DIGITAL GLOBALIZATION: A NEW ERA OF GLOBAL FLOWS April 2016
Has globalization stalled? Flows of goods, services and finance, 1980 2014 $ trillion, nominal; % of GDP Finance Service Goods All flows as % of GDP 53-14 p.p. 39 31 26 6 12 5 3 14 19 1980 1990 2000 2007 2014 SOURCE: UNCTAD; IMF Balance of Payments; World Bank; McKinsey Global Institute analysis McKinsey & Company 1
All forms of goods trade have flattened since the Great Recession Value of goods trade, 2002 14 % of world GDP Processed and raw materials Intermediate goods Finished goods 12 11 10 9 8 7 6 5 4 3 2 1 0 2002-1.1 08 2014 Trade value $ trillion 12 11 10 9 8 7 6 5 4 3 2 1 0 2002-0.4 08 2014 12 11 10 9 8 7 6 5 4 3 2 1 0 2002 08-0.5 2014 4.6 6.1 8.5 SOURCE: IHS; UNCTAD; McKinsey Global Institute analysis McKinsey & Company 2
Growth in global consumption has exceeded increase in trade for many goods categories, suggesting localization of production Growth of global consumption vs. growth of trade CAGR of trade (2011 2014) 5 4 Goods categories where trade growth trailed consumption Apparel 3 2 1 0 Others Machinery Transport Equipment Chemicals -1-2 -3 Mineral fuels Metals -3-2 -1 0 1 2 3 4 5 CAGR of consumption (2011 2014) SOURCE: ITC; IHS; UNCTAD; World Bank; McKinsey Global Institute analysis McKinsey & Company 3
By 2025, 3D printing could displace some trade in manufactured goods Examples of 3D printing Maersk Tankers Parts for its tanker vessels eliminating costs of warehouse and packing, airfreight to the port, customs clearance and chartering of the delivery ship GE Aviation Fuel nozzles for the new Leap engine that are five times the lifespan and weigh about 75 per cent less The US Navy Oil caps, drain plugs and even drones The US Army Mobile production facilities to manufacture parts in the combat zone Field Ready Medical disposables in Haiti to reduce procurement costs and transport time SOURCE: McKinsey Global Institute analysis McKinsey & Company 4
Cross-border data flows are surging and connecting more countries Used cross-border bandwidth Size of bubble represents intraregional used bandwidth Regions NA United States and Canada EU Europe AS Asia LA Latin America ME Middle East AA Africa OC Oceania Bandwidth Gigabits per second (Gbps) <50 50 100 100 500 500 1,000 1,000 5,000 5,000 20,000 >20,000 2005 2014 1 100% = 4.7 211.3 Terabits Tbps per second (Tbps) 45x NA NA EU EU AS AS ME ME LA LA AA AF OC SOURCE: TeleGeography; McKinsey Global Institute analysis McKinsey & Company 5
Digital constitutes a significant share of other types of flows Share of selected cross-border flows that are digital, 2014 % 12 50 50 54 46 88 Goods Services Calls SOURCE: AliResearch; TeleGeography; UNCTAD; McKinsey Global Institute analysis McKinsey & Company 6
Digital technologies are transforming global flows in three ways Online platforms Active users on select platforms In millions, 4Q 2015 or latest available Digital goods Digital wrappers Facebook Youtube WhatsApp WeChat 650 Alibaba 407 Instagram 400 Twitter 320 Skype 300 Amazon 300 PayPal 179 ebay 162 LinkedIn 100 1,000 1,000 1,590 SOURCE: Facebook, Twitter, Freelancer, Upwork, Mashable, Fortune, Statista, McKinsey Global Institute analysis McKinsey & Company 7
Nearly 1 billion online shoppers will spend $1 trillion in crossborder commerce by 2020 Cross-border Domestic Forecast Global B2C e-commerce transaction volume $ trillion Global B2C e-commerce shoppers Billion +27% p.a. 1.9 1.6 0.3 0.2 1.4 1.6 2.2 0.4 1.8 2.5 0.5 1.9 2.8 0.7 2.1 3.1 0.8 2.2 3.4 1.0 2.4 +21% p.a. 1.5 1.3 0.4 0.3 1.0 1.1 1.6 0.5 1.2 1.9 1.8 0.7 0.6 1.2 1.2 2.0 0.8 1.2 2.1 0.9 1.2 Crossborder % of total 2014 15 16E 17E 18E 19E 2020E 2014 15 16E 17E 18E 19E 2020E 15 16 18 21 24 27 29 23 25 28 33 37 42 45 SOURCE: AliResearch; McKinsey Global Institute analysis McKinsey & Company 8
Instead of waiting for benefits of globalization to trickle down, SMEs can go global on their own Number of SMEs on select platforms 50 million 10 million 2 million SOURCE: Facebook; Amazon; WSJ; McKinsey Global Institute analysis McKinsey & Company 9
Global flows have increased global GDP by 10 percent over the last decade, worth at least $7.8 trillion +$7.8T Increase in world GDP from flows a 10% lift +$2.8T Increase in world GDP from crossborder digital flows +$2.6T Increase in world GDP from goods trade SOURCE: McKinsey Global Institute analysis McKinsey & Company 10
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