McKinsey Global Report
Asia’s initial response to the COVID-19 pandemic in 2020 was partly enabled by technological foundations developed long before the crisis. Over the past decade, the region has developed and deepened its technological capabilities and infrastructure rapidly, accounting for a large share of global growth in technology company revenue start-up funding, spending on R&D, and patents filed.
Asia’s strengths, particularly in digital and mobile technologies, played an important role in the region’s early response to the novel coronavirus SARS-CoV-2 in spring 2020. The region’s technology-enabled responses were rooted in capabilities developed prior to the pandemic. Over the past decade, Asia has undergone a significant technological transformation, which in turn has changed the region’s technology marketplace.
Corporate presence: Between 2006–08 and 2016–18, Asia accounted for 52 percent of global growth in the revenue of technology companies. Based on market capitalization, four of the world’s top ten technology firms were Asian in 2020; ten years earlier, the region had no companies in the top ten. In 2012, Asia was home to only two unicorns (privately held start-ups valued at $1 billion or more); today, the region has 170 unicorns, accounting for 36 percent of the global total.
Investment: Asia’s share of start-up investment, which includes venture capital investment and initial public offerings, increased from only 16 percent in 2006–08 to 40 percent in 2017–19, accounting for 43 percent of global growth. China still accounts for a large share, but over the past decade, venture capital has increasingly flowed to Southeast Asia, too. Asia’s share of global R&D investment increased from 26 percent in 2006–08 to 34 percent in 2016–18, accounting for 51 percent of global growth.
Some Asian governments have been vital catalysts for the development of technology in recent years, steering its commercialization and execution. In China, for instance, the government’s stated aim is to develop a domestic AI industry worth nearly $150 billion by 2030. India has launched several programs that link technology and social development, such as the digital ID program, as a strategic tool for delivering government services, managing budgets, and increasing financial inclusion. Malaysia has formed digital free trade zones through which $65 billion of goods and services are expected to flow in the period to 2025.
Emerging Asia has relatively low investment in technology and is not richly endowed with significant technology players. India, too, has fewer large technology companies than other major economies, and business dynamism is relatively constrained by some gaps in physical infrastructure. Moreover, there are risks that we cannot overlook, including potential disruptions to global flows of technology that could impede the rate of innovation and global GDP growth. Collaboration on technology can improve total factor productivity, which facilitates knowledge flows and the adoption of competitive solutions.
Between 2010 and 2020, about 50 percent of Asia’s GDP growth, equivalent to $6 trillion, came from total factor productivity, a broad measure of the contribution to the economy of technology and innovation, according to the McKinsey Global Growth Model. Over the coming decade, in order for Asia to maintain about 4 percent growth, technology needs to contribute 43 percent of expected total growth in GDP in the period to 2030—$7 trillion. (Part 1)
