An AI Inflection Point: How Asia Can Lead in a Competitive Global Landscape

While the global technology landscape is undergoing multiple significant shifts,^[1] few technologies offer the transformative potential of artificial intelligence (AI). Overall, McKinsey estimates that the total economic potential of AI globally could be in the range of $15.5 trillion to $22.9 trillion annually by 2040.^[2]

The benefits of AI—both as a powerful technology in its own right and as an important amplifier of other trends—are no longer theoretical. More than three-quarters of executives, for example, report that their organizations now use AI in at least one business function. The integration of AI will continue to gather momentum; only 1% of survey respondents currently describe their gen AI rollouts as mature.^[3]

While the competitive landscape continues to develop, Asia is making strides toward becoming a global standard setter in integrating AI. In 2022, the region accounted for 75% of AI patents globally.^[4] AI investments in the region are projected to reach $110 billion by 2028,^[5] reflecting a 24% compounded annual growth rate from 2023 to 2028. Asia can become an established powerhouse of AI innovation, and three broad actions can help leaders realize this potential.

Asia’s Emerging Position as an AI Leader

Asia possesses several important advantages in the global race for AI leadership. Data center capacity is emerging as a particular strength. Global demand for this capacity is projected to grow at an average annual rate of 33% between 2023 and 2030,^[6] and many Asian countries—including Malaysia, Singapore, Indonesia, the Philippines, and India^[7]— are making important new investments in this area. In India, for example, data center capacity is expanding at 26% annually.^[8] The region is also rapidly becoming a preferred destination for AI Centers of Excellence (CoEs), with Singapore alone hosting over 26.^[9]

In addition, Asian governments have generally moved quickly to develop AI strategies and policies, which can help to foster an enabling macroeconomic environment. All Southeast Asian nations have implemented their own national strategy or other formal initiative, for example.^[10]

Asia also offers a large tech-savvy population ready to embrace new products and services,^[11] as well as deep labor markets. India ranks second only to the United States, for example, in terms of the availability of AI talent.^[12]

As a result of these strengths, Asia is increasingly an engine of AI innovation. The following are just a small subset of recent transformative developments across industries:

• Transforming a banking leader into a technology leader: Singapore’s DBS Bank integrated AI across its operations, leading to a 50% reduction in the cost-income ratio relative to serving digital versus traditional customers.^[13]
• Rethinking customer experience around air travel: An Asian airline used a large language model (LLM) to distill customer experience insights from a large volume of text in multiple languages, resulting in an increase in their Customer Satisfaction Index of more than 15%.^[14]
• Nursing an ageing population: A Japanese university has developed a prototype of an AI-driven robot that could help address the chronic shortage of workers to care for the elderly.^[15]
• Enabling real-time crop disease detection: Indian researchers have developed an AI model that allows farmers to detect diseases affecting their crops from their fields. The model achieved an accuracy rate of over 97% during testing, and can be used across regions and climates.^[16]

Setting up for Sustained Success

There is currently significant variation by geography in terms of AI adoption. Southeast Asian businesses, for example, initially lagged behind their counterparts in China and other parts of the world,^[17] though this gap is narrowing. MSMEs (micro, small, and medium-sized enterprises), which make up 97 to 99% of businesses across Southeast Asia, are starting to drive rapid digital transformation in the region.^[18] Adoption looks different across industries and business functions.

Three broad actions can help CEOs—and Asia as a whole—cement and extend the region’s emerging position as an AI leader:

1. Accelerate implementation of existing and emerging AI technologies. To enhance operational efficiency, leaders should move rapidly to reimagine key business processes with AI at the core, tap into fast-growing customer segments through AI-centric business models, and build AI capabilities.^[19]
2. Boldly reimagine what is possible. Establishing AI leadership will require ambitious moves from stakeholders across the AI landscape. For business leaders, this means moving from a reactive, incremental approach to the integration of AI to a radical, innovative, and context-driven transformation of current business models. An increased appetite for experimentation by investors could help counteract the tendency for local startups to chase growth abroad.^[20] Government stakeholders could consider actions to foster increased regional coordination and ecosystem development, which could help scale adoption.
3. Integrate the human side into AI. Succeeding with AI is not just about technology; it’s also about people.^[21] Fully harnessing the potential of AI will require comprehensive upskilling, a rethinking of traditional models of learning, robust change management, and careful attention to ongoing ethical concerns around the use of AI. Asian companies are already demonstrating global leadership in this area, including through large-scale upskilling initiatives. CIMB Group Holdings Bhd in Malaysia, for example, is committing over 100 million ringgit in 2025 to upskill employees in AI and other future skills, with previous training efforts accumulating over 2.66 million hours of learning around digital, data, and AI skills.^[22]

The time for cautious experimentation is behind us. The world is now at an AI inflection point, and Asia has a significant but time-limited opportunity to capitalize on its existing strengths to become a global AI leader. Those that thrive in the emerging AI-driven era will act early and decisively to integrate existing AI solutions and continue to push the innovation frontier.

Gautam Kumra is Chairman of McKinsey’s Asia offices, based in Singapore.

Sources:

[1] McKinsey [2] McKinsey Global Institute [3] McKinsey [4] Stanford University HAI [5] International Data Corporation [6] McKinsey [7] McKinsey [8] Economic Times [9] The Straits Times [10] ASEAN-KOREA Partnership Project for Innovative Culture [11] US-ASEAN Business Council [12] Tortoise Media [13] McKinsey [14] McKinsey [15] Reuters [16] Times of India [17] McKinsey [18] ERIA, AInvest [19] McKinsey [20] McKinsey [21] McKinsey [22] HRD Asia