Spending: Catching up
APAC firms have been slower to get started with generative AI, but will shrink the gap with companies in the rest of the world in the next 12 months
APAC companies overall have spent $1.4 billion on generative AI in the past 12 months — a sizable sum that’s well behind North American firms but slightly ahead of those in Europe (Figure 1).
However, more aggressive spending by APAC businesses in the next 12 months is expected to shrink the gap with North America and extend the lead over Europe, according to our survey data.
Our research found that APAC companies plan to increase generative AI spending by more than 140% to $3.4 billion in 2024. These investments are well ahead of Europe’s forecasted growth rate of 115% and about double the expected growth in North America (70%).
Figure 1. Generative AI spending by region
Source: Infosys Knowledge Institute
In dollar terms, the APAC region will move ahead of generative AI spending in Europe but still fall well behind North America in late 2024.
But the total spending does not tell the entire story, since APAC companies spent much less as a ratio of the region’s economy.
We compared the APAC, North American and European ratios of spending to GDP, and we found that if APAC companies had spent the same amount compared to their GDP, they would have spent about $4 billion this past year, more than North America’s $3.3 billion. APAC’s parity spending would also be nominally higher in 2024: $6.7 billion vs $5.6 billion in North America.
Looking at the countries individually, a more nuanced picture emerges. China — as might be expected, given its highly developed and mature technology sector — is the region’s leader (Figure 2). APAC companies expect to increase their generative AI spending to more than $2 billion in the next year, or more than all of Europe’s spending on this technology in the past year. China’s projected $2.1 billion in spending in 2024 would be a 161% increase.
Generative AI Radar: APAC
Figure 2. Spending on generative AI by APAC country
Japanese companies also expect strong growth (116%) in generative AI spending, from $334 million in 2023 to $720 million in 2024. And India, which is jostling to establish itself as an AI leader, is also set to boost spending substantially. We estimate that generative AI spending by Indian companies will increase by nearly 165% to $386 billion.
South of the equator, we see a clear focus on generative AI even though the sums spent are smaller. The Australian government is backing tech investment through its Digital Economy Strategy, which includes a AU$124.1 million AI Action Plan that aims to position the country as a global leader in this technology by 2030. Overall, generative AI spending by Australian companies is expected to increase by more than 150% in 2024, to $142 million.
Similarly, companies in New Zealand also expect to boost their spending, although from a low base. Firms in New Zealand spent $4 million on generative AI in 2023, and we see that growing by 125% over the next 12 months.
It is worth noting that APAC countries — with the exception of China — had delayed access to generative AI technology as a result of the global shortage of GPUs that drive AI computing power. This chip scarcity slowed in-house development by firms that prefer not to send corporate data to the cloud for processing. For those in the southern hemisphere that did use cloud AI, the regional imbalance caused latency issues since they had to rely on servers in North America. These factors likely explain why spending in Australia and New Zealand trails others in the region.
However, coming later to the technology, APAC countries are arguably well poised to benefit from the lessons learned from other regions that have been more enthusiastic in their approach. For instance, our analysis shows that ANZ companies generally spend on AI more efficiently and create more business value than most countries in Asia, Europe, and North America.
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