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Asia’s technology sector continues to be a global powerhouse, characterised by rapid innovation, dynamic growth, and increasing global influence. As a result, tech stocks from Asia landed on the agenda of global investors seeking exposure to the tech advancements shaping our future. Asia Technology Funds and ETFs have also entered the international stage.
According to Neuberger Berman, Asia is gaining more attention from tech investors due to its pivotal role in semiconductor manufacturing, driven by supply chain evolution over the past decades. While Western companies dominate branding, production has shifted to Asia, especially with the rise of AI and the global chip shortages during Covid. The demand for advanced AI chips, which require complex processing, further highlights the region’s importance in the tech ecosystem.
Key drivers of Asia’s technology sector
Yan Taw Boon, Head of Thematic – Asia at Neuberger Berman, explained Asia’s dominance in an interview: “If you consider the U.S. Magnificent Seven companies, all rely upon Asian companies in what we call the new Golden Triangle: Taiwan, Japan and South Korea. In our view, without these three major economies and the expertise and manufacturing they provide, you wouldn’t have Apple, Microsoft, Amazon, Meta or Google, or any other tech giants that currently dominate our lives.”
The adoption of artificial intelligence (AI) is another factor driving Asia’s tech dominance. “Increased global demand for AI-related products and high-performance semiconductors could be particularly significant for companies in Taiwan and Korea given their key roles as AI enablers and their established dominance in tech supply chains,” opined Stephanie Aliaga, Global Market Strategist at J.P. Morgan Asset Management. “Moreover, recent government policies aimed at strengthening and building upon technological advantages, with ambitious goals for gaining ground as global chip leaders, could help these economies gain global market share,“ she added.
Green technologies, particularly in electric vehicles and renewable energy, are also seeing a surge in Asia. According to the International Energy Agency (IEA), China is the leading global supplier of clean energy technologies and holds at least 60% of the world’s manufacturing capacity for most mass-manufactured technologies. At the same time, the green tech sector is becoming more important for China’s economy. According to data from Carbon Brief, clean energy contributed 9.0% to the GDP in 2023, up from 7.2% in 2022.
While China is the dominant region, Asia’s green tech sector as a whole is expected to grow with a CAGR of 11.1% during 2024-2023, reaching $12,073 mn by 2030, as per P&S Intelligence data.
Asia technology sector – risks and opportunities for investors
According to industry experts, the future of Asia’s technology sector is bright, but not without its challenges. While strong fundamentals support the sector’s dynamic growth, geopolitical factors, for example, introduce challenges.
With the rise of AI, advanced semiconductor chips are on the frontline of geopolitical rivalries, with Taiwan at the epicentre.
“Investors fear an escalation in tensions between mainland China and Taiwan that would drag in the US,” Lombard Odier wrote in an insight. “Political rhetoric, such as Donald Trump’s comments in mid-July 2024 on Taiwanese sector dominance, can lead to sharp swings in semiconductor stocks”.
Around the world, economies, including the US, China, Japan, India, and the European Union, have launched ambitious plans to boost their semiconductor industries to become more independent. “Thus far, such efforts have done little to shake Taiwan’s dominance in semiconductors,” Lombard Odier added.
However, many asset managers remain optimistic, suggesting that long-term investors could benefit from the region’s technological advancements and strategic positioning in global supply chains.
Here are some Asia Technology Funds and ETFs that offer exposure to the sector:
Global X Asia Semiconductor ETF – The ETF invests in Asian companies that are involved in producing and developing semiconductors. The portfolio comprises only four countries: Japan (28.7%), Taiwan (28.6%), Korea (24.4%), and China (17.6%)*.
Neuberger Berman InnovAsia Fund – Thematic equity fund with an investment focus on opportunities in innovative Asian pioneers, and the ‘small giants’ of Asia. Japan (31,71%) and Taiwan (24,21%) comprise more than 50% of the portfolio.*
Sanlam Asia Pacific Artificial Intelligence Fund – This Asia technology fund is a long only diversified portfolio investing in companies that are engaged in the main activities associated with AI in the Asia Pacific region. China (29%) and Japan (19%) comprise almost 50% of the portfolio.*
Wellington Asia Technology Fund – Focuses on technology stocks in Asia, “outside the well-known global mega-cap tech stocks”, particularly in sectors like semiconductors and electronics. Strong focus on Japanese companies (41.9% allocation*).
Editorial Note: Funds in alphabetical order. Funds are subject to certain regulations and might not be available in your country.
* as of 30 September 2024
