Page 40 - bne IntelliNews monthly magazine October 2024

40 I Cover story bne October 2024
Top ten countries patent filings 2019-2023
China has dominated IPO activity globally, especially with its STAR Market and other tech-heavy exchanges. In 2023, there were 42 IPOs concentrated in tech hardware and services. The market saw valuations increase dramatically due to the sheer scale of listings, and in 2023 alone, China raised $45.3bn through IPOs, contributing to its robust tech sector growth.
The US tech ecosystem is much more mature than China’s with a lot more companies coming to market. There was a boom in tech IPOs in 2021,
with a record-breaking 126 tech IPOs. However, market conditions in 2022 saw a dramatic slowdown, with only 6 tech IPOs and a slow recovery in 2023 with major listings like Arm and others boosting confidence. Total funds raised through IPOs in the US in 2023 were approximately $17.57bn.
Europe is the laggard. The European tech IPO market is much smaller and any really successful venture usually chooses to list in the larger and more liquid New York market. In the peak year of 2021 there was an average of about 5 IPOs per month and companies like UiPath raised billions of dollars. The total market capitalisation for major European tech companies that went public in recent years is estimated at around €7.5bn.
But the pipeline in the US for more valuable tech IPOs is healthier than in China. As of 2024, the number of tech unicorns (privately owned companies valued at more than $1bn) in the US is the highest globally, with 720. China is in second place with 317 unicorns and
particular is rapidly catching up, and in some places has already overtaken Europe.
From the world’s 100 most valuable tech companies the US accounts for about 60% and includes such household names like Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta and Tesla, a few of which are worth over $1 trillion. US tech firms are much more profitable and are ten times the size of European tech firms.
Coming later to the game, China is in second place with around 15-20% of the top 100, including major companies like Tencent, Alibaba and PDD Holdings (Pinduoduo).
The EU holds about 5% of the top 100 but has some notable names like ASML from the Netherlands and SAP from Germany, which are both also in the world’s top 20 most valuable global tech companies. Taiwan-based Taiwan Semiconductor Manufacturing Company (TSMC) should also get a special mention, as it dominates the world of very small and highly sought after microchips.
“European firms are smaller and less profitable than US ones. Europe's lacklustre productivity growth and
low R&D expenses mean EU firms
are lagging behind US peers. The gap with US is most striking among tech firms, which are twice as profitable and ten times bigger in US,” says Agathe Demarais, a columnist at Foreign Policy.
China has been pouring money into R&D to close the gap with the US and has already managed to overtake it in
Rank
Country
Number of Patents Filed (2019–2023)
1 2 3 4 5 6 7 8 9 10
China 6,900,000+
United 2,700,000+ States
Japan 1,900,000+
South 1,400,000+ Korea
Germany
European Patent Office
India
Russia
France
United Kingdom
700,000+
600,000+
500,000+
400,000+
300,000+
250,000+
Source: World Intellectual Property Organization (WIPO) and other patent offices
joint public investment in breakthrough technologies, to removing barriers to scaling up for innovative companies,
to investing in computing and connectivity infrastructure to lower
the cost of developing AI,” Draghi said. “A weak tech sector will not only rob
it of the growth opportunities of the coming AI revolution. It will also hinder innovation in a wide range of adjacent sectors – such as pharmaceuticals, cars and defence – where integrating AI into operations will be critical for the EU to remain competitive.”
Draghi focused on the competition between the US and Europe in his report, but it is the emerging markets that are the real competition. And Draghi is right: the only place Europe can compete, given its fixed material and power costs, is on productivity – labour is by far the biggest contributor to unit costs. Staying ahead in the technology race is the key to keeping Europe competitive.
Over the past three years, the number of tech IPOs in the US, China and Europe has been very varied.
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“European firms are smaller and less profitable than US ones”
the EU is a distant third with around 100 unicorns across the various member countries: UK (53), Germany (30) and France (26), according to PitchBook.
Europe has fallen badly behind the US in the technology race, while China in
several sectors. Ford CEO Jim Farley travelled to China with his CFO John Lawler in 2023 for the first time since the pandemic. They tested an electric SUV from their Chinese joint venture partner Changan and after thrashing it around a test track, Lawler turned to his