DXN Signs Indonesia JV to Capture US$7M Market, Bypass 40% Import Tariffs

DXN Limited has signed a strategic Memorandum of Understanding with Super Sistem Indonesia to establish a Joint Venture targeting Indonesia’s burgeoning data centre market. The DXN Indonesia Joint Venture Strategy positions the company to capture a US$7 million revenue opportunity over three years whilst circumventing import tariffs of 20-40% that would otherwise apply to foreign suppliers.

The partnership addresses a critical market access challenge. Indonesia’s regulatory environment imposes substantial barriers on foreign data centre equipment, creating competitive disadvantages for external manufacturers. By establishing a 50/50 ownership structure through a Singapore-domiciled JV entity and building a Jakarta manufacturing facility, DXN transforms from tariff-burdened exporter to cost-competitive domestic manufacturer.

DXN Secures Indonesian Market Entry Through Strategic Joint Venture with Super Sistem Indonesia

The MOU establishes a framework for Super Sistem Indonesia to place future modular data centre purchase orders through the jointly-owned Singapore entity. SSI operates as a critical digital infrastructure operator which primarily deals with subsea fibre optic cable systems, bringing local market expertise and regulatory navigation capabilities to the partnership.

The JV structure channels SSI’s modular requirements to a jointly-owned manufacturing facility in Jakarta. This operational model enables DXN to service the Indonesian market without incurring the 20-40% import tariffs that would apply to products shipped from external manufacturing bases. The Singapore domicile provides governance transparency and operational flexibility whilst maintaining the domestic manufacturing advantage.

Managing Director Shalini Lagrutta noted that in FY25, at least 80% of DXN’s modular revenue was for the export market. The Indonesian JV represents a strategic pivot towards localised manufacturing hubs that eliminate tariff obstacles whilst positioning for regional customer acquisition beyond the initial SSI partnership.

The US$7 million revenue opportunity is oriented towards years two and three, reflecting the operational ramp period required to commission the Jakarta facility and establish production workflows. This phasing indicates conservative near-term expectations whilst acknowledging the facility’s capacity to scale significantly once operational.

Why Is DXN Establishing a Joint Venture in Indonesia?

Indonesia launched its ‘Making Indonesia 4.0’ strategy in 2018, a government-led initiative designed to accelerate digitisation, build a self-reliant digital economy, and position the nation among the world’s top economies. The strategy created policy tailwinds for domestic digital infrastructure investment, coinciding with explosive growth in e-commerce, fintech, cloud computing, and emerging technologies such as AI.

The regulatory environment, however, imposes significant barriers for foreign suppliers. Import tariffs on data centre products and equipment are often in the range of 20-40%, substantially increasing costs for companies attempting to service the Indonesian market from external manufacturing bases. These tariffs effectively create a protected domestic market favouring local manufacturers.

Data sovereignty regulations compound the access challenge. The implementation of Indonesian data sovereignty regulations require certain types of data, particularly in the public, financial, and strategic sectors, to be stored and processed domestically. This mandate has driven sustained demand for in-country data storage facilities, creating captive market segments that foreign suppliers cannot address without local infrastructure.

Indonesia’s market fundamentals support the strategic investment. With a population of approximately 285 million, the country hosts one of the world’s largest internet user bases. As of late 2025, Indonesia has witnessed a surge in digital activity. Market forecasts project data centre capacity to grow from approximately 970 MW currently to 1,800 MW by 2028, representing substantial expansion driven by hyperscale and edge deployments.

The JV structure enables DXN to navigate these barriers systematically:

1. ‘Making Indonesia 4.0’ Alignment: Positioning as domestic manufacturer supports government digitisation objectives
2. E-commerce and Fintech Surge: Rapidly expanding digital economy drives infrastructure demand
3. Cloud Computing Adoption: Enterprise migration to cloud platforms increases data centre capacity requirements
4. AI Infrastructure Build-Out: Emerging technology workloads create new facility specifications and deployment urgency
5. Data Sovereignty Compliance: Domestic manufacturing unlocks government and financial sector opportunities inaccessible to foreign suppliers

For investors in (ASX: DXN), the regulatory arbitrage opportunity is material. Competitors servicing Indonesia from external bases absorb 20-40% tariff costs, either compressing margins or passing costs to customers. DXN’s Jakarta facility eliminates this disadvantage, creating pricing flexibility whilst maintaining profitability.

Indonesia’s Digital Infrastructure Boom Explained

Indonesia’s increasingly connected population is driving an economy that is rapidly powered by data, fuelled by explosive growth in e-commerce, fintech, cloud computing, and emerging technologies like AI. Both hyperscale and edge data centres are being developed at pace to serve the needs of a growing population and an expanding corporate sector.

The 970 MW to 1,800 MW capacity trajectory reflects both hyperscale deployments by cloud providers and edge data centre proliferation serving enterprise and regional connectivity requirements. Hyperscale facilities support cloud service providers and content delivery networks requiring centralised capacity in Jakarta and major urban centres. Edge deployments address latency-sensitive applications, supporting e-commerce logistics, fintech transaction processing, and emerging IoT implementations across Indonesia’s geographically dispersed archipelago.

Government policy accelerates this trajectory. The ‘Making Indonesia 4.0’ strategy includes targeted incentives for digital infrastructure investment, whilst data sovereignty regulations mandate domestic capacity regardless of cost considerations. This creates a multi-year structural tailwind independent of broader economic cycles.

“In FY25 at least 80% of DXN’s modular revenue was for the export market. The MOU and establishment of a JV, strongly positions us to participate in the next wave of South-East Asia’s infrastructure development, without incurring significantly high import charges.” — Shalini Lagrutta, Managing Director

The export revenue concentration validates the strategic rationale. DXN’s existing business model relies heavily on cross-border sales, exposing the company to tariff headwinds in regulated markets. The Indonesian JV demonstrates a replicable localisation strategy applicable to other high-growth Southeast Asian markets with similar regulatory structures.

What Does the Super Sistem Indonesia Partnership Mean for DXN Shareholders?

Super Sistem Indonesia operates as a critical digital infrastructure operator which primarily deals with subsea fibre optic cable systems. This domain expertise positions SSI at the intersection of Indonesia’s connectivity expansion, as subsea cables form the backbone infrastructure enabling domestic data centre capacity to interconnect with regional and global networks.

SSI’s operational footprint provides the JV with immediate credibility within Indonesia’s regulatory environment. Navigating local permitting, compliance frameworks, and government relationships represents a significant barrier for foreign entrants. SSI’s established relationships and operational track record de-risk DXN’s market entry whilst accelerating the timeline to commercial operations.

The partnership follows a staged growth pathway designed to prove operational capability before scaling customer acquisition:

• Phase 1: SSI places modular data centre purchase orders through the Singapore JV entity, establishing transaction workflows and validating manufacturing quality standards
• Phase 2: Jakarta facility commissioning and operational ramp, building production capacity and local supply chain relationships
• Phase 3: External customer acquisition leveraging cost-competitive Southeast Asian manufacturing base, expanding beyond SSI to capture broader market opportunity

The partnership positions (ASX: DXN) to capitalise on Indonesia’s US$7 million revenue opportunity through controlled execution rather than aggressive upfront capital deployment. The equal ownership structure aligns incentives whilst limiting DXN’s financial exposure during the facility establishment phase.

SSI’s subsea cable specialisation creates natural adjacency opportunities. Data centres interconnect directly with subsea cable landing stations, creating integrated infrastructure requirements. SSI’s customer relationships within telecommunications and connectivity sectors provide potential introduction pathways to expand the JV’s customer pipeline beyond the initial SSI orders.

How Will DXN Capture Indonesia’s Data Centre Market Growth?

The operational model channels SSI’s modular requirements through the Singapore JV entity to the Jakarta manufacturing facility. This structure separates commercial agreements (Singapore domicile) from production operations (Jakarta facility), providing contractual clarity and governance transparency whilst maintaining the domestic manufacturing advantage.

The US$7 million revenue projection over three years, oriented towards years two and three, reflects realistic expectations for facility commissioning, production ramp, and order fulfilment cycles. The Managing Director stated: “Initially the focus will be on securing modular orders for SSI out of the Jakarta facility; overtime we believe we can grow the Indonesian pipeline, securing work for a list of additional customers who require a cost-effective manufacturing solution based in Southeast Asia.”

Initial orders from SSI validate manufacturing quality and operational workflows before scaling to external customer acquisition. The Jakarta facility’s design incorporates scalability from inception. Whilst initial capacity targets SSI’s requirements, the infrastructure supports expanded throughput as additional customers are secured. This approach minimises upfront capital expenditure whilst preserving optionality to scale production in response to market demand.

DXN’s competitive positioning benefits from several structural advantages:

1. Tariff Elimination: 20-40% cost advantage eliminates foreign competitors’ primary pricing disadvantage
2. Data Sovereignty Compliance: Domestic manufacturing classification unlocks government, financial, and strategic sector opportunities
3. Regional Proximity: Jakarta location reduces logistics costs and delivery timelines across Southeast Asia
4. Vertically Integrated Expertise: DXN’s design, engineering, and manufacturing capabilities ensure quality control and customisation flexibility
5. Local Market Intelligence: SSI partnership provides regulatory navigation and customer relationship access unavailable to foreign entrants

The competitive moat strengthens as production scales. Foreign suppliers face static 20-40% tariff burdens regardless of order volume. DXN’s Jakarta facility benefits from operating leverage, with marginal costs declining as throughput increases and fixed infrastructure costs amortise across larger production runs.

The facility’s Southeast Asian positioning creates geographic optionality. Whilst initially focused on Indonesian demand, the Jakarta location provides cost-effective manufacturing for potential customers across Thailand, Malaysia, Vietnam, and the Philippines, markets experiencing similar data centre capacity expansion trajectories.

Investment Thesis: Positioning for Southeast Asia’s Infrastructure Supercycle

Indonesia represents Asia’s next digital infrastructure frontier, combining population scale, regulatory tailwinds, and structural capacity deficits that mandate multi-year investment cycles. The 970 MW to 1,800 MW capacity expansion projected through 2028 signals institutional confidence in the market’s trajectory, with recent large-scale data centre projects validating commercial viability.

The DXN Indonesia Joint Venture Strategy balances near-term revenue catalysts with long-term strategic optionality. The US$7 million three-year revenue opportunity provides measurable financial contribution whilst the Jakarta facility establishes a platform for regional expansion as Southeast Asian markets mature.

Capital efficiency distinguishes this approach from traditional international expansion. The 50/50 ownership structure with SSI shares facility establishment costs whilst maintaining strategic control through equal governance. DXN gains Indonesian market access without shouldering full infrastructure investment, preserving balance sheet capacity for complementary growth initiatives.

The Singapore domicile adds operational flexibility. The structure separates commercial agreements from manufacturing operations, enabling the JV to service customers beyond Indonesia if regulatory frameworks permit cross-border delivery from a Southeast Asian manufacturing hub. This optionality becomes increasingly valuable as regional data sovereignty regulations evolve.

“Global tech giants and regional investors alike are recognising Indonesia as a prime destination, drawn by its scale and momentum. Recent large-scale data center projects across Indonesia have signalled strong confidence in the country’s digital future. To effectively navigate these dynamics and capture the growing opportunity, DXN has taken decisive action by partnering with a regional leader in SSI.” — Shalini Lagrutta, Managing Director

The Managing Director’s commentary acknowledges the competitive intensity as hyperscalers and regional players commit capital to Indonesian infrastructure. DXN’s partnership with SSI provides defensive positioning, establishing local manufacturing capabilities before tariff barriers and capacity constraints tighten market access for late entrants.

For shareholders, the JV represents diversification from the 80% export revenue concentration characterising FY25 performance. Localised manufacturing reduces cross-border tariff exposure whilst creating scalable platforms replicable in other high-growth Southeast Asian markets facing similar regulatory dynamics. The Indonesian facility serves as proof-of-concept for a broader regional localisation strategy, with lessons learned informing potential expansions into adjacent markets.

The investment case balances execution risk against strategic positioning. The US$7 million revenue projection requires successful facility commissioning, SSI order fulfilment, and external customer acquisition. However, the partnership structure mitigates downside through shared capital commitment whilst the tariff arbitrage provides pricing flexibility that reduces customer acquisition risk relative to foreign competitors absorbing 20-40% cost disadvantages.

Managing Director Lagrutta concluded: “We are enthusiastic about the high-growth prospects in this region and strongly believe an acceleration in investments, supported by rapid e-commerce expansion, widespread cloud adoption, and proactive government policies promoting digital transformation means this is an area DXN must direct its attention, to scale.”

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