What pathway between the two digital superpowers?
Digital tech has by no means escaped the overriding geopolitical trends, overshadowed by the US vs. China duel, at a time when globalisation was already slowing and now further accentuated by the Covid-19 crisis. On the sidelines of this battle, Europe and the other countries are looking for their area of specialisation as a way to stand out. Tensions are being exacerbated by the critical role that digital tech now plays throughout the economy and society.
Digital tech’s centre of gravity shifting towards the Pacific
Asia began steadily overtaking Europe as the world’s second largest digital market in 2014, and is now closing the gap with North America, which it is expected to overtake by 2025. China is of course one of the main powerhouses here, forecast to account for 50% of all global growth between now and 2023.
While Asia-Pacific naturally benefits from the sheer size of its population, other very populated but less developed regions (Africa, Latin America) will see less significant digital market growth, and in some cases only just above the global average. While APAC is steadily becoming the dominant region, it is also because of its tremendous capacity for innovation and for monetising for-pay services in consumer markets. Despite which North America remains by far number one in IT B2B segments, where Europe still holds second place.
Asia-Pacific number one in B2C markets, North America tops B2B
Regional breakdown of Digiworld markets by segment in 2023
Europe looking to forge its own niche outside the duel between China and the US
Chinese and American companies dominate virtually every digital sector, both leveraging a powerful domestic market to expand their international footprint. Americans are especially strong when it comes to content (except video games), with most OTT services financed by advertising, as well as IT, while Chinese companies lead the way in e-commerce and consumer electronics. Both countries also top the rankings in telecoms despite not having any strong international business as yet (outside B2B solutions).
China and the US are also home to the most of the world’s unicorns. With the exception of a few heavyweights (Nokia, Ericsson, Samsung, SAP, Sony…) and Europe’s IT and telecoms market challengers, top players in other countries often enjoy strong positions in their local markets, but are struggling to expand internationally.
Big Tech leaders mainly in the US and China
Top digital tech companies, by 2017 revenue
The search for sovereignty and specialisation via technology
In recent months, the tech landscape has been heavily influenced by the role that Huawei (and ZTE) might play in 5G networks, set against a backdrop of national security concerns. But this issue extends beyond the scope of digital technology, and is part of a global trade war in every sector.
From a broader perspective, most governments are working to regain their digital sovereignty, sometimes through protectionist measures to avoid getting caught between China and the United States. This requires special efforts to gain control and ownership (cloud, cybersecurity and 5G), but also to specialise, especially in B2B and dissemination in vertical markets (robotics in Japan, verticals in 5G and IA in Europe). B2C markets tend to be seen as already sewn up, with the exception of e-commerce, and except in a very few countries such as South Korea and Russia.