FAST GROWING INDUSTRIES

fast growing

Introduction

A growth industry experiences a higher-than-average growth rate when compared to other industries within the economy. Growth industries are often associated with:

  1. new or pioneer industries that did not exist in the past
  2. consumer demand for existing, and the new products or services offered by the firms within the industry (e.g. wellness products demand from China)
  3. government policy, or changes in government policy in relation to taxes and subsidies within a particular sector of the economy, mandatory requirements for specific good & services
  4. a fall in the exchange rate, making an industry more internationally competitive, e.g. tourism
  5. industry restructuring and consolidation.

Some industries, such as computer systems design, have been consistent performers in recent years, but others, such as mining & resources industry, are clearly cyclical. Industries connected to computer systems design (programming, systems integration, facilities management) have grown at mid- to high-teens percentages since 2010.

High growth industries equal high growth companies and high growth equals high uncertainty. There are similar challenges in all high growth companies that relate to scaling a business — from cash flow issues to retaining top talent, to the temptation to depend on one large client.

China

With a population of 1.4 billion people, China is the world’s 2nd largest economy with a GDP in excess of USD10 trillion annually. China’s major export markets are the US and Japan. It is strongly linked to the growth opportunities in those country’s industries.

High growth industries in China include:

  1. Food & beverage
  2. Healthcare
  3. Private education
  4. Environment & pollution – Clean technology
  5. Cloud computing
  6. E-commerce
  7. Telecoms
  8. Development of a myriad of new technologies.

The big new trend in China is a race to develop alternatives to the fossils fuels which are choking the dragon in what has been called the airpocalyse. The China government is throwing large sums of money at the pollution problem and its industry is running with it. Coal is by far the dominant energy source in China, accounting for around 68% of total primary energy consumption in 2012. China’s State Council plans to spend 1.75 trillion Yuan (around USD277 billion) between 2013 and 2017 to combat air pollution.

Reports of deteriorating air and water quality in China’s big cities have also led to the increasing regulation of high-polluting sectors and strong growth in environmental protection related industries, such as energy-efficiency consulting, pollution treatment equipment manufacturing, environmental monitoring, and water pollution control.

In finance, there is no other trend as powerful as that of Chinese money going abroad. China has invested in at least 70 countries, and this is likely to multiply over the next decade. China will play an ever-larger role in financing of new technology, mining & resources, traditional and new energy sources, agriculture, healthcare & biotech, as well as building and operating infrastructures. This will happen not only in the developing world, but also in the developed world, where infrastructures are crumbling. An increasing number of Chinese construction companies will play a role internationally.

Japan

Japan is a technology powerhouse, a proving ground for consumer goods and services, and in the social and commercial vanguard of developed market demographics. Further, Japanese companies are also major investors in countries such as the US, China and Australia.

With a population of 127 million people, Japan is the world’s 3rd largest economy with a GDP of USD6 trillion annually and is able to do so with its mastery of manufacturing and an investment infrastructure that is unparalleled. Japan’s major export markets are the US and mainland China. It is strongly linked to the growth opportunities in those country’s industries.

The main power behind Japan’s economy is its manufacturing industry. Japan is world renowned for being at the forefront in certain industries technologically. The areas where Japan enjoys the most success are:

  • Consumer electronics (Televisions, Mp3 players, DVD players)
  • Automobile Manufacturing
  • Semiconductor Manufacturing
  • Optical Fibres
  • Optoelectronics
  • Optical Media
  • Copy Machines

This also includes Japan’s role in Big Data.

Japan’s manufacturing industry is positioned as a centre for domestic research and product development, as well as a manufacturing location for high-level components and products. Japan continues to accumulate both employment and technical ability so as to continue to provide high added value.

Driven by the urgency of energy security and the energy crisis that followed the Fukushima disaster, clean energy has become a top priority among Japanese policymakers. While the future of nuclear power is subject to debate, it is certain that clean energy sources will continue to be a focus in Japan. Clean technology is not a new area for Japan, as companies in Japan have been developing solutions since the 1970s.

The most dynamism and growth in clean energy in Japan is currently to be found in the renewable energy market. As Japan lags behind in renewable energy generation as compared to other developed countries, high growth can be expected. In the near future, the FIT is set to continue and diversify to include a separate tariff for offshore wind

Also, Japan is a leader in the development and manufacture of lithium ion batteries for the hybrid and EV market.

South Korea

Korea’s electronics capabilities in the past 25 years have undergone remarkably consistent and rapid expansion in terms of

  1. size and capacity of facilities
  2. technological expertise and sophistication, and
  3. income earned and impact on the world market.

Korea has built and is continuing to build a stand-alone capability in a broad range of electronics’ technologies, including DRAM, SRAM, and ASIC design approaches; electronics materials and packaging; and development of key new information technology products (e.g., displays). The nation’s strategic focus is on achieving dominance not only in the production and manufacture of electronics products and components, but also in the creation and innovation of new technologies in the field. Korea is determined to remain internationally competitive in electronics in the long run and is prepared to commit the required long-term financial and logistical resources to achieve its goals.

With 50.8 million people, and as the world’s 11th largest economy with a GDP (PPP) of USD1.561 trillion in 2015, South Korea has experienced huge economic growth from the early 1960s to the 1990s. Development in the industrial and manufacturing industries contributes to the growth of South Korea’s economy, and is the major growth engine for its export-orientated economy.

The ruling Saenuri Party will seize a majority in the April 2016 parliamentary election. The president, Park Geun-hye, will retain her position until the 2018 presidential election, but her policy focus will shift from trying to facilitate a structural change in the economy and reduce its dependence on the external sector to strategic international diplomacy. The economy will grow by 2.7% a year on average in 2016-20 but is vulnerable to weakening GDP growth in China.

Over the years of economic progress, South Korea has transformed its economy from one which is labour intensive to one which is more capital and technology-orientated. Today, South Korea boasts as one of the top players in the electronics, automotive, telecommunication and shipbuilding industries.

Rice is the most important agricultural crop of South Korea. It made up 90% of the total grain production, and supplies over 40% of the farmers’ income. However, rising farmers’ wages and land values have made rice costly to produce. With 16.58% of arable land, South Korea’s agriculture is also responsible for the production of crops such as barley, vegetables, fruits and production of cattle, pigs, chicken, milk, eggs and fish.

The industry of South Korea contributes 39.4% of the country’s GDP. The industry and manufacturing industries were the major growth engine for South Korea during its economic progress in the 1980s. South Korea’s largest industries are electronics, automobiles, telecommunication and shipbuilding.

Electronics boosted the South Korean economy in the 1980s, by becoming the world’s sixth largest manufacturer of electronic goods such as colour televisions, microwave ovens, radio, watches and personal computers. South Korea is also a major manufacturer of semiconductors, with Samsung Electronics and Hynix Semiconductor the global leaders in the production of memory chips.

The automotive industry also plays a major role in the South Korean economy today. It has grown into one of the world’s largest automobile producers, coming in 5th after the United States and Germany, with an estimate of 4.27 million automobiles produced a year. Some of South Korea’s international automobile brands include Hyundai, Kia and Renault.

From a slow start of two million subscribers to a current high of 40 million, the mobile telephone is the fastest growing area in telecom, going beyond the 20 million fixed lines serving a 40 million-strong population. South Korea has 41.4 million internet users. South Korea also has the highest number of broadband users in the world. The presence of one of the fastest broadband networks in the world also permits e-commerce to grow.

South Korea is a global player in the production of ships, with a large share of the global shipbuilding market. Four of the world’s largest shipbuilding companies are from South Korea – Hyundai Heavy Industries, Samsung Heavy Industries, Daewoo Shipbuilding & Marine Engineering and STX Offshore & Shipbuilding. Europe’s largest shipbuilder, STX Europe, is also owned by South Korea.

Services in South Korea contribute 57.6% of the nation’s total GDP, and employs 68.4 percent of the workforce. The government shifted its focus from manufacturing to services in 2009, and experts predict that the services will become a driving force in South Korea’s economy.

Australia

With a population of 24 million people, Australia is the world’s 13th largest economy with a GDP of USD1.2 trillion annually. That’s a 3.3% average GDP growth rate per annum from 1992 to 2015.

Australia’s economic resilience and potential provide a safe, low-risk environment in which to do business. The country’s economy is rated AAA by all three global rating agencies and is forecast to realize average annual real GDP growth of 2.9% between 2016 and 2020.

The Australian economy is:

  • the world’s 12th largest
  • in its 25th year of uninterrupted annual growth
  • supported by high productivity levels, with 15 out of 20 industries rating above the global average
  • an important contributor to five sectors expected to drive future global growth: agribusiness, education, tourism, mining and wealth management
  • home to the largest pool of funds under management in the Asian region.

Australia is also a major regional financial centre and a vital component of the global financial system.

Australia’s advantages are:

  1. an educated and innovative society
  2. world-class resources in land, minerals and energy, as well as ocean resources
  3. close proximity to the world’s fastest-growing markets in Asia
  4. use of English, the world’s business language
  5. a temperate climate with a developed agricultural industry
  6. well-understood tax and regulatory regimes.

Healthcare, medical research, alternative (clean) energy development (including the development of clean coal technologies), IT technology development, agribusiness, food processing and mining & resources are the growth industries of the future.

Healthcare is a major sector, including residential aged care, retirement living and leisure, community and personal care, and preventative health and wellness), but also the digital delivery of health (Australia already delivers health care to remote locations nationally).

Digital innovations are transforming the economic landscape, far more profoundly than other big shifts in economic history, including events such as deregulation, oil shocks or mining booms. However, digital solutions will reduce barriers to entry, provide better access to data (including health data used for better health service) and will open new doors.

Whilst Australia’s economy is dominated by its services sector, its economic success is also based on an abundance of agricultural and mineral resources. Australia’s comparative advantage in the export of primary products is a reflection of the natural wealth of the Australian continent and its small domestic market.

GC Partners Asia Capabilities

  1. GCP is uniquely positioned and committed, with experienced tertiary qualified bi-lingual staff, to provide investment banking, corporate finance and advisory services to companies involved in high growth industries and corporations.
  2. Over its 27 years of operations, GCP has worked with 100s of companies to assist promoters source finance and assistance for projects along the entire value chain, from R&D to production. This has provided an invaluable and practical insight into the dynamics and management of fast growth industries and companies, along with their financial strategies and needs, and how best to assist them.
  3. We act for private companies and companies listed on the AIM (London), and ASX stock exchanges. Being located “on the ground” amongst the key Asian markets, GCP is attuned to the local business conduct, processes & culture, news flow, corporate announcements, government policy and economic initiatives. Combined with regular contact and our long standing relationships with key industry participants, this equips us to best understand the demand and potential for corporate equity investment, sources of project equity & debt, joint ventures, R&D collaboration and for customer acquisition.
  4. With Australia’s proximity to the key Asian markets, and combined with GCP’s strong differentiation, we are able to assist a variety of high growth enterprises with their financing requirements. These enterprises will have businesses or projects along the full value chain, from conceptualization and R&D, to full commercialization including development & production financing. GCP can also assist with market entry research and strategies.
  5. With over 27 years of operations GCP has assisted promoters of projects globally. These included mobile cellular distributors and retailers, satellite and cable TV developers, software developers (including receiving the COMPAQ computer award for best software company in 1997 – GCP was a founding shareholder in the company), computer hardware and software distributors, web hosting and development companies, internet service companies, content developers, the largest e-payments system in SE Asia, database management software development, data centre operators, telecommunications companies (including being the advisors to the successful applicant for Australia’s 100th telecoms license), Wi-Fi developers and operators, and a variety of others companies in various industries.