather than relying on a fixed local catchment, so the pool keeps replenishing and wage escalation has stayed orderly rather than spiking the way it has in some tighter markets.
Tunas Prima Industrial Estate
Which brings us to where you would actually put a factory in Batam…
I came across the Tunas Prima Industrial Estate in my research, and got to know the team there. They have a 100-hectare industrial park in Batam City, developed and run by the industrial division of Tunas Group, which has been in industrial real estate since 2000. Three things about it are worth flagging.
The first is speed. Ready-built factory units are available for immediate occupancy. For a brand testing whether Indonesia works before committing to a greenfield build, that difference is measured in quarters, not weeks. You can be running production while a competitor is still waiting on construction permits.
The second is the sustainability position, and this is the one that will matter more each year. Tunas Prima is Indonesia's first Green Mark certified industrial park at district level, and it supplies 100 percent Renewable Energy Certificates to every tenant through a mix of physical power purchase agreements, including floating solar and rooftop installations, and virtual PPAs with PLN. In practice that means a tenant can reach Scope 2 carbon neutrality without building anything themselves.
If you supply major Western retailers, you already know why that matters. Scope 3 reporting obligations are pushing down the supply chain, and your customers are increasingly asking questions your factory needs to be able to answer. Being able to say "our Indonesian production is Scope 2 neutral, here are the certificates" is not a nice-to-have in a 2026 vendor review. It is a line item.
The third key thing is access to extensive electronic manufacturing and supply chain.
The estate sits inside Batam's free trade zone framework, close to Hang Nadim International Airport, plugged into the island's existing supplier network, with ongoing infrastructure work on road access and secondary entrances.
Is Batam The ‘Next Shenzhen’?
That's probably an exaggeration, but Indonesia has proven scale in toy manufacturing and a track record with the biggest names in the business. The value is migrating towards electronics-integrated product, and that product needs a specific kind of place to be built. Trade policy continues to reward non-China origin and shows no sign of reversing on that. Batam has the supplier density, the trained workforce, the free trade zone status and the Singapore adjacency that makes it manageable for an international management team. And Tunas Prima offers ready capacity, green credentials that are becoming table stakes, and a route from decision to production that is measured in months rather than years.
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This article is copyright 2026 RG Marketing Ltd, all rights reserved. All contributors to this article contributed under a work for hire basis on behalf of RG Marketing Ltd. Please also note, this article was written and published in the United Kingdom.
