APAC ICT spend to hit US$647 billion in 2026 as Chinese tech reshapes regional demand
From manufacturing exodus to cheaper AI models, China's influence on APAC's ICT spending is more complex than it appears.
The era of AI experimentation in Asia Pacific is over. According to IDC's latest Worldwide ICT Spending Guide, ICT spending across Asia Pacific excluding Japan and China (APEJC) is forecast to reach US$647 billion in 2026. This is a 5.4% year-on-year increase outpacing global growth rates with the region projected to surpass US$758 billion by 2029.
According to Mario Allen Clement, research manager at IDC, boards are no longer asking whether to invest in AI. Instead, they are asking whether their foundations can support it.
"The honeymoon is over. Boards are demanding a hard ROI on every dollar spent,” Clement said.
China's shadow over hardware demand
Hardware remains the largest technology group, commanding over 52% of total APEJC ICT spend. IDC identifies the "China Plus One" manufacturing exodus as a primary growth catalyst, as production capacity shifts to India, Vietnam, and Thailand, enterprises across these markets face urgent demand for non-x86 servers, edge computing nodes, and AI-centric infrastructure to support smart factories and decoupled supply chains.
IDC characterizes this as an "infrastructure arms race" driven directly by the strategic imperative to reduce dependence on traditional manufacturing hubs. But China's influence on regional ICT spending doesn't end at the factory gate. Even as supply chains migrate away, cheaper Chinese-origin technology such as AI models, software, and increasingly hardware, continues to shape how APAC enterprises access and deploy AI.
Chinese AI companies are also broadly undercutting US counterparts on model pricing, while their open-source offerings accelerate ecosystem development without licensing costs–a dynamic that is quietly but meaningfully expanding the addressable market for AI across price-sensitive APAC economies.
According to a report by SCMP, Chinese tech companies like Xiaomi and Alibaba Cloud have launched spring recruitment drives amid fierce competition for the talent driving the global AI boom.
Software and services close the execution gap
Software is the fastest-growing segment at 16.8% year-on-year, capturing 24% of regional spend. The priority has shifted from cloud migration to data sovereignty and security resilience. With the region increasingly described as a theatre for cyber-warfare, security software and enterprise resource management applications are now considered core infrastructure rather than back-office overhead.
Services, absorbing over 23% of ICT budgets, reflects a stark execution gap: 60% of APEJC enterprises now require professional assessments to determine whether their legacy infrastructure can support AI at scale. The expansion of Global Capability Centers across India and Southeast Asia is further driving managed services demand as firms outsource AI orchestration to bridge chronic talent shortfalls.
Where the spending concentrates
Banking, software and information services, and the central government together account for over US$104 billion in combined spend–the three largest verticals–all moving beyond automation toward autonomous decisioning. India leads as the regional engine, anchored by its Digital Public Infrastructure buildout and a sovereign AI push.
ASEAN markets are prioritizing connectivity and data residency compliance, while Australia and New Zealand are directing investment toward AI integration in healthcare and professional services. IDC projects a CAGR of over 7.4% through 2029.
The window for foundational work, however, is narrowing fast. As Clement puts it, "If you haven't fixed your data architecture by the end of 2026, you won't survive the 2029 automation wave."