Transcript
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Speaker: Welcome to this HSBC Global Research LinkedIn Live, looking at disruptive technologies.
Speaker: I'm Piers Butler, Head of Global Research Direct, connecting you to world-class research.
Speaker: I'm thrilled today to welcome our two speakers, Frank Lee, Head of Technology Research in Asia, and David Jost, Thematic Analyst for Disruptive Technologies.
Speaker: So let's start with a sort of quick overview from both our speakers.
Speaker: David, why don't we kick off with you?
Speaker: Can you give us a sort of quick intro into your disruptive technology framework?
Speaker: Yeah, thank you, Piers.
Speaker: So in our HSBC disruptive framework, we have it in five different phases.
Speaker: So the first phase is called the early disruption, which is when essentially where angel investors and venture capitalists get involved.
Speaker: Then we have something called the hype mania,
Speaker: The hype mania is when you get lots of media headlines and people say the technology can solve all the world's problems in one swoop.
Speaker: Then you have the backslash window, which is when the technology fails to materialize and then people say, oh, the technology is completely dead.
Speaker: Then the really important stage you get up into, the Pinal Depart 1, which is the real application stage, which is when slowly the technology moves up the real application phase
Speaker: for listed companies and generate some kind of revenues.
Speaker: Then finally, the most important stage is the new normal.
Speaker: This is when the technology generates significant revenues for the companies and disrupts existing business models.
Speaker: So this framework helps us identify when the disruptive technology is ready for prime development.
Speaker: Thank you, David.
Speaker: That's really a good overview.
Speaker: Frank, perhaps you can give us a sense of how crucial semiconductor chips are to the world of technology and how you keep pace in this fast changing environment.
Speaker: Sure, Piers.
Speaker: I think semiconductors has really been in the focus and attention, especially this year, with the talks of the shortages.
Speaker: I think if you look at why this is such an essential part is that semiconductors is basically the backbone for a lot of disruptive technologies.
Speaker: So we continue to see semiconductor basically in all applications.
Speaker: And more importantly, in a lot of the disruptive technologies that we're looking at, such as the smartphones,
Speaker: and even electric vehicles and going forward AI, this is all going to be powered by semiconductor chips.
Speaker: And so I think when you see that, that's basically going to be a key focus.
Speaker: But as an example is the content growth in autos, for example, in the year 2000, only 18% of the car cost was actually driven by semi-content.
Speaker: But as of 2020, it's now 40%.
Speaker: And then going forward, I think you're going to see this number continue to rise even more quickly, especially with the arrival of EVs.
Speaker: But on the other hand, I also think, you know, why it's in the attention and focus now is because the concentration risk is quite high.
Speaker: So we have basically a few companies that have such a huge market share right now in the overall space.
Speaker: So it shows you that while disruptive technology is, you know, going forward is quite important.
Speaker: It's also heavily dependent on something that they're manufacturing.
Speaker: Thank you, Frank.
Speaker: Quite a few questions coming through.
Speaker: And I guess the direction of some of them relates to, in fact, the title of this LinkedIn, which is disruptive.
Speaker: There is a tendency to look, obviously, at technology developments as being positive, but there are unintended consequences to disruptive technologies, which we ought to consider.
Speaker: Devi, would you like to have a crack at that one?
Speaker: Yeah, absolutely, Pierre.
Speaker: So disruptive technologies are
Speaker: have good and bad effects, particularly from an ESG angle.
Speaker: For example, new connectivity technologies like low-earth orbit satellites can help bridge the digital divide by giving low-cost internet access to rural or emerging markets, where, for example, traditional connectivity infrastructure might be too expensive.
Speaker: Or, for example, disruptive technologies can deliver digital healthcare products low-cost
Speaker: remotely.
Speaker: But however, like you said, Piers, there is an ESG downside to growing devices and data.
Speaker: For example, what about the erosion of personal privacy?
Speaker: And the question is, can this Pandora's box ever be closed again?
Speaker: And the other kind of side is, what about the constant questioning of whether new automation technologies can replace workers, but maybe you can have alternative income models?
Speaker: Frank, from your perspective, perhaps a point on resilience, which is that there's been a lot written about shortages of semiconductor and the impact it's having.
Speaker: Are we getting too reliant on certain aspects of disruptive technology?
Speaker: Yeah, I mean, I think it's quite interesting.
Speaker: We talked about the thing earlier about the semiconductor shortages that we're seeing today.
Speaker: But I think another interesting aspect of this is what's happening in terms of a lot of the geopolitical side now with
Speaker: We've had the last 20 or 30 years of where the efficiencies have been squeezed out of the semiconductor to make things a lot more efficient.
Speaker: But now we're starting to see basically the US, Europe now want to develop their own semiconductor industry.
Speaker: And in some ways, I think what you're seeing now is that it's going to lead to less efficiency in terms of semiconductor industry going forward.
Speaker: And whether that is actually going to have a potential impact on
Speaker: on development disrupt technology is going to be interesting to see.
Speaker: For example, you talked about AI, you talked about autonomous vehicles.
Speaker: These are all going to be powered by high-powered semiconductor chips.
Speaker: But if we're going into a world where it's going to be less efficient and there is a bit more repetitiveness in terms of building duplicate supply chains, does that kind of slow down the pace of technology or disruptive technology?
Speaker: I think that's something that we'll have to continue to see whether that happens.
Speaker: Interesting.
Speaker: No LinkedIn Live on disruptive technology could happen without questions on blockchain.
Speaker: And I guess the question here is, are people too focused on cryptocurrencies and missing the real point, which is blockchain and its impact on industry and how that could disrupt?
Speaker: Davi, what are your thoughts on that?
Speaker: Absolutely, 100% pierce.
Speaker: So at the moment,
Speaker: There's a lot of talk and headlines about cryptocurrencies.
Speaker: But from a sector level point of view, we believe blockchain for industry is also very interesting also.
Speaker: At the moment, for example, we would place blockchain technologies for industry in the real application stage of our framework.
Speaker: So this is where a number of companies are running trials.
Speaker: For example, in the shipping sector, they're using blockchain as part of the
Speaker: eliminating paper process, which means they can streamline paperwork at ports and vessels.
Speaker: And thus, if you do that, if you digitize the paperwork to blockchain, you can potentially save 20% of shipping costs.
Speaker: And Frank, anything you want to add from your side?
Speaker: Yeah, I mean, I think, you know, with the crypto part of cryptocurrency has been in the news quite a bit.
Speaker: But again, this also kind of goes back to a big part of the engine that powers this is also tied into the semiconductor industry.
Speaker: I mean, if you look at, you know, all the chips, that's also one of the biggest demand drivers have been crypto has been driving the semiconductor shortage.
Speaker: Right.
Speaker: So I think it highlights the importance of how pervasive
Speaker: you know, this, this, the semiconductor manufacturing is to all these future areas that we're talking about.
Speaker: Now here's one that is close to my heart and where Devi and I have had many exchanges and conversations and that's virtual reality.
Speaker: And I would have expected with the pandemic for virtual reality to perhaps see more of a growth, more of a development, to be more present.
Speaker: But that doesn't seem to be the case.
Speaker: Is virtual reality going to be a reality, Devi?
Speaker: That's a very good question, Pierre.
Speaker: So,
Speaker: As we've spoken over the years, this generation of virtual reality has been around since 2012, right?
Speaker: So why isn't it mainstream?
Speaker: And one would assume that pandemic stuck indoors would be an ideal time for the inflection point of virtual reality, but this hasn't happened yet.
Speaker: And why not?
Speaker: So many factors include.
Speaker: So for example, the hardware price.
Speaker: So in about 2012, it was maybe in excess of $2,000 to have a VR headset, but now it costs
Speaker: maybe about $300.
Speaker: And so we expect the important things for the prices to fall even further.
Speaker: And the other is the technology itself.
Speaker: So Frank has talked about the silicon on the chips.
Speaker: There's also things like screen technology.
Speaker: For the screen technology to improve so that the digital world looks as real as the real, real world.
Speaker: And also other things like form factor of the devices.
Speaker: Remember, these are things you're wearing in your head
Speaker: So you want them to be light and comfortable.
Speaker: So when all these factors come together, we expect an inflection point going forward.
Speaker: And in the next decade, we expect about annual sales to reach, or total sales, cumulative sales, to reach about 60 to 80 million units worldwide.
Speaker: Now, Frank, it's hard to conceive given the prominence of TSMC, but I was very struck by a comment in the Warren Buffett annual general meeting, which was that he put up these charts showing these tables showing that
Speaker: the top 20 or 30 market caps in today's market, none of them were in the top 30, 20 years ago.
Speaker: And so the point was the major companies today are going to be disrupted and the major companies today are very much in the technology space.
Speaker: How do you see the next 10 or 20, 30 years in terms of technology?
Speaker: Do you have any sort of ideas around that?
Speaker: Difficult question, but, you know, it's coming through.
Speaker: That's actually an interesting question for you.
Speaker: I think, you know, I've seen, I think, a phrase out there that talks about technology itself is not the disruptor, but it's companies that are not customer centric that is a disruptor.
Speaker: So in the case of, for example, if you look at Apple, right, Apple design products were much easier for users to use versus, you know, Windows or traditional handset makers.
Speaker: And that's what enabled to dominate the spaces, both in PC and also now in smartphones, right?
Speaker: I think we talked about VR earlier, just about how come it hasn't really taken off.
Speaker: And part of it is what has Davey has mentioned, you know, it's, it's,
Speaker: The technology, the cost that has continued to improve over time.
Speaker: But I think one thing that perhaps we're seeing is that what's the use case for it?
Speaker: At the end of the day, I think for technology to be disruptive, it's not just about, oh, it's cool, it's new technologies, whether it's going to be useful and that it's going to be practical.
Speaker: And so I think...
Speaker: you know um to your point about you know how them uh how do we look for winners um i think technology is one thing but you also have to understand like you know what's what's the use case for it is there a practicality to it right so i think that's uh and there are things you can identify now and things that maybe i think you know you can't tell right now that only time will tell right i mean electric vehicles was something that you know was been around for a while but it's only uh become the forefront because of tesla right it made it they made it practical
Speaker: And once it became practical, then I think the inflection point usually follows.
Speaker: Just in terms of thinking maybe further out, 10 or 20 years, all today's winners, the sort of Amazons and the Facebooks, if history is any guide, it would say that they're not going to be the ones who are the largest companies in 10 or 20 years time.
Speaker: What is likely to change?
Speaker: I think there was a business analyst called Chris Jensen.
Speaker: And he called it the innovators dilemma.
Speaker: So the whole point is you have companies existing like Amazon, Google, Microsoft.
Speaker: And so the question is that once you become that large, your propensity to innovate becomes less incentivized.
Speaker: So therefore, what happens is new startups come who basically completely renovate or re-innovate the technology stack and sort of disrupt
Speaker: the incumbents.
Speaker: So essentially in 20 to 30 years time, one would expect the history to repeat itself like the past to have completely new technology companies existing and being the major players.
Speaker: David, thank you very much.
Speaker: I think we're up to time.
Speaker: So David and Frank, thank you very much for joining us today on this LinkedIn Live on Disruptive Technologies.
Speaker: If you have any questions,
Speaker: do contact us at the following email address, askresearch at hsbc.com.
Speaker: And don't forget to check in for our future LinkedIn Lives on our key thematic research.
Speaker: Many thanks.
Speaker: Thank you for listening today.
Speaker: This has been HSBC Global Viewpoint, Banking and Markets.
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