The Covid pandemic ushered in and accelerated many areas of technology.
Transactions, services, and our general way of life had to quickly adapt to the contactless (read: online) mode of things. Technologies such as video conferencing became the new norm and made life smoother despite the friction created by the pandemic. E-commerce saw an inevitable sharp rise, and more opportunities for growth and innovation presented themselves.
The HSBC Disruption Framework revolves around this context. It aims to visualize where we are headed (what’s in store, what ideas work, and what don’t) as HSBC zeroes in its evaluation on four key areas: connectivity, automation technologies, experiential infrastructure, and digital health infrastructure – all while taking ESG into serious account every step of the way.
Over the last decade, the rise of cloud technologies has led the pack in digitization and disruption. But though it may seem like practically everything now runs through the cloud, only 30% of software resides in it, leaving a 70% upside. Moreover, notwithstanding the prevalence of cloud computing, there still is a significant underspending in cybersecurity. HSBC forecasts cybersecurity spending to shoot up to $350 billion in annual spend come the mid-2020s.
To support growth in disruptive technologies, people must be online and have access to ways of staying connected all the time. Pandemic or not, only 50% of the global population has online access. Of those not online, 10% reside in areas outside 3G/4G/5G connectivity spaces, where traditional physical internet infrastructures are impractical for existing telcos to build. As a result, internet growth took on a slow pace in the past decade. This is a genuine concern as internet connectivity and bridging the digital divide have taken center stage in ensuring global growth of disruptive technologies–and the greater landscape of industry–can be supported.
That is where space internet comes in as a potential solution to the current disconnect. The number of Low Earth Orbit (LEO) satellites being launched by SpaceX has increased rapidly in recent years, with the aim of connecting the rest of the world. LEOs used to cost $400-$500 million each to create and launch and had to be launched 32,000 kilometers into space. Now, with the utilization of reusable rockets, the cost of creating and launching LEOs has dropped to half a million dollars or even less. They also weigh much less than their earlier iterations. They weigh 150kg and only need to go up 1,000 kilometers into space.
These advancements are nothing short of a remarkable feat. Imagine internet connectivity beaming into pizza-sized receivers in even the world’s most remote areas, independent of physical internet infrastructure. The ultimate vision is to be able to launch and re-launch a satellite within a mere few hours of each other. When this point is reached, connectivity will be as seamless as rivers flowing into sea.
Another issue in connectivity is the well-reported global chip shortage. With the shortage, where might chip demand originate in the future? Over the next few years, HSBC foresees the demand for chips to come from virtual reality headsets, as discussed in greater detail below.
In terms of e-commerce, retail penetration of online commerce saw an unprecedented peak during Covid. Even though online commerce has been around for a long time, it remained at single-digit penetration of retail pre-Covid era.
The pandemic triggered more widespread adoption of online selling and shopping, shooting up the e-commerce penetration rate from 9-10% pre-Covid to 20-30% at the height of the pandemic. Global economists are now predicting that in more developed markets (DMs), e-commerce will reach 50% penetration of the retail market by the end of the decade. Simply put, there remains a massive upside. It is likely we will start to see a more prominent exodus from physical retail stores towards an emphasis on strengthening online storefronts in the next few years.
Subsequently, the pandemic has brought much-needed improvements in the e-commerce space, especially with regard to logistics. Warehouse automation is the next frontier. Presently, only 5% of warehouses are fully automated. Technologies in logistics, such as robotics and computer vision, are therefore expected to play a significant role in expanding warehouse automation. The immediate goals are straightforward: how to improve customer experience, achieve same-day or instant deliveries of products, and streamline logistics – just some of the major pain areas of e-commerce.
Which brings the conversation to 3D printing. It goes without saying that the pandemic has tested how resilient our global supply chains are. While 3D printing has been around for some time, it has primarily been used for prototyping. More and more companies are looking into the potential of 3D printing as a means to localize manufacturing and streamline international supply chains. This, if realized, will not only disrupt global trade but will quite assuredly be ESG-approved as it can potentially save over 7% of carbon emissions across various global industries.
Another aspect that the pandemic has put on high gear is the world of gaming. Now more than ever, gaming is more than just gaming–it has become a typical social activity in the New Normal and, thus, a key area of growth. Adoption is high and sustained, and this trend is expected to stick and provide a playground for growth and innovation into the next several years and decades.
And then there’s blockchain technology. Many discussions have revolved around the different types of blockchain applications, from provenance-keeping to cryptocurrencies. Regardless of how you view blockchain technologies, one of the ESG issues being raised is that decentralized ledger technologies (DLTs)–in the way they are currently designed–consume large amounts of energy, as opposed to current dominant centralized systems.
A secondary curiosity is whether quantum computing advancements will break blockchain alongside the typical encryption technologies used today. Virtual private networks (VPNs) and RSA public-key encryption technology are all made possible by the prime number theory. As quantum computing makes it very easy to refactorize, if quantum computing came out today, most of the existing encryption technologies we have now would be rendered moot.
There are, however, other existing technologies that can be used for security and encryption. One-time pad (OTP) encryption, for one, is a technology developed for a post-quantum computing world. These innovations and other security concerns are worth watching out for as the post-quantum computing world evolves.
As mentioned, video conferencing has allowed society to function smoothly during the pandemic. Of course, comes the next question, what’s next for this platform? The next logical step involves a combination of virtual and augmented reality (VR/AR). Right now, one of the challenges in expanding VR/AR is price compression. How can hardware become cheaper and more accessible to more people? This also necessitates the upscaling of digital content for VR/AR platforms. In this regard, we can expect to see several millions of units in the heads and hands of consumers by the middle of the decade. For its sheer size alone, China is expected to make up a substantial portion of the consumer market for VR/AR.
Another case in the push for AR headsets is Microsoft’s HoloLens. There is much buzz about Microsoft’s signing a contract with the US military for the procurement of thousands of these headsets. So despite the steep price point ( around $2,000 per piece) Microsoft has successfully created a market for these devices while going through the usual industry rounds.
Education is also spending big on this technology. If there is a value proposition for VR headsets for every student in school–perhaps to expand remote learning and experiences with significantly reduced risk–then this is undoubtedly another potential and lucrative area for growth. Presently, AR/VR is still in the Real Application phase of the disruption framework. Herein lies the delicate balance needed between consumer and industrial markets, and it’s interesting to watch AR/VR’s journey and see whether its applications are close to inching over to the New Normal phase.
As expected, there are some privacy concerns which have created a bit of a Pandora’s Box scenario. Data privacy and usage, as VR/AR becomes widely used, is currently a sore point of discussion, with consumers potentially becoming a commodity in this system. Presently, smartphones have allowed the use of data voluntarily put by users in digital form. With VR, this concern is taken a step further. VR headsets typically have 4-5 cameras. When you use it, it needs to gather location and spatial data to track and digitize your 3D space. The question now is, how will data be used? What are the safeguards for privacy in this setting?
Many companies have said that they store data on the device locally and do not send these back to servers for mapping analysis. But models change all the time. A concern raised is the possibility of using this data in the way current technologies use all information presently provided by users with consent. If, for example, a VR headset detects certain products in your home, might it be an opportunity to develop upsells? What are the ethical considerations in this area of innovation and growth? All are excellent questions, with no answers as of yet.
Digital Health Infrastructure
Digitization naturally helps scale services to make them more available and accessible for a wider range of people. However, digital health digitization has traditionally lagged in the acceleration of tech innovation and the pandemic only called more attention to areas of improvement.
The biggest takeaway for digital health infrastructure from the pandemic? It is absolutely imperative to scale services for healthcare and the time is now. Healthcare costs have increased and continue to rise in terms of the percentage of nations’ GDPs. The gap in physician-patient ratio continues to widen as it is challenging and time-intensive to train medical doctors and specialists. This divide is further highlighted as aging populations have seen an increase in the last decade. These, among other problems, call for more aggressive digitization of digital health. AI, telemedicine, and remote medicine have already proven instrumental in keeping everyone healthy and well into the next decade.
Genome sequencing is an area that has seen rapid growth in research and application in the last several decades. Still, the innovations have not made it into retail markets, wherein lie significant benefits to global health. Today, doctors diagnose illnesses based on symptom perception and analysis, compared against median data and experience. They then match these symptoms to medication that has proved best effective based on the same data and experience and what has been typically taught in school and used in practice. Genome sequencing allows for the prescription of bespoke medicine–specific diagnoses based on individual physiology, prescription of the exact medicine with exact dosages–all for better outcomes. Bespoke medicine via genome sequencing is the next chapter for global health innovation.
Thankfully, genome sequencing is not as costly as it once was and the work to bring genome sequencing into the retail side of global health is a constant thrust. At the beginning of 2001, the price of sequencing a single human genome was $100 million. Today, some companies estimate the costs to be under $1,000, while some companies in China attest that it costs them less than $100 to sequence a human genome. The advancement of genome sequencing has impacted global healthcare, especially during Covid. When the MERS virus broke more than a decade ago, it took society more than three months to sequence its genome. Recently, it took academics three days to sequence Covid-19. Because of this, researchers were able to analyze data much faster.
One of the reasons for the proliferation of Covid vaccines is precisely because of this quicker-than-Moore’s-Law growth of genome sequencing. In terms of genome sequencing, we can expect to see progress in what we call the Global Next Gen Sequencing market.
In our series, The Edge of Disruption: Tech, Digital Finance, Hydrogen and Carbon Capture, HSBC’s award-winning analysts lead four 45-minute briefings on emerging disruptors in tech & telecom, digital finance, hydrogen, and global decarbonization, and their impact potential across the market. Gain access now to key insights into emerging disruptors affecting the market.