Pivotal technologies that will drive Asia’s economic growth

Anand Swaminathan, senior partner in our Singapore office, Asia lead of McKinsey Digital and co-author of Future of Asia, highlights the pivotal technologies that are contributing to Asia’s accelerated growth, and some outstanding examples of digital innovation in the region.

Which technologies have been pivotal in driving Asia’s economic growth?

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Technology has been an important driver of economic growth in Asia and frankly, around the world. There are several technologies that are contributing to Asia’s accelerated growth, and when we look at Asia’s very high share of patents, and also startup investments in a few technologies, we see where this growth is coming from.

It firstly comes from mobile services. Asia has 81 percent of the world’s strong patents and half of venture capital and IPO funding for this sector in mobile services. Asia is clearly leading global growth in mobile and telecom services. In fact, in Asia, 20 percent of the growth is expected in these super apps - apps such as WeChat, or a multi-service platform like Gojek or ride sharing apps like Grab that have multiple services all in one platform.

Artificial intelligence is another area where Asia has 42 percent share of the AI strong patents and this accounts for 48 percent of the global investment in the AI technologies. Whether it’s companies in Japan, China, South Korea, they actually hold the most number of AI patents.

And also, when you look at India and China, they produce the most number of computer science graduates in the world every single year. They’re training the graduates to become data scientists, machine-learning specialists, and beyond. In manufacturing, we find that mobile phone manufacturing in Asia benefits from the region’s well-connected and cohesive manufacturing ecosystem. The fact that about 85 percent of the semi-conductors are exported by Asian countries has actually helped to develop the region’s core manufacturing capability and ecosystem.

And finally, in the internet of things (IoT), Asia has 39 percent of the global strong patents and 56 percent of the investment in IoT technologies. The global IoT market now is expected to grow significantly, from about $465 billion in 2019 to over $1.5 trillion in 2030.

At the end of the day, these patents are critical. Furthermore, Asia fundamentally holds a very large share of those patents in these core technology areas. But when we look at the share of startup investments in several other technologies, powered by growing consumer demand, Asia has actually continued to increase the investment in such technologies, where Asia actually accounts for 82 percent of the total investment in them.

We can look at it as whether it’s education technology. So Asia actually accounts for 63 percent of startup investments and 37 percent of strong patents in EdTech. In gaming and e-sports, Asia accounts for 48 percent of the startup investment and 18 percent of the strong patents in gaming and e-sports.

With this, online, mobile gaming in Southeast Asia is actually predicted to grow to have over 400 million users by 2021. And finally, in AdTech, or advertising technology, Asia accounts for 40 percent of startup investment and 7 percent of the strong patents in AdTech.

That being said, digital advertising accounted for 49 percent of all spending in advertising in Asia in 2019, which is actually an all-time high. Innovative companies such as Panshi in China or PRIMO in Thailand or Near in Singapore, are all strong players in this space in AdTech.

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