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Digital economy

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Digital economy

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We are at the threshold of 4th industry revolution. The economy will be digital. Data will be the most important commodity. The infrastructures to collect, transmit and process data will be the determining factor of the strength of the future economy.

We are at the threshold of 4th industry revolution. The economy will be digital. Data will be the most important commodity. The infrastructures to collect, transmit and process data will be the determining factor of the strength of the future economy.

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Digital economy

  1. 1. Dr. Len Mei 2019/10
  2. 2. High tech Brand name High value services Commodity Cheap Labor Low income Middle income High income Least developed developing developed 2
  3. 3. 3  G7 is an exclusive club. (Canada, France, Germany, Italy, Japan, UK and US)  G7, 5.7% world population, produces 22% of global GDP and owns 62% of the global net wealth ($280 trillion).
  4. 4. No knowledge required 10 years of education 20 years of education No economic value Small economic value Large economic value Value of product or service is proportional to the knowledge content. 4
  5. 5. 5 Knowledge intensive R&D/ high-end manufacturing Developed countries Developing countries Labor intensive/ low- end manufacturing Market profit Developing countries are both a source of cheap labor and a market . Labor cost and purchasing power are two opposing factors. Middle income countries are ideal partners because of cheap educated labor and sufficient purchasing power. Developed countries want to keep the developing countries as they are to get cheaper labor and to avoid competition. Cheap labor makes rich countries richer.
  6. 6. iPhone X: Raw material cost $357 Other cost $238 Total cost $357+$238 = $595 ----------------- Apple net profit $992- $595 =$397 (40%) References: https://www.oled-a.org/techinsights-claims-iphone-x- costs-us357-sells-for-us999-november-13-2017.html https://slate.com/business/2012/09/foxconn-getting-by- on-8-per-iphone.html 6
  7. 7. https://slate.com/business/2012/09 /foxconn-getting-by-on-8-per- iphone.html 7
  8. 8. Industrial revolution Year Driven by Major invention Leader 1st 1760 Mechanical energy Steam engine, locomotive, steam boat UK 2nd 1879 Electrical energy Power generator, lamp US 3rd 1947 Computer power Transistor, IC US 4th 2030 Data (digital economy) AI, 5G ?? 8 Economic world order is determined by the technology innovation.
  9. 9. 1960 2008 9 45%5% 45% 5%
  10. 10.  Few developing countries were elevated to the developed countries status in the last 70 years.  Germany and Japan were total destroyed during WWII, and yet they rebuilt quickly to reach the developed status in less than 20 years.  This is because Germans and Japanese still retained the knowhow of building advanced economy.  Most developing economy cannot do so because they do not possess such knowhow. 10
  11. 11.  Internal barriers: Highly educated population Technology Investment Infrastructure, supply chain Government policy (incentives, tax, R&D initiatives , environment for startups, etc)  External barriers: Developed countries are determined to keep the barrier high. International trade rules were set by the developed countries. 11
  12. 12.  Technology is a specialized knowledge. It adds most value to products and services. It differentiates developed countries from developing countries.  There is no apparent difference in the knowledge of other professionals, such as medical doctors, lawyers, economists, etc. between developed and developing countries.  Technology is the monopoly of the developed countries, which have more resources, market share, IP protection, regulation, government intervention, etc. 13
  13. 13. https://brandz.com/Global 14 All these technology companies are in the area of digital technology.
  14. 14. Old way New way 15
  15. 15. 16
  16. 16.  It took Uber only 5 ½ years to surpass valuation of 107 year old General Motor.  In 9 years, WeWork became a $47 b company.  Apple became the first trillion dollar company, followed by Amazon.  Amazon challenges Walmart.  Cambridge Analytica influenced elections in India, Kenya, Malta, Mexico, UK, US and many other countries.  Conclusion: Digital economy is the future… 17
  17. 17. 18
  18. 18.  We are entering the era of 4th industrial revolution.  The major components in the 4th industrial revolution are: ◦ Financial technology ◦ Artificial intelligence ◦ Industrie 4.0 (IoT)  These areas become the fighting ground of the major economic powers.  US, Europe, Japan and China are all putting national resources to develop technologies in these areas. 19
  19. 19.  The economy of countries without all or parts of these technologies will forever be dependent on foreign suppliers, and will become a economic colony.  There is a small window of opportunity during the next decade. 20
  20. 20. Internet, 5G & HPC, Cloud computing Blockchain Fintech Big Data Artificial intelligence IoT/ automation Industrie 4.0 Semiconductor Applications Technology Foundation
  21. 21.  Artificial intelligence will replace large professionals. ◦ Factory of the future will replace workers by robots, and managers and engineers by artificial intelligence.  Disparity between rich and poor will widen.  Disparity between rich countries and poor countries will also widen.  Data will become the most important commodity. 22
  22. 22.  The most important infrastructures for the digital economy are those collecting, transmitting and processing data, such as IoT, Internet, 5G, High Performance Computer (HPC) and Cloud computing.  Semiconductor is the foundation of the above infrastructures. 23
  23. 23.  Moore’s law comes to the end at 3 nm technology, because the law of physics of transistor breaks down.  It is forseen that 3nm technology will be reached in the mid of next decade.  However, the demand of semiconductor will skyrocket because the world volume of data generated explodes exponentially.  Data need to be transferred, processed and stored. All these requires semiconductor. 24
  24. 24.  Semiconductor industry will be separated into foundry (manufacturing) and design.  IC design industry is less capital intensive, therefore, is within the reach of many developing countries.  However, IC design industry requires to be close to the market and highly trained human resource. 25
  25. 25.  Cloud computing is where AI will reside. It becomes the brain of many economic activities.  5G is a must for the transmissoin of quick and large volume of data, which is needed for AI in the cloud to acquire advanced capabilities through deep learning.  While 4G only allows people to people communication, 5G allows object to object communication as well.  This has huge implication because there are more objects than people. 26
  26. 26.  There will be 30 billion IoT/ sensor devices installed by 2020. It will grow to 75 billion by 2025.  IoT will allow objects to communicate to each other and to the cloud, where AI will reside.  5G collects data from objects to form big data.  AI’s deep learning algorithm will predict, prescribe and make decision based on the data, and drive IoT to take action.  IoT and sensors are the point of collection of data and through which AI can act upon the real world. 27
  27. 27.  Not only the industry will be fully automated, but most of the professional services will also be fully or partially automated.  Such an automation will make the economy much more efficient.  Economy which relies on the old way of doing things will be non-competitive, and driven to obliviation. 28
  28. 28.  Digital economy will propel economy to a higher level of prosperity.  Without digital economy, the society cannot compete and is doomed.  By 2030, the new world economic order will be formed based on the digital economy revolution.  Countries fail to develop digital economy will remain as poor country for long time to come. 29

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