Why Southeast Asia Is The World’s Next Tech Hub

Jul 1, 2020
 by 
Asia Market Entry
Why Southeast Asia Is The World’s Next Tech Hub

Technology has taken over the world and we are seeing more tech startups today than ever before. The focus always remained on the Western world before China emerged as a major technology innovator and shifted minds eastward.

Now, in 2020, the world’s leading technology experts are seeing Southeast Asia as the next tech hub due to factors such as it’s relatively young population and fast adoption of the digital world. So how has Southeast Asia emerged as a tech giant and a great opportunity for business expansion?

The Golden Era Of South East Asia

Despite the effects of the Covid-19 pandemic, Southeast Asia is still going through its golden era when it comes to the growth of tech startups that have helped improve people’s livelihoods across the region. The average per capita income of countries in the region reached $4600 USD by 2018 which is very similar to that of China’s per capita income in 2007 right at the start of country’s tech boom. China’s 2018 average per capita income is at $9770 USD, with patience and effort, this might be the potential growth that Southeast Asia can expect (if not more), the payout for growth will be immense and not something to be ignored.

There are opportunities across a myriad of tech sectors in this region. Research shows that e-commerce, online gaming, ride-hailing, online travel, and video streaming services have emerged as the sectors with the highest potential for breeding Southeast Asia’s upcoming tech unicorns. Similarly, internet financial services and mobile payment options are seeing a boom as well.

The markets potential lies in its younger population where almost 26% population in the region is below 14 years of age, compared to 19% in the US and 18% in China.  This younger consumer based are more adept at using technology and more open to enjoying its advantage. For example, on average Filipinos spend almost 10 hours online every day - which is the highest in the world.

The Opportunity for Foreign Tech Businesses – Localization

Several Chinese tech giants such as  Baidu Inc. and Tencent had identified the potential of Southeast Asia as the next tech hub as early as 2012 which led them to launch localized versions of their services. However, since then, these companies have faced challenges in tackling the high diversity of the market when it comes to culture, religion, and politics. For this region, there isn’t any one-size-fits-all business model, due to the massive social as well as economic differences among the countries in the region.

This leaves a huge gap to be filled by new tech startups or even established tech companies from around the world to cash-in on the opportunity by offering localized tech solutions. A perfect example of localizing a solution is demonstrated by ride hailing serviceGrab who has customized their platform by country and allows users to book tricycles in Philippines and Thailand, motorcycles in Vietnam and Indonesia, and automobiles in Singapore.

Follow the Money

With the political and societal changes happening in 2020 and increasing frictions among  world leaders, particularly between the United States and China, Southeast Asia is increasingly seen as the safest emerging market for  global investors. In the first half of this year,  tech startups in the region raised $7.6 billion, this is a 7% increase from the same period last year.

With investments coming in from the likes of Chinese venture capitalists, New York-based private equity firm Warburg Pincus, and the global venture capital firm GGV Capital, there is no denying the fact that Southeast Asia is all set to see the tech boom in the near future. This makes the region ripe for expansion of established tech businesses. It’s time to grab the opportunity and reap the benefits in years to come.