Whereas commodity production had been a major economic driver in emerging markets, we think technology is now the leading force.

When it comes to technological innovation around the world, semiconductor production is one of the best examples. Among the semiconductors produced in the U.S., many are analog chips—which are often used for power supplies, sensors and wideband signals (e.g., speech, music and video). Applications for digital chips, on the other hand, include computer processing, data storage, logic functions and information management.

Compared to analog chips, digital chips are generally considered much more technologically advanced—and are largely produced in emerging markets, with the leader being Taiwan. Digital chips are necessary to enable e–commerce, mobile payments, fintech, 5G telecom, health–care advances (e.g., telemedicine and drug discovery), remote learning, online entertainment, artificial intelligence, autonomous machines, self–driving cars, supply–chain management, cloud computing and software–as–a–service (SaaS) applications.


Semiconductors have been around for decades. But many of today’s electronic devices depend on the most technologically sophisticated chips, which are extremely difficult to fabricate. So while oil and other commodities were the key economic “lubricants” for emerging markets in the past, we think advanced semiconductors and other cutting–edge technologies will dominate the landscape going forward.

Some observers of emerging markets may take issue with our comparison of oil to semiconductors. After all, oil has a finite supply while semiconductors theoretically can be improved ad infinitum. But we think the reality is that some semiconductor companies are so far ahead of their competitors that supply is in fact a constraint—and therefore a major investment consideration.


For a better understanding of how emerging markets have been changing over time, refer to Figure 1—which shows the sector weightings of the MSCI Emerging Markets Index in 2000, 2010 and 2020. As you can see, energy and materials rose in importance during the decade ended December 31, 2010 but fell in importance during the most recent decade. Conversely, information technology (IT), communication services and consumer discretionary have seen their roles in emerging markets expand dramatically during the most recent decade. These are the sectors that include, for example, semiconductors, e–commerce and SaaS.

One sector that hasn’t shown as much significance in the Index is health care. But we think this will change dramatically during the coming decade due to the growing utilization of health–care services by people in developing nations and the use of technology to make health care more accessible to these people. For example, China’s Ping An Healthcare & Technology is an online and mobile provider of medical services through the internet–based platform “Ping An Good Doctor.” The platform is used for remote consultations, hospital appointments, health management, wellness services and health–care resource referrals. Ping An’s goal is to improve efficiencies in the allocation of primary–care and hospital resources through the use of innovative technologies including artificial intelligence.

Another example is Wuxi Biologics, which is headquartered in China but operates globally. The company develops antibody drugs and biological medicines and provides value–added services to other pharmaceutical firms. Wuxi has an expanding pipeline of business including involvement in vaccine production for Covid–19.