India’s early industrialization efforts in the 1950s and 1960s were state-driven, with a heavy reliance on public sector enterprises in industries such as steel, aerospace, and defense manufacturing. However, this approach led to systemic inefficiencies, an absence of competitive pressure, and limited access to cutting-edge technology.
Additionally, India’s economy remained highly protectionist, restricting foreign investments and market competition. With limited exposure to global best practices and a constrained talent pool in high-tech fields, the country struggled to establish a meaningful presence in advanced manufacturing. The result was a missed opportunity in high-tech sectors, with India unable to capitalize on its early ambitions.
In stark contrast to its high-tech struggles, India’s pharmaceutical industry thrived despite lacking full vertical integration. The turning point came as global drug patents expired, opening opportunities for low-cost generic manufacturing. Initially reliant on European and Japanese suppliers for raw materials, Indian firms later leveraged Chinese manufacturers for cost-effective inputs, allowing them to scale rapidly.
This layered approach—focusing on specific segments of the value chain rather than attempting full vertical integration—enabled India to dominate the global generic pharmaceutical market. By specializing in cost-efficient manufacturing and regulatory expertise, Indian firms carved out a niche in a heavily commoditized industry, demonstrating that strategic positioning within a value chain can sometimes outweigh full control over it.
For decades, China dominated the global toy industry, particularly in South China, controlling over 80% of global market share. However, India has recently emerged as a challenger, driven by a combination of government protectionist policies, a booming domestic market, and localized product innovation.
Historically, India had a strong domestic toy industry focused on traditional, handcrafted toys, but lacked large-scale manufacturing capabilities. Recent government incentives, coupled with rising middle-class purchasing power, have enabled Indian manufacturers to scale up production and cater to both domestic and international markets. Unlike China, which dominates through mass production, India is differentiating itself by leveraging its cultural heritage—customizing toys to reflect regional preferences and traditional aesthetics.
This success reflects India’s broader industrial strategy: leveraging domestic strengths to create export opportunities, rather than directly competing with China’s economies of scale.
India’s industrial conglomerates have played a defining role in shaping the country’s manufacturing landscape, but their origins differ significantly from their Chinese counterparts.
While Chinese conglomerates often trace their roots to banking, finance, or real estate, Indian business houses emerged from trading and commerce. Historically, trading families from Gujarat, Rajasthan, and the Parsi (Iranian) diaspora built extensive networks with the Gulf, Africa, and Europe, later expanding into manufacturing and industrial sectors.
When India’s economy was heavily regulated, these conglomerates diversified across multiple industries to navigate restrictions and survive. However, post-liberalization, many of them restructured and consolidated, focusing on sectors where they could achieve global competitiveness.
This evolution has created a fundamental difference in industrial structures:
| ● | China’s manufacturing model is vertically integrated, with companies controlling multiple stages of production. | |
| ● | India’s model remains horizontally integrated, with firms specializing in specific segments of the value chain rather than fully owning upstream and downstream processes. |
This structural distinction has implications for India’s future in high-tech manufacturing—can it replicate China’s model, or should it refine its own unique approach?
The Indian government has been both an obstacle and a catalyst for manufacturing growth. In the past, high import tariffs and nationalization efforts sheltered domestic industries but limited their competitiveness. Today, however, India has embraced a more market-driven approach, introducing:
| ● | Production-Linked Incentives (PLI) to encourage domestic manufacturing. | |
| ● | Infrastructure investments in roads, power, and logistics. | |
| ● | Tax reforms such as GST (Goods and Services Tax) to harmonize the regulatory landscape. |
These policies have lowered costs, improved supply chain efficiency, and incentivized foreign investments, making India a more attractive manufacturing hub.
India’s biggest advantage is its massive domestic market, which few low-tech manufacturing hubs can match. Unlike countries such as Bangladesh (focused on textiles) or Vietnam (electronics), India benefits from sectoral diversity, spanning pharmaceuticals, petrochemicals, medical devices, and even aerospace.
This breadth of expertise allows India to compete across multiple verticals, rather than being dependent on a single industry. Additionally, India’s labor force, while still in transition, offers a balance between cost competitiveness and technical capability.
India’s manufacturing landscape today is split into two parallel worlds:
| 1. | Globally integrated, world-class manufacturers—leveraging IoT, AI-driven inventory management, and predictive analytics to optimize efficiency. | |
| 2. | Fragmented, low-tech enterprises—often informal, small-scale, and slow to adopt digital tools. |
While large corporations have embraced Industry 4.0 innovations, smaller enterprises remain largely untouched by digitalization. Bridging this gap is crucial for India’s broader industrial transformation. To stay competitive, India must accelerate digital adoption at all levels—integrating small-scale manufacturers into modern supply chains and enabling them to compete globally.
The low-tech industrial foundation has provided it with a strong cost-competitive base, but its future lies in scaling high-tech industries. The transition from horizontal diversification to vertical specialization will require:
| ● | Greater investment in R&D to drive innovation. | |
| ● | Stronger policy support for high-tech sectors. | |
| ● | Global partnerships to accelerate technology transfer. |
As India positions itself for the future, the central question remains: Can India replicate China’s vertically integrated manufacturing success, or will it forge its own distinct, layered approach? The answer to this will define India’s global industrial role in the decades ahead.
To find out more about how IGPI Group can provide support for businesses, browse through our insight articles or get in contact with us.
Kohki Sakata, CEO of IGPI Singapore
After joining Cap Gemini and Coca Cola, Kohki joined Revamp Corporation where he managed projects on global expansion and turnaround in various sectors including F&B, healthcare, retail, IT, etc. After joining IGPI, he has managed projects mainly on global expansion and cross border M&A in various sectors such as logistics, IT, telecom, retail, etc. In addition to his broad experience in implementing solutions that has been developed in Western countries, he has developed multiple methods to turnaround Asian companies with focus on setting clear vision and employee empowerment. Kohki has proven the practicality of these methods by turning around Asian companies not only as an advisor but also as senior management.
He graduated from Waseda University Department of Political Science and Economics and IE Business School.
Shivaji Das, Managing Director of IGPI Singapore
Shivaji has over 20 years of strategy consulting experience, specializing in New Business Models, Innovation Roadmaps, and Sustainability Journeys. He has worked with private and public sector clients across 25 countries in sectors like Technology, Semiconductors, Chemicals, Healthcare, Renewable Energy, and Construction. Previously, Shivaji was a Partner and Managing Director-APAC at Frost & Sullivan. His paper on Artificial Intelligence was presented at CAINE-2000 in Hawaii, USA. He is the author of seven acclaimed travel, art and business books including The Visible Invisibles and Rebels, Traitors, Peacemakers (both Penguin Random House), as well as The Great Lockdown: lessons learned during the pandemic from organizations around the world (Wiley, USA).
He is an alumnus of IIT Delhi and IIM Calcutta.
IGPI Group is a Japan rooted premium management consulting & Investment Group headquartered in Tokyo with a footprint in Osaka, Singapore, Hanoi, Shanghai & Melbourne, as well as parts of Europe and India. The organization was established in 2007 by former members of the Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turn-around projects in Japan. IGPI Group has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation to name a few. IGPI Group has vast experience in supporting Fortune 500s, Govt. agencies, Universities, SMEs and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has ~8,500 employees on a consolidated basis.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness, and accuracy of such information. All rights reserved by IGPI.
Two major forces are accelerating the move toward regionalization. The first is the digital revolution, or what can be called the smartphone revolution in emerging markets. Today, nearly everyone has a powerful computing device in their hands, enabling new business models that were previously impossible. Digital platforms allow companies to localize services dynamically, adapting to the needs of regional consumers in real time.
The second key driver is global decoupling, caused by geopolitical tensions and economic realignments. Trade barriers, sanctions, and shifting regulatory environments have made it more difficult for companies to operate under a single, unified global strategy. Instead, businesses are adopting regionalized approaches, leveraging local champions such as CP Group in Thailand and Mahindra Group in India, as well as fast-growing unicorns that are reshaping local economies.
The digital revolution is also disrupting traditional manufacturing models, making vertical integration less relevant. The automotive industry offers a prime example. With the rise of electric vehicles (EVs), components have become increasingly modularized, reducing complexity in supply chains. Unlike traditional gasoline-powered vehicles, which require thousands of intricate parts, EVs rely on fewer, more standardized components.
This modularization has enabled startups and regional players to enter the market with specialized designs, sourcing components globally and focusing on assembly and service differentiation. At one point, China had over 500 EV manufacturers, illustrating how a shift away from vertically integrated models can foster greater innovation and competition.
For Japanese, European, and U.S. multinational companies, this shift requires a reassessment of how they structure their supply chains and operations. The old model—where companies designed a product centrally and exported it globally—is giving way to regional manufacturing ecosystems where businesses must tailor their offerings based on localized consumer demand and regulatory conditions.
As regionalization accelerates, MNCs must redefine how they position themselves in these new ecosystems. The key challenge is no longer just about producing the best products but about delivering localized services efficiently.
In the past, a company like Toyota could build a globally standardized car like the Corolla and sell it across multiple markets. Today, businesses must design services and customer experiences tailored to specific regional needs, which requires closer collaboration with local partners.
Japanese companies, in particular, need to shift away from value chain-based thinking and instead adopt a layered approach to market entry. In Southeast Asia, Japanese firms have traditionally built vertically integrated supply chains similar to their domestic models. However, this approach has not worked as effectively in India, where business conditions and consumer preferences differ significantly. Rather than replicating the Suzuki-Maruti model—which successfully built a localized automotive supply chain in India—new entrants must adopt more flexible business models, aligning themselves with regional market structures and emerging business layers.
ASEAN has long operated as a regional economic bloc, where companies naturally adopt regional approaches to manufacturing and supply chains. India, however, has traditionally functioned as an independent market, but its role in the regionalization movement is now evolving.
For Japanese firms, ASEAN has historically been seen as an extension of their home market, allowing them to replicate Japan-style vertical integration across the region. India, in contrast, requires a fundamentally different strategy – Japanese companies entering India must move beyond value chain thinking and instead analyze which layers of the economy they should focus on. The competitive dynamics and consumer behaviors in India are distinct from ASEAN, requiring new business models, localized strategies, and stronger local partnerships.
Suzuki’s success in India came from building a vertically integrated supply chain, establishing deep control over local production. While this model worked well for Suzuki, it is not necessarily replicable for other industries or new market entrants.
Traditional Japanese manufacturing firms are accustomed to deeply integrated supplier networks, where tier-one, tier-two, and tier-three suppliers exclusively serve a single OEM. However, in a regionalized economy, companies must instead determine which layer of the value chain they excel in and adapt accordingly.
For example, Japanese firms entering India today may find greater success by focusing on specific segments of a layered market rather than attempting to build and control an entire supply chain. The ability to identify core competencies—whether in manufacturing, software, or services—and integrate them into regional ecosystems will be critical for future success.
Geopolitical tensions have become a dominant factor shaping business strategy. In the past, corporate leaders assumed that political changes had minimal impact on economic decision-making, but the events of recent years have shown that this assumption no longer holds.
For Japanese firms accustomed to fully integrated, self-controlled supply chains, adapting to geopolitical uncertainty requires two key shifts. First, companies must build robust business intelligence capabilities that go beyond simply tracking political events. They must actively analyze where global resources, talent, and supply chain opportunities exist.
For instance, a recent project analyzed global AI talent distribution and identified regions with emerging AI expertise that had not previously been considered strategic hubs. This type of intelligence gathering is essential for companies looking to navigate geopolitical risks while optimizing their operations globally.
Second, Japanese firms must embrace open innovation and collaborative supply chains rather than focusing solely on self-contained, vertically integrated networks. In a world of regionalized trade and shifting alliances, building strategic partnerships across multiple geographies will be key to reducing risk and maintaining resilience.
The shift from globalization to regionalization is reshaping how companies operate across industries. Digital transformation and geopolitical realignments are making traditional value chain approaches obsolete, forcing companies to adopt more flexible, layered business models.
For Japanese, European, and U.S. firms, success in this new era will depend on their ability to localize services, adapt supply chains, and form strategic partnerships within regional economies. Companies must move beyond product standardization and instead focus on layered market strategies, identifying their core strengths and leveraging them in specific regional contexts.
The most successful firms will be those that combine digital intelligence, supply chain flexibility, and regional collaboration, positioning themselves as key players in the evolving global economic landscape.
At IGPI, we have extensive experience supporting multinational corporations in navigating the complexities of regionalization by optimizing supply chains and adapting business models to localized market needs. Our understanding of the interplay between digital transformation, geopolitical tensions, and regional market dynamics allows us to provide tailored strategies that enhance operational flexibility and resilience in a rapidly evolving global landscape.
To find out more about how IGPI Group can provide support for businesses, browse through our insight articles or get in contact with us.
Kohki Sakata, CEO of IGPI Singapore
After joining Cap Gemini and Coca Cola, Kohki joined Revamp Corporation where he managed projects on global expansion and turnaround in various sectors including F&B, healthcare, retail, IT, etc. After joining IGPI, he has managed projects mainly on global expansion and cross border M&A in various sectors such as logistics, IT, telecom, retail, etc. In addition to his broad experience in implementing solutions that has been developed in Western countries, he has developed multiple methods to turnaround Asian companies with focus on setting clear vision and employee empowerment. Kohki has proven the practicality of these methods by turning around Asian companies not only as an advisor but also as senior management.
He graduated from Waseda University Department of Political Science and Economics and IE Business School.
Shivaji Das, Managing Director of IGPI Singapore
Shivaji has over 20 years of strategy consulting experience, specializing in New Business Models, Innovation Roadmaps, and Sustainability Journeys. He has worked with private and public sector clients across 25 countries in sectors like Technology, Semiconductors, Chemicals, Healthcare, Renewable Energy, and Construction. Previously, Shivaji was a Partner and Managing Director-APAC at Frost & Sullivan. His paper on Artificial Intelligence was presented at CAINE-2000 in Hawaii, USA. He is the author of seven acclaimed travel, art and business books including The Visible Invisibles and Rebels, Traitors, Peacemakers (both Penguin Random House), as well as The Great Lockdown: lessons learned during the pandemic from organizations around the world (Wiley, USA).
He is an alumnus of IIT Delhi and IIM Calcutta.
IGPI Group is a Japan rooted premium management consulting & Investment Group headquartered in Tokyo with a footprint in Osaka, Singapore, Hanoi, Shanghai & Melbourne, as well as parts of Europe and India. The organization was established in 2007 by former members of the Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turn-around projects in Japan. IGPI Group has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation to name a few. IGPI Group has vast experience in supporting Fortune 500s, Govt. agencies, Universities, SMEs and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has ~8,500 employees on a consolidated basis.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness, and accuracy of such information. All rights reserved by IGPI.
China’s vertically integrated model provides greater control over supply chains, cost efficiency, and innovation synergies. This model has helped China dominate industries such as electronics, automotive, and industrial manufacturing, where deep coordination between suppliers and producers is crucial. A prime example is China’s semiconductor industry, where state investment has strengthened domestic chipmakers, reducing reliance on foreign technology. However, this model also faces challenges, particularly in overcoming technological dependencies and geopolitical constraints.
India, by contrast, follows a horizontal specialization model, where different firms focus on specific segments of the value chain. This approach requires less capital investment, encourages global partnerships, and aligns well with industries where R&D and production can be geographically dispersed. In the automotive sector, for instance, Indian firms such as Tata Technologies and Infosys provide digital engineering and automation solutions for global car manufacturers, bridging software and manufacturing without full-scale production facilities.
India’s pharmaceutical industry exemplifies the benefits of horizontal integration, particularly in the generic medicine sector. India is the world’s leading supplier of generic drugs, accounting for over 40% of the U.S. market. Unlike China’s vertically integrated pharmaceutical sector, India has succeeded by leveraging a combination of process patents, cost-efficient production, and strategic global partnerships.
Sun Pharmaceutical Industries is a case in point. Initially focused on generics, the company later expanded into specialty and branded drugs through acquisitions, demonstrating how horizontal integration enables value-chain upgrades. Similarly, firms like Biocon and Dr. Reddy’s have leveraged their strengths in generics to enter the contract development and manufacturing organization (CDMO) space, working with multinational pharmaceutical companies on advanced drug development.
While India initially built its pharmaceutical success on cost efficiency, it is now moving up the value chain into biologics, specialty medicines, and high-end research. This shift illustrates how horizontal models can evolve to capture higher-value segments, reinforcing India’s growing influence in the global pharmaceutical landscape.
Despite its dominance in pharmaceuticals, India lags behind in medical device manufacturing, a sector historically controlled by global giants such as GE, Siemens, and Toshiba. However, the industry is undergoing a transformation, shifting from hardware-driven products to service-based, software-integrated solutions.
For India to establish itself as a global player in medical devices, it must strengthen its local supply chains, encourage deeper collaboration between universities and industry, and leverage government incentives to attract investment in domestic production. The transition to a more digital and services-driven healthcare model presents a strategic opportunity for India to integrate its software strengths with traditional manufacturing capabilities.
Beyond pharmaceuticals and medical devices, India’s software industry is reshaping global manufacturing by shifting value from physical production to data-driven services. In the automotive sector, the growing emphasis on connected vehicles and autonomous systems has made India a key hub for automotive software development. Meanwhile, smart grid solutions and predictive analytics are modernizing energy networks, while AI-driven predictive maintenance is improving factory efficiency worldwide.
Bosch India’s operations exemplify the evolving nature of global manufacturing. The company has strategically leveraged India’s AI expertise to optimize its production networks worldwide. This integration of advanced software capabilities into manufacturing processes underscores the increasing centrality of digital technologies in modern industrial operations, potentially offering Bosch a competitive edge in efficiency and innovation.
While India has significant strengths in software and digital transformation, its manufacturing sector faces structural challenges. One key issue is workforce readiness. India’s workforce is comparable in size to China’s, but literacy rates, advanced manufacturing skills, and female labor force participation remain significantly lower. In manufacturing-driven economies, these factors influence productivity and industrial scalability.
China has benefited from a strong, state-driven industrial policy that has supported manufacturing through large-scale infrastructure investment, subsidies for priority sectors, and strict technology transfer requirements for foreign firms. In contrast, India has taken a more market-driven approach, though recent policy reforms are addressing historical bottlenecks. Initiatives such as the Production-Linked Incentive (PLI) scheme are helping boost local manufacturing, while deregulation of labor laws and improvements in ease of doing business have made India a more attractive destination for industrial investment.
India’s emerging toy manufacturing industry presents an interesting case of policy-driven industrial growth. Recent government initiatives, including local content requirements and tariff adjustments, have reshaped the competitive dynamics of this sector. As a result, India has begun to capture a growing share of the global toy production market, a space traditionally dominated by Chinese manufacturers. This shift highlights the potential impact of aligned government policies and industry needs in developing new manufacturing capabilities.
Traditional value chain analysis is no longer sufficient for understanding global industries. As manufacturing becomes more software-driven, companies must move beyond sector-based strategies and adopt a layered approach, considering the integration of software with traditional industries, the rise of data-driven, subscription-based business models, and the increasing interdependence of manufacturing, AI, and IoT.
This shift requires firms to rethink supply chains, innovation models, and global partnerships. Companies that can successfully navigate this transformation by integrating software with traditional production and leveraging cross-industry collaboration will be best positioned to lead in the next phase of global industrial evolution.
India and China represent two distinct pathways to manufacturing success. China’s vertically integrated model has allowed it to achieve dominance in scale-driven and infrastructure-heavy industries, while India’s specialization model has enabled it to succeed in technology-driven and service-enhanced sectors.
As technology reshapes industry boundaries, firms must rethink their manufacturing strategies. The future of global manufacturing will not be defined by a single model but by the ability to integrate digital capabilities, optimize global partnerships, and embrace the layered industrial transformation that is already underway. Companies that successfully adapt to this changing landscape will emerge as leaders in the next era of global industry.
IGPI possesses extensive experience supporting companies in aligning their manufacturing strategies with either vertical or horizontal integration models, depending on their industry and market needs. By considering strategic trade-offs, we can help businesses optimize their processes to retain competitiveness.
To find out more about how IGPI Group can provide support for businesses, browse through our insight articles or get in contact with us.
Kohki Sakata, CEO of IGPI Singapore
After joining Cap Gemini and Coca Cola, Kohki joined Revamp Corporation where he managed projects on global expansion and turnaround in various sectors including F&B, healthcare, retail, IT, etc. After joining IGPI, he has managed projects mainly on global expansion and cross border M&A in various sectors such as logistics, IT, telecom, retail, etc. In addition to his broad experience in implementing solutions that has been developed in Western countries, he has developed multiple methods to turnaround Asian companies with focus on setting clear vision and employee empowerment. Kohki has proven the practicality of these methods by turning around Asian companies not only as an advisor but also as senior management.
He graduated from Waseda University Department of Political Science and Economics and IE Business School.
Shivaji Das, Managing Director of IGPI Singapore
Shivaji has over 20 years of strategy consulting experience, specializing in New Business Models, Innovation Roadmaps, and Sustainability Journeys. He has worked with private and public sector clients across 25 countries in sectors like Technology, Semiconductors, Chemicals, Healthcare, Renewable Energy, and Construction. Previously, Shivaji was a Partner and Managing Director-APAC at Frost & Sullivan. His paper on Artificial Intelligence was presented at CAINE-2000 in Hawaii, USA. He is the author of seven acclaimed travel, art and business books including The Visible Invisibles and Rebels, Traitors, Peacemakers (both Penguin Random House), as well as The Great Lockdown: lessons learned during the pandemic from organizations around the world (Wiley, USA).
He is an alumnus of IIT Delhi and IIM Calcutta.
IGPI Group is a Japan rooted premium management consulting & Investment Group headquartered in Tokyo with a footprint in Osaka, Singapore, Hanoi, Shanghai & Melbourne, as well as parts of Europe and India. The organization was established in 2007 by former members of the Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turn-around projects in Japan. IGPI Group has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation to name a few. IGPI Group has vast experience in supporting Fortune 500s, Govt. agencies, Universities, SMEs and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has ~8,500 employees on a consolidated basis.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness, and accuracy of such information. All rights reserved by IGPI.
The second Trump administration raises concerns about the future of sustainability investments in ASEAN. Over the past few years, the region has seen significant momentum in areas like hydrogen, carbon capture, and renewable energy, driven by global commitments to climate action. However, if the U.S. shifts its stance, corporations may pause to reassess their exposure, delaying projects and investment decisions.
Yet, the broader trajectory remains clear. Climate change is accelerating, and public pressure for action is growing. While short-term disruptions may occur, long-term sustainability initiatives will continue, supported by multilateral agreements like COP16 and coalitions led by Japan and Singapore. Rather than retreating, businesses should take a calibrated approach—hedging against political shifts while staying committed to the long-term potential of green investments.
For decades, globalization followed a predictable formula: source raw materials at the lowest cost, manufacture in cost-effective locations, and export to high-margin markets. However, digitalization and shifting geopolitical realities are making this model obsolete.
The new paradigm is regionalization—where companies leverage regional synergies rather than purely global supply chains. ASEAN firms are already adapting – companies like Vietnam’s VinFast are not just producing electric vehicles but integrating them into smart city ecosystems, creating value beyond manufacturing. In contrast, many Chinese manufacturers continue to operate under old globalization rules, aggressively exporting amid domestic slowdowns.
This shift presents a strategic imperative for ASEAN, Japanese, and Korean firms: competing solely on cost is no longer viable. The future lies in regional collaboration, digital integration, and problem-solving within ASEAN’s unique ecosystem.
The next three to five years will be defined by several key geopolitical risks. The trajectory of U.S. trade policy remains a central concern. A more protectionist America could disrupt trade flows and unsettle markets. Meanwhile, conflicts in Ukraine, the Middle East, and potential tensions in the Taiwan Strait pose risks to supply chains, energy prices, and currency stability.
Beyond military conflicts, the geopolitical landscape is being reshaped by ideological battles. A growing backlash against sustainability policies, particularly in parts of the U.S. and Europe, could slow the green transition. Political instability is another concern, with leadership changes in Indonesia, Japan, and Korea introducing regulatory unpredictability. Resource nationalism is also emerging as a critical factor, as major powers compete for control over strategic minerals and supply chains.
Japanese businesses in ASEAN must prepare for these disruptions, not just by managing risk but by identifying where opportunities may emerge in this shifting landscape.
Periods of uncertainty often create openings for specific industries. The defense sector, particularly outside the U.S., is set to expand as European and Asian countries ramp up military spending. Infrastructure and housing will benefit from deregulation in key markets like India, Indonesia, and China, creating opportunities for investment. The digital economy, including fintech and e-commerce, will continue to thrive as shifting regulations open new doors for innovation.
Rather than seeing uncertainty as a purely defensive challenge, businesses should approach it as an opportunity to reposition for long-term growth.
The flood of daily political events makes it easy for companies to fall into a cycle of reaction rather than strategy. But geopolitics should be a tool for shaping long-term vision, not just a series of immediate risks to manage.
Companies must expand their strategic horizons. Instead of focusing solely on domestic markets or short-term disruptions, they need to analyze how resource flows and political alliances will evolve over the next decade. This means thinking five, ten, or even twenty years ahead rather than getting caught up in daily headlines.
Equally important is ensuring that geopolitical strategy is not confined to top management. Mid-to-long-term planning must be embedded across the organization, from leadership down to operational teams. This prevents businesses from being swayed by short-term noise and ensures consistency in strategic execution.
Many companies recognize the importance of geopolitical intelligence but struggle with making it actionable. The most common mistake is relying on fragmented, news-driven analysis that lacks business relevance.
A well-structured intelligence function requires an in-house team that interprets global events through a business-specific lens. Rather than dispersing intelligence efforts across multiple units, companies should establish a centralized function that synthesizes insights across the organization.
However, internal teams cannot do this alone and collaborating with external experts is essential. While external specialists bring deep geopolitical insights, they often lack the granular understanding of how these developments impact specific industries. A hybrid model—combining internal expertise with external analysis—allows companies to build a nuanced, actionable intelligence framework.
At IGPI, we have supported multiple clients in setting up business intelligence teams that do more than just track events. Our approach focuses on turning intelligence into clear, strategic direction —ensuring that insights are not just collected but used to drive real decision-making.
Geopolitical uncertainty is not a passing trend—it is the new reality. Companies that continue to view it as an external risk rather than an integral part of strategy will find themselves constantly reacting rather than leading.
The businesses that succeed in this environment will be those that recognize:
– The era of globalization is over, and regionalization is the future.
– Geopolitical risks are not just threats—they are opportunities for those who anticipate them.
– Intelligence is only valuable if it is structured to drive long-term strategy, not just immediate reactions.
At IGPI, we specialize in helping businesses decode geopolitical complexity and turn risks into competitive advantages. In an era where uncertainty is the only constant, the ability to think ahead will define the winners of tomorrow.
To find out more about how IGPI Group can provide support for businesses, browse through our insight articles or get in contact with us.
Kohki Sakata, CEO of IGPI Singapore
After joining Cap Gemini and Coca Cola, Kohki joined Revamp Corporation where he managed projects on global expansion and turnaround in various sectors including F&B, healthcare, retail, IT, etc. After joining IGPI, he has managed projects mainly on global expansion and cross border M&A in various sectors such as logistics, IT, telecom, retail, etc. In addition to his broad experience in implementing solutions that has been developed in Western countries, he has developed multiple methods to turnaround Asian companies with focus on setting clear vision and employee empowerment. Kohki has proven the practicality of these methods by turning around Asian companies not only as an advisor but also as senior management.
He graduated from Waseda University Department of Political Science and Economics and IE Business School.
Shivaji Das, Managing Director of IGPI Singapore
Shivaji has over 20 years of strategy consulting experience, specializing in New Business Models, Innovation Roadmaps, and Sustainability Journeys. He has worked with private and public sector clients across 25 countries in sectors like Technology, Semiconductors, Chemicals, Healthcare, Renewable Energy, and Construction. Previously, Shivaji was a Partner and Managing Director-APAC at Frost & Sullivan. His paper on Artificial Intelligence was presented at CAINE-2000 in Hawaii, USA. He is the author of seven acclaimed travel, art and business books including The Visible Invisibles and Rebels, Traitors, Peacemakers (both Penguin Random House), as well as The Great Lockdown: lessons learned during the pandemic from organizations around the world (Wiley, USA).
He is an alumnus of IIT Delhi and IIM Calcutta.
IGPI Group is a Japan rooted premium management consulting & Investment Group headquartered in Tokyo with a footprint in Osaka, Singapore, Hanoi, Shanghai & Melbourne, as well as parts of Europe and India. The organization was established in 2007 by former members of the Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turn-around projects in Japan. IGPI Group has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation to name a few. IGPI Group has vast experience in supporting Fortune 500s, Govt. agencies, Universities, SMEs and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has ~8,500 employees on a consolidated basis.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness, and accuracy of such information. All rights reserved by IGPI.
We have touched upon the Japanese side being challenged with internal buy-in/alignment for Australia, and the Australian side on the “customized approach” to Japan or Japanese corporates. While these issues can be anticipated and planned for, unexpected situations always arise. Hence, the actual engagement will become a valuable experience for understanding each other. This Part III (the final part in the series) intends to put a spotlight on how Japanese corporations can engage with Australian universities and research institutes. These institutions offer a wealth of untapped potential and represent a rich source of capabilities Japanese corporations can leverage off, and frankly less explored at this stage.
The wider objective of this piece is our contribution to a conversation about increasing the A-J innovation success cases in the Australia-Japan corridor. Specifically, IGPI shares some of its observations of how Japanese corporates can engage or partner with Australian universities and research institutes – these could be in the forms of straightforward research relationships all the way to commercialization initiatives.
Throughout the article series, we have touched on the changing nature of “What” and “Who” Japanese corporations are collaborating with in the Australia-Japan corridor. We explored the capabilities of the broader Australian innovation ecosystem, including universities and research institutes.
However, we also highlighted that both Japanese and Australian sides need to prepare internally before engaging. For Japanese corporations, this involves internal alignment between headquarters and the local arm. For Australians, it means developing a customized Japan strategy to understand and overcome cultural or communication barriers.
You can find Part I can be found here and Part II here.
The next question is “how,” or in other words, the “actions” to take for collaboration.
It is first important to note that it is common for Australian universities to have a dedicated department for managing industry collaboration and IP-related matters (e.g. commercialization). These departments are generally known as “Technology Transfer Offices” or TTOs1.
TTO is a general term, and some universities might call it an “Industry Engagement Office” or something similar. TTOs are a crucial point of engagement for any industry partner, regardless of whether they have existing connections with university faculty. This is because the university’s IP management and contractual matters will ultimately be handled by the TTO. Therefore, establishing a holistic relationship with the university early on is important and beneficial.
From the Australian perspective, identifying the right contact within a Japanese corporation is essential. However, this is easier said than done since, unlike Australian universities with their standardized TTO function, Japanese corporate structures vary significantly. To get started, having a Japanese engagement specialist is helpful. If this expertise is not accessible internally, then engaging with government bodies (like Austrade in Japan) or ecosystem participants (like IGPI) can be a strong starting point for your Australia-Japan innovation journey.
Once you know who to contact, the next step is exploring engagement and partnership options. Here are some collaboration methods Japanese corporations and Australian universities can potentially explore (but not limited to):
2.1. Example of Mode of Collab. # 1: Contract Research
Contract research offers a tailored approach for Japanese corporations to access expertise from Australian universities on specific research topics. This could include, consulting, evaluations, lab services, or independent research projects2. The scope is flexible and can range from simple research outsourcing to joint research projects led or supported by the university. However, contract research is generally considered a transactional engagement rather than a long-term partnership, though it can be a stepping stone. It’s a valuable way for Japanese corporations in Australia to gain first-hand experience with a university’s research capabilities.
2.2. Example of Mode of Collab. # 2: Center of Excellence (CoE)
Center of Excellence (CoE) is a generic term referring to hubs that have specialized units (or individuals, or even collaborations between organizations) focused on a particular area of expertise3. While not exclusively research-focused, CoEs can be instrumental in driving business or industry transformation.
There are already examples of CoEs in Australia with Japanese participants.
| CoE | Brief Example |
|---|---|
| ARC Centre of Excellence in Quantum Biotechnology x Olympus | The Arc Centre of Excellence in Quantum Biotechnology’s focus is partnering with industry and government to seek to drive fundamental understanding and innovation across manufacturing, clean energy, agriculture, health and national security4. |
Unlike contract research, a CoE represents a deeper commercial and technical collaboration on a focus area between the partners.
2.3. Example of Mode of Collab. # 3: Intellectual Property (IP) utilisation
Compared to the previous examples, utilizing intellectual property (IP) offers a more direct and relatively immediate path to commercialization. There are several ways universities utilize IP, and Japanese corporations could be involved with5:
| [1] | Licensing to external companies (i.e. university owns IP, Japanese corporations pay for the IP usage) | |
| [2] | License assignment or selling/buying the IP (i.e. IP’s ownership is sold to third party) | |
| [3] | Create a spin-off company to utilize the IP (different to licensing, as spin-offs generally act as an extension of the university as explained in the Part II article) |
Methods [1] and [2] are straightforward in concept. However, spin-offs can involve Japanese corporations co-establishing the spin-off, also known as “Joint Venture Spin-off / Spin-out” or JVSO. While not uncommon, JVSO offer practical advantages. The industry partner becomes a part-owner and can influence the entrepreneurial mindset and commercial direction of the spin-off. It could also benefit the venture’s credibility and stability with the support of the industry partner too6.
These are just a few examples of how to engage and partner with universities or research institutes. The most suitable method will depend on each partnership’s objectives, timing and situation.
In this article series, we have covered the bottlenecks on the Japanese and Australian sides, and explored various forms of engagement or partnership the two parties can action. But it is important to note that there is a critical gap to be addressed for innovation to reach the real-world, this is commonly known as the “Innovation Valley of Death” (hereafter Valley of Death).
The Valley of Death refers to the timing where public funding (i.e. university funds) for research decreases, but there isn’t enough private fundings (i.e. industry partner support) to reach the minimum investment level needed to sustain the initiative7.
Graph 1: Idea to Value – The Innovation Valley of Death8
Here is a simple scenario to illustrate the Valley of Death:
| 1 | An innovative technology, heavily supported by university on the primary R&D funding, reaches the point where it is proven in a lab environment | |
| 2 | The next step is to test it in the real-world and investigate the problem/solution fit | |
| 3 | At this point, primary research funding from the university starts to diminish as the project nears its conclusion | |
| 4 | But industry players are not ready to invest due to uncertainty about the technology’s business scalability | |
| 5 | As a result, the funding/investment level may be insufficient to support the technology’s commercialization |
The above is an example where R&D is run by a separate entity (i.e. university). However, the same principle applies to internal corporate R&D and new business creation cases as well. For example, the initial R&D might be conducted, but further for scaling could be withheld due to core the business being prioritized or facing challenges that require those funds.
Also, it is noted that Australia is experiencing “publishing inflation”, where researchers are prioritizing the number of papers published over the impact of that paper/research9. This suggests an entrepreneurial mindset focused on commercialization might be lacking or not prioritized. While university professors and TTOs are aware of this issue and working to address it, change cannot happen overnight.
Despite these challenges, it is critical to outline that a smooth transition from the R&D to scaling / commercialization, enabled by sufficient collaborative funding or support is a vital requirement for any innovation to succeed.
For specific/apt Australian innovations that may appeal to Japanese corporations – to avoid the Valley of Death, several factors are crucial. The “Why?”, “What?” and “How?” of the Australian innovation must be (i) well-defined within an international context and (ii) discovered and identified by the right audience (e.g. Japan Inc.) and (iii) aligned with the right market situation and timing. And this is where IGPI Group can add value.
IGPI Group has been working with universities and corporations in Japan to address this issue of innovation commercialization by setting up a subsidiary entity “Advanced Technology Acceleration Corporation”, in short ATAC.
ATAC’s focus is being the bridge to support universities and research institutes, start-ups and Japanese corporations to perform hands-on incubation of cutting-edge technologies, bringing them to the real world based on market needs.
Figure 1: Diagram on ATAC’s support10
So far, IGPI Group has executed these initiatives for both Japanese corporations or individual Japanese universities. One example is a joint initiative with Toyota Motor Corporation to establish the “Innovative Technology Acceleration Platform” or ITAP, which collaborates with University of Tokyo’s School of Engineering, Tokyo Institute of Technology and Nagoya University on technology incubation11.
Figure 2: Toyota Global Newsroom12
Another example is a joint initiative with Nagoya Institute of Technology called “Nagoya Institute of Technology Expansion Platform” or NITEP, which specializes in incubating and commercializing the university’s expertise13.
These are just a few examples from Japan, but symbolizes a strong commitment to hands-on incubation and bringing innovation beyond the labs and to the real world through collaboration—literally “Bridge the Valley of Death”. IGPI Group has developed a deep-rooted understanding of innovation ecosystem and incubation processes and we see strong potential for applying our learnings in the Australia-Japan corridor too.
If you are an Australian university or research institute or an Australia corporation that has the ambition of building new businesses through Australia-Japan innovation, we will be glad to have a confidential conversation. IGPI provides highly customized business advisory to its diverse range of clients, including but not limited to:
I. Building your “for Japan” or “with Japan” strategy
II. Capability statement prioritization based on needs/wants of Japan Inc.
III. Market assessment for specific research initiatives x Japan as a market or Japan Inc.
IV. Strategic partner/capabilities search x Japan
V. Commercial negotiations support
VI. Other custom hands-on support (for/in Japan) etc.
To find out more about how IGPI Group can provide support for businesses, browse through our insight articles or get in contact with us.
1 Knowledge Commercialisation Australasia – https://techtransfer.org.au/ipc-training/commercialisation/who-participates-in-commercialising-universities-ip/
2 University of Melbourne Contract research – https://research.unimelb.edu.au/partnerships/collaborate/research-collaboration/contract-research
3 Catalant Everything you need to know about CoE – https://catalant.com/coe-everything-you-need-to-know-about-centers-of-excellence/
4 The University of Queensland – https://smp.uq.edu.au/research/research-centres/arc-centre-excellence-quantum-biotechnology
5 Knowledge Commercialisation Australasia – https://techtransfer.org.au/ipc-training/commercialisation/commercialisation-pathways-and-vehicles/
6 J-Stage Articles – https://www.jstage.jst.go.jp/article/jsmeicbtt/2002.1/0/2002.1_77/_article/-char/en
7 Idea to Value – https://www.ideatovalue.com/inno/nickskillicorn/2021/05/the-innovation-valley-of-death/
8 Idea to Value – https://www.ideatovalue.com/inno/nickskillicorn/2021/05/the-innovation-valley-of-death/
9 The Age: We’ve hit peak science, and that’s not good https://www.theage.com.au/national/we-ve-hit-peak-science-and-that-s-not-good-20240116-p5exkb.htmll
10 ATAC website – https://igpi-atac.co.jp/
11 Toyota Global Newsroom – https://global.toyota/en/newsroom/corporate/37000298.html
12 Toyota Global Newsroom – https://global.toyota/en/newsroom/corporate/37000298.html
13 IGPI News – https://www.igpi.co.jp/2020/07/28/news_20200728/
Mr. Rachit Khosla is the Country Manager of IGPI Australia. Rachit is a seasoned strategy consulting professional with over 14 years of experience in leading and executing market entry and growth strategies (both organic and inorganic) and open innovation engagements for Fortune 500 businesses and large MNCs across the Asia Pacific. He has advised clients in a diverse range of industries, including automotive, fin-tech, industrial and manufacturing, med-tech & healthcare, smart cities, construction materials, travel, IT & telecommunications to name a few. Rachit was the former Country Manager and Director for YCP Solidiance (now Japanese-owned) and Founder and CEO of an online B2B marketplace startup for professional advisory services focused on Emerging Markets.
Mr. Kaoru Shingae is a Consultant at IGPI Australia. Prior to joining IGPI, Kaoru worked at Toyota, BMW and Boston Consulting Group, primarily specializing in the Automotive and Mobility sector and with exposure to wider industrial sectors. Kaoru has both internal and external strategy experience with a deep understanding on ‘What’ is most important for all stakeholder’s future. He has end-to-end experience from corporate and enterprise-level planning to all the way down to operational planning. Kaoru is a holistic all-rounder who engages with both strategic and operational stakeholders throughout the company. Past achievements include crisis turnaround plans, long and mid-term vision plans, CEO’s company goal plans and sales & market operational plans plus delivery, to name a few. Kaoru has graduated from The University of Melbourne with a Bachelor of Commerce.
Ms. Devina Hashifah is an Intern at IGPI Australia (Nov 2023 – Feb 2024). Devina graduated with a Bachelor of Commerce from the University of Melbourne, majoring in Marketing and Management. She has previously worked in the financial advisory sector and student consulting organizations, conducting research for clients from the agriculture, renewable energy, microfinance, and media industry.
IGPI Group is a Japan rooted premium management consulting & Investment Group headquartered in Tokyo with a footprint in Osaka, Singapore, Hanoi, Shanghai & Melbourne, as well as parts of Europe and India. The organization was established in 2007 by former members of the Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turn-around projects in Japan. IGPI Group has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation to name a few. IGPI Group has vast experience in supporting Fortune 500s, Govt. agencies, Universities, SMEs and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has ~8,500 employees on a consolidated basis.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness, and accuracy of such information. All rights reserved by IGPI.
The Southeast Asia data center market is one of the fastest-growing globally, driven by several key factors. The adoption of cloud-based services is expected to be a major growth driver in the coming years. Additionally, Singapore is set to become the first country in the region to implement 5G technology, with Thailand, Malaysia, and Vietnam also planning and investing in 5G network deployment in the next 5 years. This will further increase data generation, necessitating data centers to manage more complex network traffic. Moreover, the growing demand for generative AI, which requires substantial computational power and vast amounts of data storage, is expected to further drive the need for data center resources.
Graph1. Data Center Market Forecast in ASEAN[1]
The maturity of the data center market in ASEAN countries is as follows:
Table1. Number of Data Centers with Capacity and The Breakdown of Upcoming Projects by Stage[2]
Singapore is the most mature market in the region. In the APAC area, it ranks second only to Tokyo, with 1GW of operational capacity and a remarkably low vacancy rate of just 1%. In 2019, concerned about the increase in power consumption and the environmental impact caused by the rapid surge in data centers, the Singapore government imposed a moratorium on new data center construction. However, this moratorium was lifted in 2022, and in May 2024, the government announced the “Green Data Center (DC) Roadmap,” which includes goals such as providing at least an additional 300 megawatts (MW) of capacity in the near future and expanding capacity further through the adoption of green energy.
Indonesia and Malaysia are fast-growing markets with enormous supply potential, further driving data center growth in ASEAN. In Malaysia, data center investments are rapidly increasing, particularly in Kuala Lumpur and Johor, while in Indonesia, Jakarta is seeing a surge in investments. This growth is driven by the expansion of the digital economy, the rise of cloud adoption, and hyperscalers such as GAFAM and major Chinese tech players investing in the region. In Malaysia, the government is also working on implementing a regulatory framework focused on sustainability.
Most of the new data centers to be built in the near future will be hyperscale facilities. For instance, out of 18 upcoming projects in Malaysia, 11 are designed as hyperscale, similar to 6 out of 11 in Indonesia and all 9 upcoming projects in the Philippines. This trend towards larger, higher-performance data centers is fueled by advancements in AI technologies.
The increasing use of cloud computing in both the public and private sectors in Southeast Asia is a key factor driving the demand for data centers.
For example, the Singapore government set a target to migrate most of its less sensitive digital workloads to the commercial cloud by 2023 and successfully achieved it. Similarly, many large companies in Singapore’s private sector have begun adopting cloud services, utilizing these solutions to implement advanced technologies such as artificial intelligence and machine learning.
In 2021, the Malaysian government introduced a cloud-first strategy in the public sector to increase cloud adoption rates to 50% by 2024.
Meanwhile, Indonesia’s cloud computing market has experienced remarkable growth, with a CAGR of 48%, over the last 5 years, according to CNBC Cloud. This surpasses the global average, and currently, 90% of companies in Indonesia are moving towards cloud computing solutions.
Amid these trends, the cloud market in ASEAN is expected to grow at a 21% CAGR.
Graph2. Public Cloud Market Revenue in ASEAN by Segment[3]
Additionally, to meet the growing demand for data storage and processing, major cloud providers are expanding into the ASEAN region. For example, in 2024, Microsoft announced several significant investments. In April, the company committed $1.7 billion to build new cloud and AI infrastructure in Indonesia over the next four years. In May, Microsoft pledged $2.2 billion to further develop digital infrastructure in Malaysia and also announced its first regional data center, focused on providing AI training opportunities, although the investment amount was not disclosed.
Table2. Area Coverage of Major Cloud Provider in ASEAN[4]
The generative AI market is growing rapidly in Southeast Asia. Currently valued at $0.8 billion, it is expected to reach $13 billion with a 50% CAGR by 2030.
Graph3. Generative AI Revenue Forecast (ASEAN) as of Mar 2024[5]
Indonesia, ranked sixth globally for its number of startups, is experiencing significant growth in generative AI applications, such as chatbots. One example is Kata.ai, which focuses on natural language processing to provide AI-powered conversational chatbots, helping businesses engage with customers more effectively. Kata.ai has a proven track record with major telecommunications companies and state-owned banks. Mekari, a leading SaaS company, also entered the generative AI business in 2023, offering tailored advice on management strategies by analyzing clients’ financial and HR data.
Advances in generative AI are driving increased demand for new types of data centers. Generative AI models, particularly large-scale language models (LLMs) and image generation models, require immense computational resources for both training and inference. This necessitates specialized hardware, including large numbers of GPUs and TPUs (Tensor Processing Units), which are more expensive than conventional CPU-based systems. These specialized systems also require more power and cooling, and take up more physical space, fueling demand for higher-performance and larger data centers, such as hyperscale data centers. Over the next 6 years, the average data center capacity is expected to double, while total capacity is projected to triple.
As generative AI technologies become more widespread, the computational load will increase, leading to higher power consumption. To illustrate, generating a response from ChatGPT requires roughly ten times the energy of a traditional Google search. Based on 9 billion searches per day, this translates to an additional 10 terawatt-hours of energy consumed annually (according to a report by the International Energy Agency, IEA). Furthermore, as computational loads increase, so does the heat generated by servers, which in turn drives up the energy needed for cooling. It’s estimated that cooling accounts for about 30-40% of a data center’s total energy consumption. Overall, the IEA has announced that the power consumption of data centers could double by 2026 compared to 2024 levels.
As power consumption in data centers increases due to the use of generative AI and other technologies, several challenges arise. These include whether we can meet the new energy demands, what types of energy will be used to supply this demand, and how these needs can be balanced with decarbonization goals. However, these challenges present new business opportunities for those who can provide solutions.
[Increasing Energy Efficiency in Data Centers]
One approach is offering hardware and software services aimed at reducing power consumption and improving the efficiency of data centers. For example, the Singaporean startup KoolLogix provides thermal management solutions for data centers. KoolLogix reduces the power consumption of data centers by implementing an innovative cooling system that addresses the inefficiencies of traditional cooling methods. Their system focuses on removing the waste heat generated by servers using a passive heat exchange and phase change approach. Instead of relying on energy-intensive air conditioners, the KoolLogix system uses the servers’ waste heat to power a refrigerant-based cooling loop. This system operates without mechanical pumps or compressors, relying on natural convection, which significantly lowers energy consumption.
[Providing Green Energy to Data Centers]
Another approach is building infrastructure to supply clean energy to data centers. This could include constructing power plants that utilize renewable energy sources such as solar, wind, hydro, or geothermal power. These plants would then supply clean electricity to data centers through long-term contracts. In this model, power generation companies sign Power Purchase Agreements (PPA) with data center operators to provide predictable, long-term energy at stable prices.
One example is an initiative launched in Japan in April 2024. Green Power Investment Corporation (GPI) and Kyocera Communication Systems Co., Ltd. (KCCS) are collaborating on a local renewable energy production and consumption model aimed at supplying a zero-emission data center with clean energy. Specifically, GPI’s subsidiary, Green Power Retailing LLC (GPR), will procure electricity generated by the Ishikari Bay New Port Offshore Wind Farm through a specified wholesale supply of renewable energy. This power, along with FIT non-fossil certificates with tracking from the Ishikari Bay wind farm, will be supplied to KCCS’s Zero Emission Data Center (ZED), which is scheduled to open in autumn 2024 in Ishikari City, Hokkaido, and will be operated entirely on renewable energy.
Since its establishment in 2013, IGPI Singapore has supported many Japanese companies with market research, strategy planning, and execution support, including partner search and approach, ideation, and related training for new business creation in Southeast Asia.
Leveraging the extensive insights gained through involvement in the management of data center-related companies in Japan, along with its strong network of data center players in the ASEAN region, IGPI Singapore is well-positioned to offer consulting services. These services include market entry strategies and the development of partnerships with local players in the data center industry. Through on-the-ground research conducted by local staff in ASEAN, IGPI Singapore stays informed about real-time trends in the region’s data center market. This knowledge allows IGPI Singapore to craft effective market strategies and identify potential partners.
To find out more about how IGPI can provide consulting support for businesses, browse through our insight articles or get in contact with us.
[1] Arizton
[2] Data Center Map, DC Byte (Apr 2024), Cushman & Wakefield (Apr 2024)
[3] Statista
[4] IGPI Research. As per public disclosure, Mar 2024
[5] Statista
Mr. Jongwoo Lee is the Manager of IGPI Singapore. He worked for a Japanese general IT consulting firm, where he was involved in numerous projects such as business planning and implementation support, new business planning, operational efficiency improvement, and business management enhancement support in a wide range of industries, including trading companies, energy, manufacturers, automobiles, and systems, etc. After joining IGPI, he has extensive experience in new business creation in Southeast Asia, including the development of new business models and strategies for expanding sales of new solutions in the Southeast Asian market and the study of new business entries for local companies in Southeast Asia. Graduated from the University of Tokyo, Faculty of Economics. Japanese Certified Public Accountant
Industrial Growth Platform Inc. (IGPI) is a Japan-rooted premium management consulting & investment firm headquartered in Tokyo with offices in Osaka, Singapore, Hanoi, Shanghai & Melbourne. IGPI was established in 2007 by former members of Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turnaround projects in Japan. IGPI has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation, to name a few. IGPI has vast experience supporting Fortune 500s, government. agencies, universities, SMEs, and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has approximately 7,500 employees on a consolidated basis.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.
A key strategic thrust is renewable energy development, with a goal for renewables to contribute 75% of the country’s electricity capacity by 20401. Among these renewable resources, Indonesia’s geothermal potential stands out, with abundant resources located at 362 sites throughout Indonesia2. This potential is particularly promising for supporting the nation’s decarbonization goals, as geothermal energy offers a reliable and sustainable source of power.
This article will explore Indonesia’s geothermal potential, the challenges of greenfield development, opportunities for Mergers and Acquisitions (M&A) investment in the sector, and how IGPI can support private and public companies to capitalize on these opportunities.
Within ASEAN today, two countries lead in geothermal capacity: Indonesia and the Philippines. While both nations boast abundant potential, Indonesia’s geothermal potential has seen more rapid growth in this area over the last five years. However, despite this potential, the development of geothermal energy in Indonesia is fraught with significant challenges, especially during the exploration phase, which presents obstacles to sustained greenfield development.
In ASEAN, the total geothermal potential capacity amounts to 34 gigawatts (GW), concentrated primarily in Indonesia and the Philippines. Over the past five years, Indonesia has emerged as the leading developer of geothermal power in the region, achieving an annual growth rate of 4.6% compound annual growth rate (CAGR) from 2018 to 2023, while the Philippines has seen minimal growth at just 0.3% CAGR over the same period3.
As of 2023, Indonesia has installed about 2.28 GW of geothermal capacity, representing only around 8% of its total geothermal potential of 30 GW. According to the General Plan for National Energy (RUEN), Indonesia aims to achieve 7.24 gigawatts of geothermal power by 2025, requiring an investment of approximately US$15 billion, and to reach 9.3 gigawatts by 2035. This plan highlights significant opportunities for future development in Indonesia’s geothermal potential.
Yet, two key obstacles hinder the development of greenfield geothermal projects in the country: high exploration risks and challenges in securing licensing and land clearance.
1) High Exploration Risk
The primary challenge in developing new greenfield geothermal projects is the substantial risk associated with exploration, requiring substantial investments ranging from 3 to 5 million USD/MW4 and carrying considerable uncertainty in finding viable geothermal sources. The government has implemented measures to mitigate these risks, including support for drilling, soft loans, and exploration funding through initiatives such as the Geothermal Sector Infrastructure Financing Scheme (PISP) and Geothermal Resource Risk Mitigation (GREM)5. However, these incentives have seen limited uptake due to a combination of factors, including insufficient tariffs on electricity produced and high-interest rates that increase the required return on investment.
2) Challenges in Licensing and Land Clearance Procedures
Despite the government’s introduction of a one-stop licensing system and the designation of geothermal projects as National Strategic Projects (PSN), practical challenges remain. Exploration and subsequent development often overlap with, and potentially conflict with, other environmental legislation, such as protected land/forest areas. Deconstructing and organizing these policies will take time; until then, many exploration permits will require long waiting periods for approval or may fail after multiple rounds of submission and clearance.
Given the challenges associated with greenfield projects, a brownfield approach—specifically via geothermal M&A—has become an attractive entry option for many developers and investors seeking to enter this sector. This strategy has particularly resonated with Japanese entities; to date, there are 7 Japanese entities involved in geothermal projects in Indonesia, with 5 of these entering via M&A. Between 2007 and 2023, there were approximately 15 M&A transactions in Indonesia’s geothermal industry6, 8 of which were executed by Japanese entities.
Among the 5 Japanese players in the market today, INPEX stands out. Since its entry in 2011, the company has primarily employed a brownfield strategy to rapidly expand its geothermal business in Indonesia. Through INPEX Geothermal Ltd., which primarily focuses on geothermal activities, the company has successfully completed four acquisitions7.
In 2015, INPEX made its inaugural brownfield investment by acquiring a 49% stake in Medco Power Indonesia, which in turn owns a 37.25% interest in the Sarulla Geothermal Project, joining a consortium that oversees one of the world’s largest single-contract geothermal power projects. To date, INPEX holds an 18% stake in the project.
In 2021, INPEX further expanded its portfolio by acquiring a 33.3% share from PT Supreme Energy Sumatera, which in turn owns a 30% interest in the Supreme Muara Laboh Geothermal Project, bringing the company’s ownership in this project to 10%. In 2022, INPEX further increased its stake from 10% to 30% by acquiring an additional 20% from another project shareholder, ENGIE SA. That same year, INPEX also completed an investment in the Supreme Energy Rantau Dedap Geothermal Project by acquiring a 27.4% stake from ENGIE SA.
Most recently, in 2023, INPEX joined the Supreme Energy Rajabasa Geothermal project in Lampung, acquiring a 31.45% stake from PT Supreme Energy Raja Basa. Through these strategic investments, INPEX is solidifying its position as a key player in Indonesia’s geothermal energy sector, contributing to the country’s efforts toward sustainable energy development.
Japanese entities have already begun their foray into the geothermal sector. The combination of a fragmented market landscape, characterized by numerous operating entities and relatively young geothermal facilities (with 60% being under 16 years old8), along with the apparent interest from local entities in seeking strategic partners to enhance technology and expand operations, highlights a market primed and ready for foreign private capital to spur growth.
IGPI Singapore specializes in supporting clients with M&A projects, conducting market research, and developing market entry strategies, particularly within the renewable energy sector.
To address these challenges, IGPI offers comprehensive M&A assessment services, including (not limited to):
◆ Target Screening (Pre-Due Diligence): We conduct thorough primary research to identify potential investments and shortlist viable targets.
◆ Due Diligence: Our team performs detailed commercial due diligence to gain a deeper understanding of potential targets, covering market analysis, business models, synergies, investment risks, and more.
These solutions are tailored to empower clients to make informed decisions and navigate complexities in their investment initiatives, ensuring strategic and successful market entries.
To find out more about how IGPI can provide consulting support for businesses, browse through our insight articles or get in contact with us.
1. Business Plan for Electricity Supply (RUPTL) PLN 2024-20
2. Center for Mineral, Coal, and Geothermal Resources (PSDMBP)
3. IRENA, Geothermal Energy Data
4. API – Indonesia Geothermal Association
5. API – Indonesia Geothermal Association, Webinar – Geothermal Added Value Creation Strategy as a Supportive Measure for NZE 2060
6. Merger Market
7. INPEX Corporation
8. Global Geothermal Tracker
Mr. Febrizal is the Associate of IGPI Singapore. Prior to joining IGPI, Febrizal worked at YCP Solidiance and PwC Indonesia, where he successfully completed a range of consulting projects, including market entry strategy, growth strategy, and business model identification, across diverse industries such as Agriculture, Automotive, and Industrial. He has extensive experience in M&A activities, including conducting commercial due diligence, valuations, and providing deal advisory services (connecting buy-side and sell-side). Febrizal holds a degree in Economics from Binus University.
Industrial Growth Platform Inc. (IGPI) is a Japan-rooted premium management consulting & investment firm headquartered in Tokyo with offices in Osaka, Singapore, Hanoi, Shanghai & Melbourne. IGPI was established in 2007 by former members of Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turnaround projects in Japan. IGPI has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation, to name a few. IGPI has vast experience supporting Fortune 500s, government. agencies, universities, SMEs, and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has approximately 7,500 employees on a consolidated basis.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.
The Indonesian telecommunication sector has undergone a series of “evolutions” predominantly caused by digitalization, driven largely by increasing data consumption. This has triggered a set of “assets reorganization” activities marked by consolidations, mergers and acquisitions (M&A) and divestments and the creation of infra-co.
Some of these activities are propelled by capital markets that have seen an increase in activity in the infrastructure private investment and higher cost of funds. More importantly, however, central to these is the convergence of telecommunication services that has now been largely driven by data connectivity and the demand for high-speed, high-quality and affordable communication.
The Indonesian telecommunication sector has long been “mobile-centric,” primarily driven by mobile use as a more affordable and practical connectivity option. Before the wave of consolidation that occurred nearly a decade ago (sometime in 2015-16), there were 7 mobile network operators (MNOs) in Indonesia, namely Hutchison 3, XL Axiata, Indosat Ooredoo Hutchison, Sampoerna, Telkomsel, SmartFren and Bakrie Telecom.
Today, due to this wave of consolidation among these players (as detailed out in the table below) we are left with four key major MNOs. Soon, the country may only have three MNOs, as there is a potential merger between SmartFren and XL Axiata.
In addition to the wave of M&As among the MNOs, the Indonesian telecommunication sector has also witnessed a rise in divestments of telecommunication infrastructure assets, including telecommunication towers, data centers to fiber optics assets.
This trend it highlighted by the recent announced divestment Telkom Sigma, a subsidiary of Telkom Indonesia (a state-owned enterprise telecommunication company), and the proposed divestment of Indosat Ooredoo’s Fiber Optic and Marine Cable businesses.
This shift further underscores the ongoing reorganization of the Indonesian telecom sector.
Amidst these ongoing consolidations and divestments, we have also observed key emerging trends (discussed in further details below), including the rise of fixed-mobile convergence (FMC) in the Indonesian telecommunication landscape. This trend is exemplified by XL Axiata’s acquisition of Link Net, a major Indonesian fixed broadband player (initially owned by First Media, a subsidiary controlled by the Lippo Group and has been invested by a global PE, CVC), and the recent merger of Telkom’s subsidiaries – IndiHome (a fixed broadband service provider) and Telkomsel (one of the major MNO operators).
Underlying these corporate actions, is the significant increase in data consumption driven by digitalization and consumers’ contents consumption. This has made it strategically imperative for Indonesian telecommunication players to provide better quality and high-speed internet connections to grow their market share.
Specifically, in Indonesia, the fixed broadband communication segment has ample room to grow. The country currently has the lowest fixed-broadband penetration at less than 20%, significantly below Southeast Asia’s average of 40%, highlighting a significant opportunity for expansion and fiber optics investment in Indonesia. (DBS, 2023)
Furthermore, the services provided today are sub-standard, with average speeds that users typically get from the current fixed broadband internet service providers (ISPs) being only 31.42 Mbps, a far cry from the SEA internet speed of about 77.5 to 284.93 Mbps. (Ookla, Q2 2024)
This underscores the pressing need for improved broadband infrastructure and services in Indonesia, which could further drive the adoption of fixed-mobile convergence and accelerate 5G development to meet the growing demands of its digital population.
From our research and analysis, the bouts of divestment and M&As that happen in the Indonesian telecommunication market are mainly driven by several external and internal factors including but not limited to the following:
<External Factors>
1. The end of the low interest-rate era, bringing about an increase in the cost of funds, has raised the bar for return on invested capital.
2. Heightened competition among the MNOs driving Average Rate per Users (ARPUs) downwards (shown by the decline in the ARPU/GDP Ratio in the chart below), while the number of subscribers remain stagnate.
3. Technological change, including the use of DWDM (Dense Wavelength Division Multiplexing) / WDM (Wavelength Division Multiplexing) which essentially allows for a single fiber optic to cater for various data signals use has expanded the bandwidth capacity of a single fiber optic, making fiber optic use capacity more efficient.
4. The entry of new players in the market, especially with the recent entry of Starlink (the satellite internet entity belonging to Elon Musk), has intensified competition in the Indonesian telecommunication sector. Starlink offers an alternative way for consumers to access the internet; adding pressure to the already competitive landscape, though its reach is currently limited.
<Internal Factors>
1. The need for MNO players to seek new avenues for growth including providing higher value-added services, has become increasingly important.
2. Adding to this is also the decline in legacy revenue streams (voice calls, SMS) for mobile companies, which now only provide a meager portion of the overall revenue (see below illustration on the proportion of legacy revenue to the total revenue of Telkomsel)
3. The high capital expenditure (capex) required to maintain competitiveness and/or to capture new markets has further driven the assets-reorganization. Combined with (1) and (2), this has triggered the slew of consolidation and divestment within the Indonesian telecommunication sector.
A confluence of these factors, coupled with the shift towards data-driven revenues, has resulted in the continuous shake up in the country’s telecommunications sector.
Driven by the rise of data consumptions and the strive for efficiency, the key trends in the telecommunication market in Indonesia will be mainly driven by the need to provide high quality communication more effectively i.e. higher quality and at lower price. Due to this reason, we likely to witness the key following trends:
1. Fiber optic investment in Indonesia will become crucial for the future of telecommunications, with FMC convergence and fiberization enabling high-quality, affordable internet
Driven by increasing need of data, fiber optic, with its ability to channel vast amounts of data efficiently and effectively and with its already proven technology, has been the clear winner. In addition, the use of DWDM and WDM technologies is a breakthrough that has increased the amount of bandwidth capacity that can be channeled by a single fiber optic network.
Adding to that, fiberization – which is basically connecting tower to the fiber optic cable becomes the key for 5G development in Indonesia. We have seen this done in major markets such as India and China. This also means there is a convergence whereby fixed broadband will generally empower the telecom tower. Hence Fiber optic is a clear winner of this transition and evolution.
2. EDGE Data Center will provide further content localization
With increased content consumption, placing content closer to users to reduce latency has become ever more important. Edge data centers (EDGE), which is essentially smaller sized data center closer to the population of end users and utilization of content delivery network (CDN), which is essentially network of servers with the goal of delivering content quickly, cheaply, reliably, and securely as possible, are crucial in this “localization” effort.
3. Telecommunication companies will evolve to become “techcos”, whereas infrastructure companies will focus on deepening their infrastructure play, creating a more scalable back-end sharing economy
With the creation of “infra-co” companies, separating infrastructure ownership from operations, is supported by the rise of infrastructure investors, particularly infrastructure private equity funds, seeking exposure to digital infrastructure.
Whilst operating-co will focus on providing more value-added, higher return and technological based servicing. We can already see this happening in developed markets such as Singapore, where Singtel and StarHub have made acquisitions in the enterprise services sector to expand their offerings in this area.
We in IGPI Singapore have been active in the telecommunication sector in the region, working with not only key telecommunication clients across various spectrums, but also with various infrastructure and non-infrastructure investors who are looking into investing and getting exposure into the SEA telecommunication market. We are happy to discuss and assist you on your strategy and investment matters.
To find out more about how IGPI can provide consulting support for businesses, browse through our insight articles or get in contact with us.
Mr. Erwin Thio is the Senior Manager of IGPI Singapore. His areas of expertise are in M&A deal management (both buy-side and sell-side), deal structuring, valuation and commercial due diligence, market analysis, and project management. He has also spent several years working within the investment and fund management (particularly for Real Estate Private Equity Funds) division of major developers such as Mapletree, Lendlease, Savills IM, and CFLD, where he helped with deal execution and origination, capital raising, fund creation/ development, and management.
Mr. Nicholas Quek is an Associate of IGPI Singapore. He graduated from Singapore Management University with a Bachelor of Business Management, majoring in Finance. During his time in university, he gained internship experience at OCBC bank where he took on a compliance role responsible for AML. He was also a Teaching Assistant for Financial Markets and Investments, and a Research Assistant for Real Estate Investment Trusts (REITs). In his final year, he embarked on an experiential learning course where he formulated strategies to increase e-commerce sales for an MNC.
Mr. Darren Hardisurjo is an Intern at IGPI Singapore (August 2024 – October 2024).
Industrial Growth Platform Inc. (IGPI) is a Japan-rooted premium management consulting & investment firm headquartered in Tokyo with offices in Osaka, Singapore, Hanoi, Shanghai & Melbourne. IGPI was established in 2007 by former members of Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turnaround projects in Japan. IGPI has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation, to name a few. IGPI has vast experience supporting Fortune 500s, government. agencies, universities, SMEs, and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has approximately 7,500 employees on a consolidated basis.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.
Australia has rich innovation capabilities and potential that could yield significant benefits for Australia-Japan (A-J) innovation and even beyond.
The key question is “How to enable Australia?”
This entails fully unlocking the innovation capability and potential that Australia holds. This article intends to put a spotlight on the rich capabilities and the missing link which Australia as a nation faces to spearhead their innovation efforts for Japan in particular.
The wider objective of this piece is to contribute to discussions on increasing successful A-J innovation cases within the Australia-Japan corridor. Specifically, IGPI shares some of its observations of the potential bottlenecks faced by the Australian side – these include challenges in gaining awareness and recognition from the Japanese side in a customized fashion, which by no means have easy fixes.
Australia-Japan relationship has been a longstanding and complementary relationship that started in the form of trading in traditional sectors such as energy, agriculture, and mining.
It was touched upon in part I how this relationship is now evolving in terms of “What” and “Who” in recent years. Examples touched upon were Japan transitioning from traditional fossil fuels to initiatives such as renewable energy generation and hydrogen; and widening the collaboration partners beyond mega corporations to include universities and startups in Australia. It also highlighted the bottlenecks Japanese corporations face, such as “Why Australia?” and their motivation to explore such opportunities, particularly addressing the alignment or misalignment between the HQ and local arm.
For the full article on part I: What are the bottlenecks being experienced on the Japanese side?
However, this does not mean there are no bottlenecks on the Australian side. Australia faces its own bottlenecks as the “Innovation supplier”, providing solutions to the Japanese “demand” side.
For decades, Australia has been a key partner for Japan. As previously discussed in part I, this relationship has now dramatically shifted towards sourcing innovative solutions in various forms from broader players in the Australian innovation ecosystem. Namely, these have been from (i) Startups / Spinoffs, (ii) Universities, and (iii) Research Institutes.
2.1. Startups and Spinoffs
Throughout the world, startups have played a pivotal role in driving innovation.
Australia, recognized as having one of the largest startup ecosystems in the world (9th in the world, 2nd in Asia-Pacific)1, is home to numerous unicorns such as Canva, Atlassian, and Airwallex, to name a few. But most recently, the B2B sector startups have been on the radar of Japanese corporations, showing notable progress in Japan and beyond:
| Collaboration | Brief Example |
|---|---|
| Macnica x icetana | Macnica has secured a strategic stake in icetana, a leading artificial intelligence software developer. As part of this deal, Macnica will assume the role of the exclusive distributor for icetana in the Japanese and Brazilian markets2. |
| JR East Water Business x Hivery | JR East Water Business in collaboration with Hivery, an Australian AI-driven retail tech company, will roll out AI-driven vending machine optimization solutions to 6,000 vending machines across the East Japan Railway’s train stations3. |
Both examples illustrate Japanese corporations leveraging solutions from Australian startups in Japan and beyond.
One unique fact to note is that both icetana and Hivery are startups but started off as spinoffs of an Australian university or a research institute. The term “spinoff” describes a new and separate entity created by the parent entity that holds all or partial shares4. In the context of an Australian university or a research institute, spinoffs are created with the aim to boost entrepreneurial activities to commercialize a certain innovative technology5. In the same line, icetana was spun off from Curtin University (Perth, Western Australia), and Hivery from the Commonwealth Scientific and Industrial Research Organization (in short CSIRO, Australia’s National scientific research agency).
As these startups and spinoffs aim to commercialize the innovative technology they possess, they represent the significant potential for collaboration with industry partners in technical, business, or financial forms to realize new business opportunities.
2.2. Universities
On the other hand, Australia is a rich source of innovation from numerous universities. Australian universities are recognized for their world-class capabilities, comparable to the institutions the USA and UK universities. Based on QS World University Rankings 2025, the composition for Australia, Japan, the UK, and the USA in total count and the count in the “Top 50s” are as follows:
Figure 1: QS World University Rankings 20256
Factually, Australia ranks 3rd in the Top 50 coverage, behind the USA and UK. The interesting fact here is that despite being 3rd, Australia has the highest “coverage ratio” relative to the country’s total university count within the ranking (6 in the top 50 out of a total 38 = 16%; compared to 8% for the USA and 9% for the UK). This highlights the exceptional quality of Australian universities despite being fewer in number.
This excellence is evident in the “International Research Network” metric introduced by the QS World University Ranking in 2024, which provides insights on how internationally connected an institution’s research is as well as recognizing the importance of collaborative research more broadly7.
Here’s how the top 3 Australian universities fare against their counterparts in the USA and UK in terms of international research connectivity:
| Country | International Research Network Score (Top 3 Average) | University | Individual Score | Overall Rank |
|---|---|---|---|---|
| Australia | 97.2 | The University of Melbourne | 97.4 | 13 |
| The University of Sydney | 95.8 | 18 | ||
| The University of New South Wales | 98.3 | 19 | ||
| USA | 97.5 | MIT | 96 | 1 |
| Harvard University | 99.6 | 4 | ||
| Stanford University | 96.8 | 6 | ||
| UK | 98.9 | Imperial College London | 97.4 | 2 |
| University of Oxford | 100 | 3 | ||
| University of Cambridge | 99.3 | 5 |
Figure 1: QS World UnivTable 1: QS World University Rankings International Research Network Scores8
Again, despite the overall ranking being lower, the research capabilities of the top 3 Australian universities are on par with, or even exceed, those of the leading institutions in the USA and UK. It should be noted that overall ranking includes metrics outside of research capabilities, such as international student ratio, and non-capability specifics.
In addition, Australian university’s research and development spending is notably high on a global scale. This is illustrated by the “HERD” or “Higher Education Expenditure on R&D” metric, which measures the R&D expenditure by higher education entities such as universities as a percentage of GDP. Below is a comparison of the USA, UK, Japan and Singapore:
Figure 2: OECD Stat Dataset – Main Science and Technology Indicators Higher-Education Expenditure on R&D as a percentage of GDP9
| Country | 2016 | 2017 | 2018 | 2019 | 2020 |
|---|---|---|---|---|---|
| Australia | 0.62% | 0.61%* | 0.62% | 0.64%* | 0.61% |
| Singapore | 0.64% | 0.56% | 0.52% | 0.52% | 0.52% |
| Japan | 0.38% | 0.38% | 0.37% | 0.38% | 0.38% |
| UK | 0.39% | 0.39% | 0.65% | 0.63% | 0.66% |
| USA | 0.36%* | 0.37%* | 0.36%* | 0.36%* | 0.38%* |
Table 2: OECD Stat Dataset – Main Science and Technology Indicators Higher-Education Expenditure on R&D as a percentage of GDP10
* Note: Estimate (Australia case) or slight definition differs (USA case), Data based on full available data for all 5 listed country comparison
Apart from the UK, which has increased significantly since 2018, Australia is represented with a consistently high level of expenditure or investment into R&D from a GDP percentage basis, which is by contrast, much higher than the likes of the USA or Japan.
Australian universities offer world-class innovation potential, which can be nurtured as business opportunities. The key importance is to make that “critical step” to collaborate with industry partners to realize that capability outside of the lab and apply it to the real world.
2.3. Research Institutes
Separate from universities, Australia also has numerous research institutes. These can be categorized into individual organizations or “Cooperative Research Centers” (hereafter CRC).
Individual organizations can range from national science agencies such as the CSIRO to more niche specialized research institutes (e.g., Health – Melanoma Institute Australia, or even university spinoff R&D entities, etc.).
Most notably, CSIRO is the largest research institute in Australia and one of the significant globally, is often compared to the Australian version of Japan’s “AIST” (産業技術総合研究所) or “RIKEN” (理化学研究所). Typically budgeted with approximately $1.6B AUD annually, it is ranked as the 6th or 7th against selected international applied research organization over the past 10 years and with over 4,000 industry and government partners11. For reference, AIST’s annual expenditure in FY22 was around $1.1B AUD12**. CSIRO’s R&D ranges in 9 fields (further split into subcategories) and works in a collaborative manner with the universities and industries to bring innovation to the real world13.
Figure 3: CSIRO Research fields14
With its broad coverage and extensive network of connections, CSIRO represents the diverse capabilities of Australia’s national science agency.
The other important research institute category is the CRCs. CRCs are Australian government programs since 1990 with the government providing funding support for industry-led collaborations. CRC themes vary depending on each CRC but are all aimed at addressing industry identified problems and key issues. Typically, CRC are mid to long-term programs that can range from 5 to 10 years, but shorter programs (CRC-P) up to 3 years also exist15. CRCs require at least one Australian industry organization and one Australian research organization, but they are not limited in total numbers, and can include non-Australian corporations as partners as well. Below are examples of CRCs that interacted with Japanese corporations:
| CRC x JP Cos | Focus of CRC | Grant size | Collaboration form |
|---|---|---|---|
| Food Agility CRC x NTT, Yamaha Motor | Support Australian agrifood industry to be profitable and sustainable16 | $50M | Official CRC Partner |
| Future Energy Exports CRC x Impex | Energy export decarbonization17 | $40M | Official CRC Partner |
| Future Energy Exports CRC x JX NOEX, Mitsui O.S. K. Lines, Osaka Gas | Collaboration Conduct research and development to demonstrate the technical feasibility and operability of low-pressure and low temperature solutions for bulk CO2 shipping transport18. | ||
| Heavy Industries Low-carbon Transition (HILT) CRC x Mitsubishi Heavy Industries | De-risk decarbonisation pathways for heavy industry19 | $39M | Official CRC Partner |
Note that entities can be part of the CRC itself (official CRC partner) or engage in a collaborative form, such as the Future Energy Exports CRC with companies like JX NOEX. It is also important to highlight that government grants require the applicants (i.e. CRC lead and partners) to at least match the amount of government grant / funding either through cash and / or in-kind contributions. With both long-term support and commitment, CRCs are unique research initiatives that bring like-minded partners together 20.
While each Australian startup / spinoff, university or research institute faces unique challenges, a common issue is the limited “Awareness” of Australian innovation capabilities. Despite the high quality and rich sources of innovation, Australia’s recognition by Japan lags behind that of global innovation hubs likes of Silicon Valley or Europe.
Unlike the USA or European countries, Japan is a unique country that requires a very different approach culturally or communication wise. Hence from an Australia point of view, applying a global strategy may not necessarily be most effective approach.
IGPI has seen many cases on both the Australian and Japanese sides having basic misunderstandings due to certain cultural differences or communication methods. In particular, the cultural differences can at time cause unnecessary friction unintentionally.
For example, due to the size and organizational structure, Japanese corporations may cause mass communication delays to get to the “Right” person. Even after making contact, an “unwritten” authorization or approval process, known as “Nemawashi”, might be required. This process of consulting stakeholders informally can significantly extend timelines and might be seen as a loss of momentum from a non-Japanese perspective. However, these processes are often integral to Japanese culture, intended to show respect and give courtesy updates to the people who may be impacted by a certain decision, just that it took a bit of time, which may have been out of their control.
To address this type of barrier, it is important for the Australian side to consider a dedicated and specific Japan strategy. This strategy should focus on deepening engagement and forming partnerships with Japan and Japanese corporates. Elements could include prioritizing capabilities that are particularly relevant to Japan, appointing an internal advocate for Japan-related initiatives, and establishing dedicated channels for promotion and interaction with Japanese entities.
It is important to be clear on the details of “what is requested” and “what can be offered as an exchange” from the Australian side to the Japanese side.
Unless there is a clear ambition and direction set for Japan, it could be difficult for both Australian and Japanese side to understand “what is the aim or goal”.
By addressing these bottlenecks with a targeted approach, Australia-Japan collaboration can improve, leading to more successful innovation partnerships across the Australia-Japan corridor.
IGPI Group has developed a deep-rooted understanding of Japanese Corporations and has been a part of the global expansion and ambitions of many prominent companies across the APAC and beyond. If you are an Australian startup, university or research institute, and believe in the potential of Australia-Japan on the pillars of innovation and keen to enhance your approach to Japan / Japanese corporations, we will be glad to have a confidential conversation. IGPI provides highly customized business advisory to its diverse range of clients, including but not limited to:
To find out more about how IGPI can provide consulting support for businesses, browse through our insight articles or get in contact with us.
1 StartupBlink – Global Startup Ecosystem Ranking
2 icetana – https://www.icetana.ai/investor-updates/global-technology-giant-macnica-takes-strategic-investment-in-icetana
3 Hivery – https://www.csiro.au/en/news/All/Articles/2019/November/hivery-exports-ai-solutions-to-the-world
4 investopedia – https://www.investopedia.com/terms/s/spinoff.asp
5 Taylor & Francis Online – https://www.tandfonline.com/doi/full/10.1080/1331677X.2022.2086148
6 QS World University Rankings 2025 – https://www.topuniversities.com/world-university-rankings
7 QS World University rankings Methodology – https://www.topuniversities.com/qs-world-university-rankings/methodology
8 QS World University Rankings 2025 – https://www.topuniversities.com/world-university-rankings
9 OECD. Stat – https://data-explorer.oecd.org/
10 OECD. Stat – https://data-explorer.oecd.org/
11 CSIRO Annual report FY22-23 – https://www.csiro.au/en/about/Corporate-governance/annual-reports/22-23-annual-report
12 AIST: Employees and Budget – https://www.aist.go.jp/aist_e/about_aist/facts_figures/fact_figures.html
** RBA Exchange rate at $1 AUD = ¥97 JPY as of 12/08/24
13 CSIRO Research – https://www.csiro.au/en/research
14 CSIRO Research – https://www.csiro.au/en/research
15 Business.gov.au – https://business.gov.au/grants-and-programs/cooperative-research-centres-crc-grants
16 Food Agility CRC – https://www.foodagility.com/about
17 Future Energy Exports CRC – https://www.fenex.org.au/about/
18 Future Energy Exports CRC news – https://www.fenex.org.au/australian-japanese-partners-execute-rd-project-agreement-to-develop-safe-and-efficient-solutions-for-industrial-scale-shipping-of-co2/
19 HILT CRC – https://hiltcrc.com.au/about/
20 Business.gov.au – https://business.gov.au/grants-and-programs/cooperative-research-centres-crc-grants
Mr. Rachit Khosla is the Country Manager of IGPI Australia. Rachit is a seasoned strategy consulting professional with over 14 years’ experience of leading and executing market entry and growth strategy (both organic and inorganic) and open innovation engagements for Fortune 500 businesses and large MNCs across Asia Pacific. He has advised clients in a diverse range of industries including automotive, fin-tech, industrial and manufacturing, med-tech & healthcare, smart cities, construction materials, travel, IT & telecommunications to name a few. Rachit was the
former Country Manager and Director for YCP Solidiance (Japanese owned) and Founder and CEO of an online B2B marketplace startup for professional advisory services focused on Emerging Markets.
Mr. Kaoru Shingae is a Consultant at IGPI Australia. Prior joining IGPI, Kaoru has worked at Toyota, BMW and Boston Consulting Group, primarily specializing in the Automotive and Mobility sector and with exposure to wider industrial sectors. Kaoru has both internal and external strategy experience with deep understanding on ‘What’ is most important for all stakeholder’s future. He has end-to-end experience from corporate and enterprise level planning to all the way down to the operational planning. Kaoru is a holistic all-rounder in engaging with both strategical and operational stakeholders throughout the company. Past achievements include crisis turnaround plans, long and mid-term vision plans, CEO’s company goal plans and sales & market operational plan plus delivery to name a few. Kaoru has graduated from The University of Melbourne with a Bachelor of Commerce.
Ms. Devina Hashifah is an Intern at IGPI Australia (Nov 2023 – Feb 2024). Devina graduated with a Bachelor of Commerce from the University of Melbourne, majoring in Marketing and Management. She has previously worked in the financial advisory sector and student consulting organizations, conducting research for clients from the agriculture, renewable energy, microfinance, and media industry.
Industrial Growth Platform Inc. (IGPI) is a Japan rooted premium management consulting & investment firm headquartered in Tokyo with offices in Osaka, Singapore, Hanoi, Shanghai & Melbourne. IGPI was established in 2007 by former members of Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turn-around projects in Japan. IGPI has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation to name a few. IGPI has vast experience of supporting Fortune 500s, Govt. agencies, Universities, SMEs and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has ~7,500 employees on a consolidated basis.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness, and accuracy of such information. All rights reserved by IGPI.
In the financial business market of Southeast Asia, B2B financial services integrated with operational DX for SMEs will be the key.
This article delves into the author’s perspective that the frontier of Fintech in the Southeast Asian market is shifting from the B2C domain to the B2B domain based on the latest Fintech trends.
So, what exactly is Fintech? While Fintech can be defined in various ways across different media sources, this article defines it as ‘financial solutions’ that meet at least one of the following two conditions:
1. Using digital technology to provide financial services to a broader user base than previously possible.
2. Using digital technology to increase the value of financial services provided to users.
One fundamental aspect to understand is that “financial services rarely stand alone.” This is because financial services typically involve the movement of money, which is accompanied by the movement of related information, such as the product or service being paid for, collateral assets, or credit involved in a loan. Since “money isn’t free,” the evolution of Fintech services is inevitably influenced by the degree of digitization of peripheral services. Thus, it is safe to say that advancements in Southeast Asia FinTech are closely linked to how digital transformation impacts the broader financial ecosystem.
Since the 2010s, the digital transformation in Southeast Asia has rapidly advanced in the B2C domain, reaching levels of convenience that surpass those in some advanced countries like Japan and Europe, particularly in sectors such as mobility, education, and healthcare. Examples of this Southeast Asian Fintech evolution include lifestyle support platforms like Grab (Singapore) and Gojek (Indonesia), which initially began as ride-hailing services. Additionally, personalized online education solutions like Geniebook (Indonesia), and online medical consultation solutions through platforms like Alodokter (Indonesia) highlight the advancements in ASEAN Fintech.
In the ASEAN Fintech landscape, digital services such as C2B/C2C payments and budget management have emerged alongside these innovations. Additionally, the data obtained from these services is used to assess consumer credit scores and lending needs, leading to the provision of consumer finance services like BNPL (Buy Now, Pay Later).
However, consumer financial services, particularly payments and BNPL, often face intense competition, resulting in persistently high customer acquisition costs. For example, Atome, a BNPL service provider based in Singapore, announced in May 2023 that it would cease all operations in Vietnam more than a year after entering the market.
Conversely, the digitization of operations for SMEs, which are the backbone of the Southeast Asian economy, remains sluggish, and productivity continues to be low. For instance, the situation in Thailand, a relatively advanced region in Southeast Asia, is as follows:
Agriculture:
| ✓ | Despite 47% of Thailand’s land and 33% of its labor force being engaged in agriculture, agricultural production accounts for only 8-11% of GDP. | |
| ✓ | 30% of agricultural households carry debt exceeding the average annual agricultural income per capita, with 10% carrying debt three times that amount. | |
| ✓ | Total rice production has decreased from 38 million tons in 2012 to 22 million tons in 2022. | |
| ✓ | Only 23% of farmers use ICT-related tools in their operations. |
Logistics:
| ✓ | B2B deliveries from region to region often use point-to-point routes, resulting in low loading efficiency for LTL (less than truckload) shipments. | |
| ✓ | 46% of annual freight transport involves empty backhauls. | |
| ✓ | In 2020, Thailand’s domestic logistics costs accounted for 14% of GDP, higher than the Asia-Pacific average (12.9%) and many other regions worldwide. |
Given this situation, some financial solution providers focus not solely on financial issues but also on supporting the productivity enhancement of SME operations. They capture financial needs and monetize by providing tailored financial solutions. For example:
| ✓ | CrediBook (Indonesia) assists MSMEs and mom & pop stores with digitizing operations and securing financing by offering a bookkeeping and reporting SaaS tool, which simplifies the process of applying for micro-financing from financial institutions easily. | |
| ✓ | Kilimo Finance (Vietnam) operates through a digital marketplace, allowing Vietnamese farmers to purchase farm inputs (e.g., seeds, crop protection, and equipment) through a wide network of suppliers. It also seeks to connect small and medium-scale agriculture players to commercial banks to enable access to formal credit through its automated credit scoring and loan origination software. |
In the future, Fintech players who contribute to improving SME productivity using digital technology and, through this process, meet customers’ financial needs while leveraging credit score-related data to provide financial solutions will occupy an essential position in the Southeast Asian market.
Considering this Southeast Asian Fintech trend, B2B operation DX technology companies might use the data they acquire to offer additional financial services, either directly through earning interest income or through partnerships with financial institutions. Conversely, existing financial institutions can acquire new customers by partnering with, investing in, or acquiring technology startups that drive digital transformation in adjacent areas of finance in Southeast Asia. They can also improve credit scoring accuracy by utilizing income statement-related information such as sales and balance sheet-related information such as accounts payable obtained through operational support, enabling risk-mitigated financing.
Particularly in emerging markets, SME financing is a significant revenue expansion opportunity for both parties due to its higher risk and higher interest rates.
IGPI offers business model hypothesis construction and verification, partnering support, and M&A support during the execution phase, not only for financial institutions but also for technology companies. If IGPI can be of assistance, please contact us through our website.
Mr. Tadasuke Noguchi is a Manager at IGPI Singapore. Before joining IGPI, Tadasuke worked in an IT company and a think tank in Japan, where he engaged in consulting projects such as new business development in various industries: automotive, logistics, retail, finance, etc. He has experience in hands-on new business development while on loan to Toyota Motor Corporation’s R&D department. In IGPI, He mostly focuses on consulting projects such as market entry/expansion in the ASEAN market, M&A advisory, and the formulation of long-term visions. Tadasuke graduated from the University of Tokyo with a B.A. in Language and Culture and acquired a certification from the Graduate School of Public Policy of The National University of Singapore. He enjoys traveling and has visited around 50 countries.
Industrial Growth Platform Inc. (IGPI) is a Japan-rooted premium management consulting & investment firm headquartered in Tokyo with offices in Osaka, Singapore, Hanoi, Shanghai & Melbourne. IGPI was established in 2007 by former members of Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turnaround projects in Japan. IGPI has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation, to name a few. IGPI has vast experience supporting Fortune 500s, government. agencies, universities, SMEs, and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has approximately 7,500 employees on a consolidated basis.
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