Towards a Transcontinental Industrial Ecosystem: 4 Trends Affecting the Southeast Asia and Europe Connection
Discovering key trends in Asia Pacific helps us bridge the two regions
Technologies such as AI, machine learning and IoT are now hyper-connecting the industrial world and advancing at an unparalleled rate. Robots transmit information about inventory, processes and personnel in real-time to multiple locations. Automated code review tools control the quality among remote development teams who build the tech-driven backbone of today’s industries. Manufacturing and production line data for factories across one continent can be viewed on another, in a single, streamlined dashboard.
As we begin to understand the impact and power of connectivity across borders, we realize the necessity of cross-ecosystem collaboration. The similarities between European and Pacific Asian industrial ecosystems are particularly apparent now and deserve closer examination.
Countries such as Japan, Singapore, Thailand and Indonesia share a similar vision of rapid advancements in industrial tech. This is evidenced by VC activity, startup growth and conferences such as ExA Summit in Tokyo this May, which, in its fifth edition, aims to engage key leaders across continents in robotics, mobility, AI and security.
From a European standpoint, we should actively exploring the innovation in Asia Pacific. In what ways can both continents bring technologies to market more quickly and effectively? How can we better ensure that funding gets channeled into the right places, and that promising ideas get the traction they deserve?
Exploring the Asia Pacific industrial landscape: 4 key trends
From pioneering exoskeletons in Tokyo to prolific AI platforms in Singapore, Asia Pacific’s innovation is evidence of a blossoming ecosystem. Let’s take a closer look at four key trends in the region’s investment and activity.
1) Japan is playing a leading role in global AI innovation, fueled by a mission to solve real challenges at home.
Japan’s history of pioneering strategies related to production (i.e. Toyota’s just-in-time manufacturing and the concept of Kaizen) precede its current status as an AI powerhouse. Today, Japan has set sights on using innovation to solve real problems for its population — in addition to maintaining strong relevance in global markets. The third largest economy in the world, Japan has begun to direct its tech innovation to precision health and mobility — two areas that would undoubtedly address issues with an aging workforce.
Industrial robotics company German Bionic’s presence in both Germany and Japan is a model example of smart technology being used to promote human longevity. Not only are German Bionic’s exoskeletons providing immediate physical solutions for factory workers, but they are also contributing data-driven insights that promote better health in the long run. The company’s cross-border presence brings together leading ecosystems with a common goal, promoting sustainable growth for this promising market.
2) Investors are quickly taking note of favorable tax frameworks and regulation in fast-growing tech markets such as Singapore.
A strong education system, favorable tax regime and supportive government framework have prompted leading investors to relocate to Singapore. Singaporean venture capitalist Yinglan Tan left Sequoia Capital to found Insignia ventures in his home country, which affords an ideal atmosphere for growth and startup incubation.
Singapore is now at the forefront of startup activity in Southeast Asia, with AI activity especially prominent. Knowledge work automation platform Taiger is a major player in the ecosystem, boasting global customers and often orchestrating government panels on AI strategies.
3) Strong investment in the previously fragmented Southeast Asian market is facilitating e-commerce, and therefore prompting advancements in warehousing/logistics.
The nature of Southeast Asian consumerism, coupled with its fragmented market and payments system, has long prevented the region from matching the success of U.S. e-commerce. Nevertheless, investments from Alibaba and Tencent have sparked growth in the region and introduced cross-border payment solutions. For example: The retail e-commerce market in Indonesia is expected to grow to approximately €40 billion by 2025. This is driving a significant need for smart logistics, warehousing and production.
Along these lines, as production in Asia grows at a rapid pace, companies lose their cost advantage unless they remain innovative. Europe has its unique struggles when it comes to innovation, as it faces fragmentation and payments variation. This signals a potential for these regions to come together to solve mutually important roadblocks in industrial logistics.
4) Shifts in investor thinking, coupled with focuses on regulation and due diligence in the region, are helping to evolve and strengthen the IPO market.
We’ve already seen Hong Kong take the global IPO crown in 2018, but IPOs in Asia-Pacific markets are on the rise after very strong IPO activity last year. Q1 2018 saw 18 IPOs in Southeast Asia — a 20% increase from the previous quarter. Thailand is set to be the region’s largest IPO market, with $5 billion expected in the second half of 2019.
Looking ahead: Identifying connections between Asia Pacific and Europe
The idea of connecting these regions isn’t just an ideal to aspire to, but rather a continually evolving goal that could yield immediately fruitful results for startups and VCs.
ExA Summit will touch on solutions for bridging industrial landscapes, which includes finding synergies with German-centric activity. JOIN hopes to bring insights back from our time in Japan.
We believe that through close contact and cooperation with Asian corporations and co-investments with Asian VCs, we can help to facilitate market entry for European startups in Asia, and vice versa.
Interesting in learning more about European VC activity in Asia? Drop us a line: hello@join.capital.
