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 (Exhibit 1).

To gauge Asia’s potential to build further technological strength, we assessed two dimensions: start-up investment based on funding for entrepreneurship (including both venture capital investment and initial public offerings); and IP creation using patents with a strength index above 50 as our key metric. Of 33 technologies analyzed, Asia leads start-up investment in 11, IP creation in ten, and both start-up and IP creation in four.

Asia has an above-average share of start-up investment in a dozen other technologies. Seven are consumer-facing, and Asia accounts for 51 percent of total start-up investment in them. On IP creation, Asia has a higher-than-average share of patents in ten technologies, namely cleantech, robotics and drones, wellness and beauty, agriculture technology, space technology, digital human resources management, augmented and virtual reality, industrial cloud technology, and nanotechnology. Most of these are manufacturing-related, emphasizing Asia’s rising innovation capabilities in manufacturing sectors.

China and India are home to more than two-thirds of urban technology hotspots. On three dimensions of technology output—technology company revenue, number of unicorns, and number of patents—we identified 50 Asian technology hotspots. Sixty-eight percent of them are in China and India, but most other Asian countries have at least one hotspot city, typically the capital.

Asia’s strong position on four elements—consumer demand, concentration of large manufacturing companies with a high share of global revenue, labor endowment, and active policy support—has been a catalyst for advances in technology in relevant sectors and has enabled a decline in technology costs over time. Four leapfrogging opportunities stand out, but there are bottlenecks, quality gaps, or other types of challenge in each of these areas, too. If they are overcome, there is an opportunity for further growth (Exhibit 3).

Accelerated consumer digitization creates huge opportunities throughout the value chain.

Asia accounted for 41 percent of global consumer demand in 2018 and is expected to represent 56 percent of global growth in that demand between 2018 and 2030. Across Asia, consumer adoption of digital technologies is accelerating at a sufficient pace for digitization to enable a jump or leapfrog from old to frontier technologies—in payments, for instance, skipping the credit-card-ownership stage and going straight to e-wallets. Widespread gaps persist in provision in consumer markets, and a considerable opportunity exists to reimagine the entire consumer experience in Asia, where citizens are so open to, and enthusiastic about, the following technologies: