After years of growth, China's tech market is of high saturation, and each sector is dominated by big players. Chinese tech companies are getting used to fierce competitions and the "winner takes all" type of scheme.

Unlike China, Southeast Asia's digital economy has no clear winner until recently. Unicorns like Grab, Sea Group, Gojek, Tokopedia are racing to raise new capital to expand and keep the market away from their competitors.

Last week, two Indonesian tech giants, Gojek and Tokopedia, announced to merge. As a result, two parties created a multi-billion-dollar digital behemoth under the name of Goto Group that covers businesses from e-commerce, ride-hailing to financial services.

The merger is not about one control over others or who takes a bigger pie of the businesses. Instead, the consolidation is a win-win situation that enables two parties to benefit from economies of scale and accelerate growth.

As the two parties stated in separate statements, the combined business will not change the corporate structure of Gojek and Tokopedia. The two entities will continue to operate separately under the new holding company. Though the two companies have agreed to send senior executives to the new company.

GoTo Group will appoint Andre Soelistyo, co-CEO of Gojek, to be the merger's CEO, and Tokopedia's Patrick Cao serving as GoTo's president.

"If you want to go fast, you go alone. The merger will bring synergy to the two businesses, we will go extreme fast as Gojek and Tokopedia. We want to go far, and to go far, we go together," said William Tanuwijaya, co-founder and CEO of Tokopedia.

The cause of the merger is the rise of the strong market forces in SEA's e-commerce, digital payment, and ride-hailing sector.

For example, ShopeePay, Sea Group's digital payment solution, has been quickly growing its user base, buoyed by its growing influence on its e-commerce platform Shoppee.

In Goto's home court Indonesia, Shopee took the lion shares of the market. By the end of April 2021, Singaporean e-commerce ranked as the region's most used online shopping app via multiple analytic and data sources like App Annie, iPrice Group, and SimilarWeb. ShoppeePay also becomes Indonesia's most used digital payment service, according to Ipsos Indonesia.

Similarly, in Vietnam, one of the largest SEA markets, Shopee overruled Tokopedia in a monthly active user number.

On another battlefield, Gojek and Grab have been in a fierce head-to-head fight for years. GoTo has a combined gross transaction value of around $22 billion for last year. In comparison, Grab had a GMV of $12.5 billion last year, while Sea's Shoppee registered $35.4 billion.

In fact, Gojek and Grab had merge talks to coexist in the same market for eight months last year. Still, the merger failed eventually because both parties could not agree on the shareholding ratio of a combined entity.

Southeast Asia's tech companies have already revealed their plans or are actively preparing to debut on the stock market, making the competition fiercer. Last month, Grab raised the competition further by announcing a plan to go public for an expansion fund of $4.5 billion.

It seems that Southeast Asia's tech sector is following the same path that Chinese tech companies have already gone through.

In recent years, China's tech space has witnessed merger after merger between two unicorns when they could no longer afford to burn cash to expand and grow.

In February 2015, the Chinese ride-hailing app Didi merged with Kuaidi to create a ride-hailing super app that competes with Uber China. In 2016, the Didi-Kuaidi merger took a further step to acquire Uber China to ensure its dominance in China.

While China's tech companies face growing regulatory challenges amid the authorities' crackdown on their dominance, Southeast Asia is increasingly a region to watch. Countries like Singapore is an appealing destination for startups and talents because of policy supports for easy funding and other favorable factors such as colossal internet population.

More than 90 percent of Southeast Asia's internet users are mobile, making it easier for technology companies to approach their users through apps.

"I am not saying China's tech and Southeast Asia's tech space alike, there is no reference model for Gojek and Tokopedia merger in China. You can not imagine Didi Chuxing (in ride hailing) merges with Alibaba's Taobao (in e-commerce) and Ant Financial (in financial service) to crate a monster. However, the development of every tech sectors follows the same path from early stage, fast-growing to mature stage, and history does repeat itself," an analyst at EnfoDesk told PingWest.

Image Credits: Bagus Ghufron on Unsplash