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What Is Driving Asia’s Technological Rise?

Dec 23, 2020 Jonathan Woetzel , Jeongmin Seong

Asia’s rapid emergence as a global technological leader over the last decade is a testament to the power of collaboration. And yet, in much of the world, the tide is turning toward isolationism and protectionism – a trend that will sap potential in many cutting-edge sectors.

SHANGHAI – Asia is a technological force to be reckoned with. Over the last decade, the region has accounted for 52% of global growth in tech-company revenues, 43% of startup funding, 51% of spending on research and development, and 87% of patents filed, according to new research by the McKinsey Global Institute (MGI). How did Asia get here, and what lessons does its success hold for the rest of the world?

Of course, Asia is not a monolith, and technology gaps within the region remain significant. India, for example, has fewer large tech companies than other major economies. Still, four of the world’s top ten technology companies by market capitalization are Asian.

China, home to 26% of the world’s unicorns (startups valued at $1 billion or more), leads the way in tech entrepreneurship in Asia, though it still relies on foreign inputs in core technologies. By contrast, advanced Asian economies like Japan and South Korea have large tech firms and a significant knowledge base, but relatively few unicorns. Asia’s emerging economies still invest relatively little in innovation, but they do provide growing markets for the goods and services produced by Asia’s tech leaders.

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Jonathan Woetzel

Writing for PS since 2014
13 Commentaries

Jonathan Woetzel, a McKinsey senior partner, is Director of the McKinsey Global Institute and co-author of No Ordinary Disruption: The Four Global Forces Breaking All the Trends.

Jeongmin Seong

Writing for PS since 2018
5 Commentaries

Jeongmin Seong is a senior fellow at the McKinsey Global Institute in Shanghai.

The Asianized World Has Arrived
DuKai/Getty Images

The Asianized World Has Arrived

Jonathan Woetzel & Jeongmin Seong show how complementary groups of countries at varying stages of development are propelling the region's global rise.

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j. von Hettlingen Dec 25, 2020

Jonathan Woetzel and Jeongmin Seong contend that Asia is on track toward assuming global leadership, with “four of the world’s top ten technology companies by market capitalization” being Asian. Southeast Asia is said to be racing ahead to become the next Silicon Valley of the region. Yet, “technology gaps within the region remain significant. India, for example, has fewer large tech companies than other major economies.”
The authors say Asia’s “rapid emergence as a global technological leader over the last decade is a testament to the power of collaboration. And yet, in much of the world, the tide is turning toward isolationism and protectionism. Indeed, after years of relative openness, rising trade barriers threaten to disrupt global flows of technology and intellectual property.” Not to mention nationalism, which is widespread across Asia, often whipped by by political leaders for nefarious ends.
Asia is a vast continent with religious, geographical, cultural or linguistic diversities. Before colonialism arrived, old Asian kingdoms fought between themselves, while also interacting with one aonther. The present-day borders of many Asian countries were more or less drawn by colonising powers in the 19th century, that were vying for regional dominance. In the absence of cultural exchanges across the region, a framework for exclusive forms of national-identity was laid that became the driving force behind decolonisation. Today nationalism impedes regional cohesion.
Like elsehwhere, Asian capitals and megacities are the real centres of cosmopolitanism and pluralism, while the countryside is seen and cast as the rural interior that is slow in development and more homogeneous in its social composition. Yet the differences between the Middle East and the Asia Pacific region in their openness to trade, investment, and new ideas could not be more striking, nor could the economic development and growth be more stark.
According to the authors, “Asia is likely to continue to forge ahead with its technological development. But to make the most of its progress - and the strides that have been made elsewhere - enhancing technological collaboration within, and among regions, remains a priority for Asia and the rest of the world.” It remains to be seen whether the 21st century will be the "Asian Century", following on from the preceding American and British Centuries.
However, Asia’s share of the global economy remains still around 30%, despite the region being home to 60% of the world’s population. Asia has the potential of continuing its convergence towards the levels of development of the advanced OECD economies, and perhaps during the 21st century regaining a share of the world economy equal to that of its share of the world population. Yet there are many challenges that Asia faces in realising an Asian Century.
Much depends on whether the region can maintain its rapid economic growth. Another question is whether Asians can cooperate together as a team. Fifty years on, the Association of Southeast Asian Nations (ASEAN) - a regional organisation that brings together disparate neighbours to address economic, security, and political issues - is a paper tiger. Its impact is limited by a lack of strategic vision, diverging priorities among member states, and weak leadership.
Regional integration leaves much to be desired, far from being Asia’s equivalent to the European Union. The bloc’s biggest challenge, according to critics, is developing a unified approach to China, particularly in response to Beijing’s claims in the South China Sea, which overlap with claims of several ASEAN members. Countries remain divided, while continuing to look to the US and other Western countries for global leadership, especially in its effort to counter China.
In this regard, critics doubt whether Asia could translate its economic might into political power. No doubt a united continent with a bi-polar or multipolar system would bring more stability to the region. Asia’s economic development relies heavily on regional security, cooperation between political leaders, who can put nationalistic ideologies aside.
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Leo Arouet Dec 24, 2020

The ascent of Asia. Stimulating article. The Asian Development Bank has estimated that Asia, after making up three-fifths of the world’s GDP at the beginning of the industrial age in 1820, saw its stake decline to one-fifth in 1940, before dramatic economy recovery has helped bring it up to two-fifths today. By 2025, according to the same estimation, Asia might return to its 1820 position in terms of world product.
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