Eye on Indonesian Tech: Where US and Chinese Companies Vie for Market Power and Soft Power

As China and the United States increasingly wall off their domestic technology markets from one another, bilateral competition will continue to spill over into emerging markets in the global south.

One key market in this competition is Indonesia, which both Chinese and American tech companies view as a cornerstone of their pushes into Southeast Asia. As one Chinese venture capitalist (VC) mused, “When [Chinese] investors talk about ‘Southeast Asia’, they are referring to Indonesia.”

That intense focus is with good reason: Indonesia’s tech industry is having a banner year. Long overlooked by international investors and technologists, Indonesia has now produced a batch of high-profile startups that are making waves throughout Southeast Asia. Just over five years ago, Indonesia had never produced a tech “unicorn” (a startup valued at over $1 billion). Today it has at least six, some of which are preparing for lucrative public offerings. Consequently, these unicorns are drawing investments from—and forging key partnerships with—the world’s most dominant tech platforms.

While companies like Facebook and Bytedance vie for Indonesian users, VC investors from the United States, China, Singapore, Japan, India, and Europe have helped fuel the rise of Indonesia’s homegrown tech juggernauts. International talent has also been a key ingredient in the country’s startup landscape. Gojek, Indonesia’s leading super app, drew its first Chief Technology Officer and much of its early technical team from India, while the logistics startup J&T Express was founded by two Chinese entrepreneurs.

That web of global connections makes Indonesia’s tech ecosystem both a vibrant international melting pot and a battleground of tech geopolitics. This is more than just a competition for new users and profits. Technology platforms are also vectors for values and models of technology governance. How a social network polices extremist content or what a social network does with user data often become the default settings for tech governance in a country.

It is therefore important to first have some grounding in the Indonesian technology scene. This case study provides a preliminary survey of the country’s consumer technology landscape and the international connections that have facilitated the growth of this sector. Drawing on data and interviews with players across the Indonesian tech ecosystem, this case study focuses on three segments: VC investments, smartphone apps, and smartphone handsets.

Venture Capital in Indonesia: Lay of the Land

To get a sense of global VC investments in Indonesia, it’s instructive to look at its six unicorn startups. The United States and China are the two largest sources of capital for this group. While more American firms have made more individual investments into these unicorns, Chinese VCs have poured in more than double the money: $4.6 billion in disclosed funding compared to $2.1 billion from US-based VCs (see Figure 1).

Figure 1. Number of Investments and Total Funding in Indonesia’s Tech Unicorns

Note: The six unicorns are Gojek, Tokopedia, Bukalapak, Traveloka, Ovo, and J&T Express. Financing by each investor was estimated by dividing the total amount by the number of investors, since only this information was disclosed. Many VC firms are global by nature, so their national affiliations were assigned based on location in Crunchbase’s database.
Source: Crunchbase and CB Insights.

Although American and Chinese players make up more than 50% of total VC funding, investors from Singapore, Japan, and Indonesia all play significant roles. Singaporean investors have made the same number of investments as those from China and have poured in almost as much money as those from the United States. Meanwhile, Japanese and Indonesian VCs have been instrumental in getting these unicorns off the ground, making seed investments in half of them.

Figure 2. Indonesian Unicorns Have Attracted Asian and American Capital

Note: In May of 2020, Gojek and Tokopedia merged to form GoTo Group. Here they are presented separately to showcase their individual investor profiles. The national affiliation of VCs was assigned based on the location in Crunchbase’s database.
Source: Crunchbase and CB Insights.

Partnerships and Influence

What is unique about Chinese and American capital’s role is the broader linkages they have forged with Indonesian startups (see Figure 2). Many of the largest Chinese and American investors are VC arms of “big tech,” including Alibaba, Ant Financial, Tencent, JD, Facebook, Google, Paypal, and Microsoft. They use their investments to advance the interests of their corporate parent, often through sharing technology or forging broader business partnerships.

The nature of these partnerships varies. Alibaba and Ant Financial have opted to share backend technology with investee startups in order to facilitate interoperable marketplaces, while e-commerce giant JD has leveraged mutual investments with Gojek to support JD’s entry into Indonesian e-commerce.

In an interview on the Indo Tekno podcast, Gojek co-founder Kevin Aluwi described what his company has learned from investment relationships with both Google and Tencent. While Google has shared best practices in data-driven management and employee wellbeing, Tencent—creator of Asia’s original super app—has instead shown Gojek “an interesting possible future” for itself, according to Aluwi.

VC investments can also give the investor a seat at the corporate decision-making table, sometimes including a spot on a startup’s Board of Directors or its Board of Commissioners (an entity charged with overseeing the Board of Directors in Indonesia).

At e-commerce giant Bukalapak, one of the five Board of Commissioners seats is held by the head of investment at Ant Financial, which invested in Bukalapak’s series E financing. Following major investments, representatives from Tencent and Alibaba also took seats on the Boards of Commissioners for Gojek and Tokopedia, respectively. The composition of those Boards leaked at the end of 2018, and at that time none of the large American tech companies were represented on Gojek or Tokopedia’s boards.

An important upcoming decision will be the composition of the Boards of Directors and Commissioners for GoTo, the entity formed by the Gojek and Tokopedia merger. Though information on the Boards has not been released publicly, Japanese VC giant SoftBank and Alibaba are reportedly the two largest shareholders in the new company, with Softbank holding 15.3% and Alibaba 12.6%. Those stakes are likely to translate into significant roles in corporate oversight, as well as a potential windfall from GoTo’s rumored public listing.

Motivations and Implications

Many observers have depicted Chinese tech investment into Southeast Asia as part and parcel of China’s “Digital Silk Road” (DSR) that falls under the banner of the Belt and Road Initiative (BRI). The intent, they often argue, is to support Beijing’s grand strategy to dominate foreign markets and transplant the “China model” to those countries. That perception is often reinforced by savvy Chinese tech companies that seek to frame their overseas ventures as supporting the DSR in order to curry favor with government officials.

But for Chinese VC investments in Indonesia to date, the DSR does not appear to be a significant driver of activity. For one, the Indonesian government has not signed a DSR agreement with China. Moreover, analysis of corporate investment strategies, combined with interviews with foreign investors across the ecosystem, indicates that Chinese capital into Indonesia is motivated by similar goals as other investors: profits, partnerships, and market share.

The Chinese companies that have made the most investments in the region—Tencent and Alibaba—have a clear business rationale for doing so. As publicly traded companies that have largely saturated their home markets, riding the Indonesian tech boom can help them tell a “growth story” to investors. For many Chinese non-corporate VCs, Indonesia’s tech scene today looks a lot like China’s ten years ago, and they believe they can use the lessons learned from home to cash-in on a new market.

Though VC activity thus far appears to be market-driven, the domestic landscape of Chinese tech is changing quickly. Those changes could influence the future direction of outbound investments. Over the past year, the Chinese government has rolled out a series of policies and administrative actions aimed at asserting greater control over big tech companies, including taking board seats at both Sina Weibo and Bytedance, the parent company of TikTok.

How the government intends to wield that board power remains to be seen. But these shifting dynamics warrant continued scrutiny of the relationship between Chinese tech investment patterns and government goals.

The Indonesian App-scape

When it comes to apps, there is no widely agreed upon metric for their rankings in a given market. Both total downloads and app store rankings have drawbacks, so we relied on app “usage” rankings that factor in both current installs and active users (see Figure 3).

Figure 3. Top 20 Most Used Apps in Indonesia, July 2021
Note: Rankings are for Android apps from the Google Play store. Apple’s iOS has just 8% market share in Indonesia. Country affiliations are based on the headquarters of the app developer’s parent company.
Source: SimilarWeb, a data intelligence firm.

US apps continue to dominate the overall rankings, holding the top six positions and 12 of the top 20 slots. Chinese apps appear four times in the top 20, while homegrown Indonesian apps appear twice, with Tokopedia and wireless network provider Telkomsel near the bottom.

This strong showing by American apps speaks to their competitiveness, but also to a deeply ingrained advantage granted by Google’s Android operating system (OS). Almost all non-Apple smartphones run some version of Android, meaning they also come with a large number of Google apps pre-installed. This is likely a major contributor to Google apps taking up eight of the top 20 spots.

Chinese apps fare significantly better in terms of social networking/media apps. While US apps again take the top four spots, Chinese apps pick up much of the slack by taking eight of the top 20 spots. There is also a stark difference in the “age” of the American and Chinese apps on the leaderboard. While the top American social apps have all been around for at least a decade, the vast majority of Chinese apps have existed for five years or less.

Tensions over Content Moderation

Jostling between these apps also has implications for technology governance and the information available to Indonesian citizens, particularly when it comes to content moderation.

This is not a problem unique to Chinese apps, as all content tech platforms constantly grapple with how to monitor and police what types of content are allowed.

But Chinese apps stand out when it comes to this challenge because they are in the early stages of expanding beyond a highly controlled online environment in their home market. Two high-profile incidents involving Bytedance apps can help illustrate these tensions.

In July of 2018, TikTok was suddenly banned by Indonesian authorities for allowing “pornography, inappropriate content, and blasphemy” on its platform. That ban was lifted just eight days later, after TikTok promised to hire 20 new content moderators in Indonesia, open an office to liaise with the Indonesian government, and strengthen controls on content for young users. Brief as it was, this episode marked the first time TikTok was banned in a country, presaging India’s ban and the Trump Administration’s subsequent attempt in 2020.

The second episode occurred on Bytedance’s news aggregation app Babe that it had acquired from an Indonesian startup in 2018. According to a Reuters report, Babe was asked to remove news stories deemed “critical” of the Chinese government, censor keywords like “Tiananmen” or “Mao Zedong,” and scrub news on tensions between China and Indonesia. (Bytedance reportedly stopped these practices at some point in 2019 or 2020, before their existence came to light.)

Although the company eventually adjusted to a more localized approach to content moderation that appears to have calmed the waters, these incidents illustrate the ways in which social apps can shape the information ecosystem of Indonesia.

Moreover, these controversies will likely pop up again and again as Chinese social apps learn to operate in different markets and to mitigate the risks that stem from its home country’s censorship regime. As long as a company’s main business is content and information, any type of censorship regime essentially acts as a “non-tariff barrier” to business operations. This is especially so when censorship or content moderation practices are not transferrable to other markets that have very different governance systems.


The final, and arguably most important, piece of Indonesia’s consumer technology landscape is smartphones. This choice of smartphone dictates what mobile OS is in use, what apps come pre-installed, and also the nature of privacy protections on the device.

While South Korea’s Samsung remains on top in Indonesia, Chinese smartphone brands have made major inroads over the past five years. In 2016, just one Chinese brand ranked among the top five in Indonesia. In 2021, Chinese brands occupied three of the top five spots and more than half of the market share.

Figure 4. Market Share of Smartphone Brands in Indonesia, 2016 vs. 2021
Note: 2021 figures are for January to July only.
Source: Statcounter Global Stats.

That surge in market share is the result of sharply divergent strategies by different Chinese brands. Following their playbook from the Chinese market, Oppo and Vivo have invested heavily into local distribution networks and poured money into sponsorships that range from international sporting events to Indonesian e-sports leagues. Xiaomi, by contrast, has a much smaller physical footprint in Indonesia, instead relying primarily on e-commerce channels.

Despite the strength of Chinese brands, Samsung, Oppo, Xiaomi, and Vivo all currently run some version or “fork” of the Android OS, while Apple operates its homegrown iOS. This speaks to the stickiness of American mobile OS, an enduring form of technological soft power that allows American firms to exert influence over the architecture and governance of the mobile internet, even when Chinese firms are building and selling the hardware.

Headwinds Ahead

Despite the growing fracture between the United States and China, Indonesian tech companies appear to have taken a chapter from the country’s foreign policy approach of “pragmatic equidistance” that seeks to balance the two superpowers. So far, it has served the country’s tech ecosystem well, facilitating its emergence onto the global stage.

But there are headwinds that call into question how much and how long Indonesia can hew closely to that approach. Intensifying great power competition could undermine pragmatic equidistance, while increasing politicization of technology will also likely challenge Indonesia’s ability to straddle these ecosystems. How Indonesian companies cope with these dynamics will certainly shape the next stage of Indonesia’s evolution as a major tech hub for Southeast Asia.

Anarkalee Perera was a MacroPolo Summer Associate and currently enrolled at Johns Hopkins SAIS.

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