Why Smart City Market Growth Matters for ASEAN's Digital Future
The global smart city market is projected to reach USD 10.2 trillion by 2035, driven by urbanization and infrastructure spending. This article examines how ASEAN can benefit from the growth in smart utilities, transportation, and digital governance.
The global smart city market is entering a phase of exponential growth, with new projections indicating that spending on connected urban infrastructure could surpass USD 10 trillion by 2035. For Southeast Asian nations, this shift represents both a challenge and an opportunity as the region accelerates its digital transformation agenda.
Global Market Surge
According to a recent report by Market.us, the global smart city market was valued at USD 1.4 trillion in 2025 and is projected to grow at a compound annual growth rate (CAGR) of 21.6% during the 2026–2035 period, reaching approximately USD 10.2 trillion by 2035. North America currently dominates the market with a 22.0% share, generating around USD 384.3 billion in revenue in 2025. However, the report identifies rapid urbanization in Asia and Africa as a major driver of future growth.
Key Drivers of Growth
The growth is underpinned by several structural factors. The United Nations Department of Economic and Social Affairs reported in 2018 that 55% of the global population lived in urban areas, with this share expected to rise to 68% by 2050. This shift will add nearly 2.5 billion urban residents, primarily in Asia and Africa, creating significant demand for modern transport, energy, water, waste management, housing, and public safety systems. At the same time, annual physical capital investment in cities is projected to rise from around USD 10 trillion to more than USD 20 trillion by 2025, while total urban infrastructure requirements are estimated at approximately USD 80–97 trillion by 2040. If only 10–15% of this spending is directed toward connected and intelligent systems, the smart city market could reasonably exceed USD 10 trillion by 2035.
Segment Analysis
The report breaks down the market by application, component, and end-user. Among applications, smart utilities hold the largest share at 29.5%, reflecting the critical role of electricity, water, and waste services in urban environments. The International Energy Agency notes that hundreds of millions of residential smart meters have been installed worldwide, and deployment continues across major economies. Smart public safety is identified as the fastest-growing device segment, as urban density increases exposure to crime, accidents, and health emergencies.
In terms of components, hardware dominates with a 54% share, as sensors, cameras, smart meters, and communication devices form the backbone of digital urban services. Software, however, is the fastest-growing component, as cities increasingly use data, automation, and artificial intelligence to improve the performance of existing infrastructure.
Within smart governance and citizen services, smart infrastructure accounts for a leading 27% share, while smart lighting stands out as the fastest-growing device segment due to its potential to reduce municipal electricity consumption by 50–70%. Smart utilities' energy management holds a 28% share, supported by the fact that cities consume around 75% of global energy use and account for nearly 70% of greenhouse gas emissions. Waste management is the fastest-growing sub-segment, as global municipal solid waste generation is projected to rise by 50% to 3.8 billion tonnes by 2050.
Smart transportation, which commands a 30% share within its segment, is driven by the need to manage traffic congestion and vehicle emissions. Intelligent transportation systems, including adaptive signals and connected public transport, are key areas. Parking management is the fastest-growing device sub-segment, as inefficient parking contributes to congestion and urban land pressure.
In smart healthcare, medical devices hold a 55.5% share, while systems and software are growing fastest as healthcare providers adopt electronic records, telemedicine, and analytics. Global health spending reached USD 9.8 trillion in 2021, equal to 10.3% of global GDP.
Regional Impact on ASEAN
For ASEAN, these global trends carry significant implications. The region is home to several rapidly urbanizing economies where city growth often outpaces infrastructure development. According to the report, the global urban population is expected to increase from 4.2 billion to approximately 6.7 billion by 2050, with much of this growth occurring in Asia. ASEAN's megacities and secondary cities are likely to see heightened demand for smart utilities, intelligent transportation, and digital governance.
The report's findings align with ongoing digitalization efforts across Southeast Asia. Many ASEAN governments have prioritized smart city development as part of national digital economy strategies. The expansion of smart utilities, for example, could help address gaps in access to electricity, water, and sanitation. In 2024, the report notes, 655 million people globally still lacked electricity access, while 2.1 billion lacked safely managed drinking water. While ASEAN has made significant progress, these challenges remain relevant in certain parts of the region.
The growth of smart transportation also presents an opportunity for ASEAN cities to reduce congestion and emissions. With private cars accounting for over half of urban passenger-kilometres and receiving more than 95% of road space in many cities, investments in intelligent transportation systems and parking management can have outsized benefits.
For ASEAN's digital economy, the smart city market offers a substantial opportunity. The deployment of hardware, software, and services across urban infrastructure will drive demand for cloud computing, data analytics, cybersecurity, and AI solutions. This, in turn, could strengthen the region's startup ecosystem and attract foreign investment. Regional collaboration on smart city standards and cross-border digital governance could further position ASEAN as a cohesive digital market.
Future Outlook
Looking ahead, the smart city market in ASEAN is expected to grow in tandem with global trends. Over the next three to five years, the region is likely to see increased investment in digital infrastructure, smart utilities, intelligent transportation, and digital public services. The overall digital economy of ASEAN is projected to expand as governments and enterprises adopt smarter, more connected systems.
However, success will require careful attention to data privacy, cybersecurity, and regulatory harmonization. The report notes that global public order and safety spending can represent 1–2% of GDP in some high-income economies, but ASEAN nations will need to balance security with citizen rights. As the market grows, ASEAN countries will also need to build digital skills and foster an environment where innovation can thrive.
The development of regional frameworks for smart city governance and data flows will be crucial. As the global smart city market moves toward USD 10.2 trillion, ASEAN has an opportunity to participate as both a market and a source of innovation. By leveraging data, AI, and connectivity, the region can address pressing urban challenges while laying the foundation for long-term economic competitiveness.
Conclusion
The global smart city market is growing at an unprecedented pace, driven by urbanization, infrastructure spending, and the digitalization of public services. For ASEAN, this represents a strategic opportunity to accelerate its own digital transformation. While North America currently leads, the report clearly indicates that Asia will be a major growth engine. ASEAN's ability to harness this momentum will depend on its capacity to invest in intelligent infrastructure, foster regional cooperation, and ensure that the benefits of smart city development are widely shared.
