Asia’s governments have launched ambitious initiatives to make their cities and nations more intelligent. Such rapid growth should yield attractive investment opportunities.
CIO believes smart cities will be at the center of Asia’s fourth industrial revolution, adding trillions of dollars of economic value over the next decade through the revenue generated from the six building blocks. According to Frost & Sullivan and Bloomberg Intelligence, the global addressable market for smart city projects should grow from USD 900bn in 2016 to USD 2trn in 2025 and the addressable market for China’s smart city projects should reach USD 320bn by 2025. CIO estimates Asia accounts for 40% of the addressable market, so based on these forecasts, the region’s smart city market could reach USD 800bn in 2025. By segment, CIO expects smart services to lead Asia’s addressable market by 2025, followed by smart governance, smart healthcare, smart connectivity, smart automation and smart mobility in that order.
Smart city addressable market by segment in 2025*
Given the huge revenue potential for Asia by 2025 (USD 800bn), investors can participate in this growth trend through various avenues. In particular, CIO believes companies exposed to faster-growth segments like fintech, 5G, smart mobility (which includes electric vehicles and autonomous driving) and healthtech are in a sweet spot given the confluence of strong demand and regulatory support. A combination of Asian corporations with strong exposure to the aforementioned trends and global leaders with strong technology leadership should benefit from the robust growth opportunities to come in Asia’s smart cities, in CIO's view.
Conversely, those engaged in antiquated urban operating systems are at risk of becoming outdated.