Innovation Rising
Driven by deregulation and domestic demand, Asian companies are challenging the U.S. and Europe in technology development and innovation
In this article
For many investors, the words “Asia” and “technology” together still conjure up images of assembly lines cranking out cheap, generic PCs for export, or stamping out parts in one country to be plugged into products in another. Japan’s dominance in consumer electronics notwithstanding, Asian countries have historically been perceived as the low-cost producers of technology that originated in Silicon Valley or elsewhere in the Western world.
A new century, however, has brought a new reality. Exports still figure prominently in Asia’s economies—China surpassed the U.S. last year as the world’s leading technology exporter. Today, however, growing domestic consumer demand is one of the key drivers behind a wave of technology development in Asia.
With increasing affluence in urban centers, Asian consumers are becoming eager adopters of new technologies—with all their bells and whistles. China has the world’s largest number of mobile phone subscribers. Chinese Internet users have grown from just one million in 1998 to 111 million at the end of 2005. In Japan, people use third-generation or “3G” mobile gadgets to exchange email, trade stocks, pay for purchases and download entertainment on the go. In South Korea, which had the world’s highest broadband penetration at the end of 2005, young people gather in “PC baangs” for online gaming tournaments, the national—and often addictive—pastime.
Technology development in Asia can be characterized as a “virtuous circle,” in which the availability of technology advances economic growth, leading to individual prosperity that, in turn, drives demand for more technology. China’s recent rapid growth, for example, has been aided by mobile communication technology and unprecedented access to vast information, making it possible to have national distribution with centralized control, and contributing to rapid development of industries that took decades to develop in the U.S. and Europe.