For decades, investors evaluated emerging economies according to what they extracted or assembled, rather than how much value they added to what they produced. That distinction was the dividing line between developing and developed markets.
It makes less sense today.
Emerging countries’ progress along the global value chain is obvious on two fronts. To begin with, commodity producers such as Chile, Brazil and Indonesia are capturing more industrial value from their natural resources by expanding into processing and manufacturing.
Then, there’s technology: China and other Asian economies are leapfrogging their Western counterparts to establish global leadership in higher‑value sectors such as technology and healthcare.
This has important economic consequences. By expanding domestic production and by increasing exports of higher-value goods, EM countries can reduce their current account deficits and reliance on volatile foreign capital flows.
There are significant investment implications, too. EM firms can now retain a larger share of the profits generated by global supply chains. It represents a long-term shift that is not yet fully reflected in EM equity valuations, creating opportunities for investors to capture structural growth through emerging stocks.
Beyond mining: extracting more margins
EM commodity producers have historically specialised in lower-value, upstream activities – digging minerals out of the ground and exporting them in raw or equivalent form. While this model delivered growth, it left the most profitable parts of the value chain to downstream specialists – particularly advanced economies with industrial scale, sophisticated infrastructure and technical expertise.
But this is changing. EM producers are increasingly seeking to extend their influence along the global value chain, converting raw materials into refined inputs and intermediate products that command higher profit margins. This includes processing nickel into battery precursors, or intermediate materials used to produce the final components of a battery, lithium to cathode materials, or iron ore to pellets and specialty steel.
Take Chile. The world’s second largest producer of lithium, a critical input for electric vehicles (EV) and energy storage systems, is moving beyond extraction towards domestic refining and downstream battery materials under its 2023 National Lithium Strategy.
Mining typically accounts for just 5-10% of the total cost of a finished battery pack. The remainder comes from refining, cathode and anode materials, electrolytes and separators, cell production, pack assembly and end-of-life recycling. Each step requires technical know-how and infrastructure – and therefore generates far greater value than mining alone.
Eventually, Chile wants to refine all locally-mined lithium. For producers such as SQM, one of the world’s largest lithium companies, this shift opens the door to high-margin activities further downstream.
Projected gross revenue from the development of battery supply chain industries to meet the demand for LFP batteries in Latin America
Notes: Cathode material production includes non-lithium material costs. Costs are estimated in 2025 US dollars, unadjusted for inflation. Source: International Council on Clean Transportation
Other mining giants are pursuing a similar strategy to gain more strategic control and profits.
Vale, the world’s largest iron ore producer in Brazil, now produces quality pellets with renewable energy sources.https://vale.com/w/vale-makes-pellets-using-renewable-energy-sources-for-the-first-time It is also moving into shipping and logistics to tighten control over the entire supply chain from extraction to delivery.
Indonesia, the world’s largest nickel miner, is developing a global hub for refined nickel and EV battery minerals, bringing downstream processing capacity such as smelting and high-pressure acid leach onshore in a move that is expected to generate more than half a trillion dollars of investment opportunities between now and 2040.https://plus.reuters.com/indonesias-half-trillion-dollar-move-up-the-value-chain/p/1
Tech: the leapfrogging opportunity
If commodity exporters are trying to process more, non-resource economies are exporting more of what they excel at: technology.
China, Korea and Taiwan are at the forefront of this shift. The North Asian tech powerhouses are fast catching up with, and in many cases leapfrogging, Western countries in exports of specialised technologies such as semiconductors, robotics, batteries and EVs.
This leapfrogging – where economies skip intermediate stages to adopt cutting-edge innovations and gain competitiveness – allows late entrants to capture dominant positions in emerging sectors without the burden of legacy systems. For investors, it helps identify where future growth and market leaders are likely to emerge.
A recent AI-driven rally has pushed the shares of companies such as Taiwan Semiconductor Manufacturing Company and South Korea’s Samsung Electronics and SK Hynix – among the most high-profile winners of the tech trade – to record highs.
This is more than a short-lived boom. Asia’s innovation is creating a deep pipeline of soon to be listed technology companies.
Rich IPO pipeline
There are reasons to believe that this is more than a short-lived boom. Asia’s innovation is creating a deep pipeline of soon to be listed technology companies.
Hong Kong is among the biggest beneficiaries, re-emerging as a leading global listing venue with more than 350 companies in the IPO pipeline.https://www.hkexgroup.com/Media-Centre/Insight/Insight/2026/Johnson-Chui/AI-IPOs-Drive-a-Strong-Start-to-2026?sc_lang=en Tech start-ups, particularly in AI, photonics chips and robotics, account for more than half of the fundraising.https://www.hkexgroup.com/Media-Centre/Insight/Insight/2026/HKEX-Insight/Q1-2026-Hong-Kong-Market-Update?sc_lang=en
Recent deals highlight strong investor appetite. Chinese AI optical computing firm Shanghai Xizhi, better known as Lightelligence, surged nearly 400% at its April 2026 debut – the second best first-day performance for a Hong Kong IPO that raised at least USD 100 million since 1985.
Asian tech markets also offer a valuation advantage. Investors
can access many of the same structural AI growth themes at a discount relative to US peers. For example, forward price earnings multiples for SK Hynix and Samsung Electronics stand around 30% below those for Micron.Source: Bloomberg, data as of 27.05.2026
Underpinning this momentum is Asia’s growing leadership in research and development in key technologies spanning AI, biotech, robotics, advanced materials to energy.https://www.aspi.org.au/programs/critical-technology-tracker/
China is the undisputed leader. For example, its USD47 billion robotics market is projected to grow 23% every year to 2028. Industrial robots make up a significant portion of demand, with the country installing 295,000 new units in a single year, more than the rest of the world combined.https://chinapower.csis.org/china-industrial-robots/
Robots are increasingly ubiquitous beyond factory floors. Across Shenzhen and other major cities, humanoid baristas serve perfect flatwhites, while yellow and black Meituan robots navigate pavements and residential complexes to deliver restaurant meals, groceries and convenience store items to neighbourhoods.
Pharma and biotech: next-generation treatments
EM companies are also shifting up in the pharma and biotech value chain, transitioning from high-volume, low-margin generic drugs to higher value-add activities such as advanced clinical trials and the development of innovative and complex therapeutics and specialty drugs, supported by rising investment in R&D.
China is fast establishing itself as a global leader in oncology, particularly in targeted therapies and AI driven screening and diagnostics, having overtaken the US in cancer research output. The country is now the biggest location for early-stage drug testing. In the third quarter of 2025, 40% of global early-stage trials were conducted in China, compared with 35% in the US.https://www.ft.com/content/ad55ee0c-ae32-42df-8e64-a2690454be8d?syn-25a6b1a6=1
China’s edge is speed and efficiency in clinical trials, especially in biologics – complex medicines derived from living organisms, such as proteins and genes, which are more difficult and expensive to produce than normal drugs. They target specific parts of the immune system to treat chronic diseases like cancer, autoimmune and inflammatory diseases.
Take Hong Kong-listed Wuxi. It controls an estimated 20% of the global antibody-drug conjugates – often described as biological missiles used in targeted cancer therapy – more than any other company in the world.
As emerging markets move up the value chain, they are capturing a larger share of global profits and strengthening growth potential at the same time. For investors, this structural shift reinforces the case for EM equities as a source of enduring, higher-quality returns.
