From robots to digitisation, tech is rapidly transforming Asia’s economy

Asia’s eager tech adoption is changing its economy in manufacturing, banking, healthcare and e-commerce, creating opportunities across the digital ecosystem

Ecaterina Bigos

Published: 10:00pm, 14 Jun 2023

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The hype surrounding advanced technology has reached fever pitch, from the latest breakthroughs in artificial intelligence (AI) to the new Apple headset that some believe could revolutionise the virtual experience and take the metaverse mainstream. While it’s exciting to associate these with the future, it’s important to note that technological transformation is already affecting how many “real” industries are operating and creating opportunities.

While Asia’s tech infrastructure and automation have historically been underdeveloped relative to the West, factors such as high internet connectivity and increasingly affluent and urban demographics have driven the region to adopt technologies and automation more quickly.

Industry 4.0 technologies – also called the fourth industrial revolution or 4IR – is the next phase in the manufacturing sector’s digitisation. It is driven by disruptive trends including the rise of data and connectivity, analytics, human-machine interactions and improvements in robotics.

China has been investing heavily in robotics and automation technologies to increase efficiency and productivity in its manufacturing sector. In Japan, companies such as Fanuc are leading the way in the development of industrial robots that can work alongside people.

Covid-19 accelerated the 4IR transition as physical distancing and shifting consumer demand forced companies to embrace digitisation and contactless operations. Smart technologies will continue to unlock the potential of the region’s manufacturing industries.

Notably, the emerging Southeast Asian manufacturing bloc – Malaysia, Thailand, Philippines and Vietnam – continues to gain market share with 7 per cent of the global manufacturing output. The same is true of India with 3 per cent, based on the World Bank data, with China at 30 per cent and the US at 16 per cent still representing the largest shares.

A view of the integrated control and intelligent decision-making platform of Xichang Steel & Vanadium in Liangshan, Sichuan on December 28. The company uses robots, intelligent sensing and model control, the Internet of Things, big data and other advanced technologies. Photo: Getty Images

Socioeconomic shifts and increased connectivity across the region are also creating exciting opportunities within fintech and digital healthcare systems. Asia’s number of commercial bank branches per adult is less than half that of the United States, while the number of credit cards per adult is nearly one-tenth.

With limited access to traditional physical bank branches and banking services like credit cards, the unbanked and underbanked population in Asia has gone straight to fintech solutions for payments and wealth management. This has empowered the growth of mobile payments, including through digital or mobile wallets, which account for a larger share of transactions at both e-commerce and physical points of sale than in Western markets.

Asia is also emerging at the forefront of developing digital healthcare ecosystems driven by ageing populations, a rising focus on health awareness and the uneven distribution of healthcare resources. The number of physicians and hospital beds per person in Asia are about 39 per cent and 40 per cent lower than the global average. With limited capacity to deliver in-person care, the region has been quick to adopt telemedicine and digital healthcare services.

Digital healthcare has touched the lives of around 1.5 billion people in Asia, in terms of registered users across emerging healthcare platforms, and its base is growing. The region’s digital healthcare revenues reached US$73.8 billion last year, accounting for over half of the global total, and are expected to continue growing at a 14 per cent compound annual growth rate to 2027, above the global rate of 12 per cent.

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With a continued rise in wealth comes higher demand for goods and services. This demographic transformation has also created an active investment landscape around e-commerce and the digital economy more broadly. With the region’s strong digitalisation marked by high smartphone use and social media penetration, the pandemic has greatly boosted e-commerce.

While e-commerce blossomed for decades leading up to Covid-19, the sector boomed during the global pandemic – accelerating at an altogether different pace. While people stayed in the safety of their homes, e-commerce saw runaway growth, with China and the US now accounting for 67 per cent of the market share, almost equally split, and Asia excluding China accounting for roughly 13 per cent.

Southeast Asia, in particular, remains among the fastest-growing regions due to the lower e-commerce penetration rate of 18 per cent – compared to China’s 31 per cent, South Korea’s 36 per cent and America’s 23 per cent – and this is expected to increase to 23 per cent by 2027. The Philippines and Malaysia enjoy the strongest online retail growth worldwide, expanding each year by some 25 per cent and 23 per cent respectively.

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This significant growth will continue to put pressure on infrastructure and create a greater need for innovative solutions, presenting a wave of opportunity across the digital ecosystem, from the logistics value chain to digital payment services and manufacturing.

While there are still challenges surrounding the region’s young digital infrastructure and related skills base, the potential is undeniable.

Ecaterina Bigos is chief investment officer of core investments (Asia ex Japan) at AXA Investment Managers