The race to build data centres in Southeast Asia

In 2023, dozens of tech companies and cloud service providers announced plans to build and operate new data centres in Southeast Asia. While Singapore has emerged as a leader in the sector, it is facing growing competition from the likes of Indonesia, Malaysia and Vietnam – as Adrian Ashurst, CEO of Worldbox Intelligence, explains.


Data centres – warehouses full of computer systems – are critical to the technologies that we are all increasingly reliant upon. Data centres operate as a physical home to digital information stored in the so-called “cloud” and other forms of IT equipment that power services and platforms. The growth of artificial intelligence (AI), cloud computing, e-commerce, and other technologies and businesses that require large amounts of processing power and data storage is fuelling demand for these centres, which are sprouting across the world.


In particular, the advent of AI, which requires far more processing power than standard computing, has put rocket boosters under the data-centre world. The likely explosion in quantum computing in the coming years will almost certainly further boost demand.


JLL, which provides real-estate services and property investment strategies, certainly expects continued rapid growth. It predicts that over the next five years, consumers and businesses will generate twice as much data as all the data created over the past 10 years. In response, total storage capacity in data centres and endpoint devices will grow from 10.1 zettabytes (ZB) in 2023 to 21.0 ZB in 2027, for a five-year compound annual growth rate (CAGR) of 18.5%. (1)


Exploding demand for data driving growth


Fast-growing digital economies in Southeast Asia are driving local demand for data. The British real-estate services company Savills cites Indonesia as an example:


200 million of its 275 million citizens have internet access, and the country’s online retail market is forecast to reach US$95 billion by 2025. Indonesia is a burgeoning tech hub, with homegrown unicorns including GoTo, which raised more than US$1 billion when it was listed last year (2022).”  (2)


Large numbers of data centres have already been built in Southeast Asia and governments across the region are battling to attract more. However, the growth of these centres is also fuelling demand for energy. That can create problems if it places too much strain on often limited energy supplies. Such is the power-hungry nature of data centres, there are even predictions that they will soon be built with their own dedicated, built-in nuclear reactors.


Singapore takes the lead… for now


Singapore’s robust infrastructure and the security of its power supplies has helped the island republic become the leading base for data centres in the region. With over 100 data centres, it accounts for 60% of Southeast Asia’s total data-centre capacity. However, even Singapore has had doubts about the impact on energy supplies and demand for land. In 2019, it imposed a moratorium on new data centres (which was lifted in 2022) while it considered the sustainability of the sector. It is now pressing ahead with construction but has called for new projects to have higher green standards. Around 7% of total electricity consumption in Singapore is generated by data centres, and this figure is projected to reach 12% by 2030.


While Singapore ranks among the most desirable data-centre locations, tying with Silicon Valley for second place globally and ranking first in Asia, countries like Thailand, Malaysia, Vietnam, the Philippines and Indonesia have cost advantages in terms of land and energy, and also stand to benefit from stepped-up investment in data centres. They all benefited from Singapore’s moratorium.


Malaysia closing the gap


Malaysia currently has around 50 data centres and is wooing investors with tax breaks and other perks as it bids to become the region’s next big data hub. In particular, it is striving to win business from Singapore. Iskandar Puteri, which lies just across the straits from Singapore, has emerged as a particular hot spot for new data-centre construction. Construction picked up after Singapore paused new development in 2019.


The government is working with energy suppliers to ensure data centres receive a stable supply of electricity. In September, Kuala Lumpur unveiled the New Industrial Master Plan 2030, which includes the promotion of digitisation as a key growth area. Cloud service giants such as Amazon Web Services and Microsoft Corporation have announced strategic plans to strengthen their cloud regions in Malaysia, which is influencing the establishment of new data-centre facilities by leading players.


Thailand aims high


Leveraging its strategic position at the heart of Southeast Asia, Thailand, which already has around 30 data centres, scored a major advance in November 2023, when Amazon, Google and Microsoft agreed to invest 300 billion baht (US$8.46 billion) in developing data-centre infrastructure in the country. Amazon Web Services said it planned to build a data centre with a budget of US$5 billion over a 15-year period.


Figure 1: Top 10 Emerging Global Data-Centre Markets, 2023

Source: Savills Industrial Whitepaper, 2023


Indonesia well placed


By the end of 2023, Indonesia had around 73 existing data centres, with plans to build a further 16. Jakarta, West Java and Batam have emerged as the main hubs for data centres, attracting local and foreign investors along with multinational corporations. The country benefits from plentiful energy supplies and huge potential for the development of renewable energy. An abundance of skilled local talent and burgeoning demand for digital services provide further attractions.


Indonesia’s data centres are also likely to serve other markets, according to Savills. It cites the example of Batam, an island near Singapore, which it says is set to be a future data-centre hotspot, serving domestic needs but also demand from Singapore. Batam has conventional and renewable power sources, making it attractive to operators. (3)


Hanoi targeting rapid growth


Vietnam has around 30 data centres currently and many more are likely to be built in the coming years, given the rapid growth of the local digital economy. Savills says Vietnam’s cloud and data-centre industry is one of the fastest-growing in the world. It is driven by the digitalisation of the local SME sector, a young and digitally literate population, the arrival of 5G, the need for self-sufficiency in digital infrastructure, and data localisation laws.


The government’s Digital Transformation Program aims to transfer 50% of business to digital platforms by 2025. Hanoi wants the country to become a key digital hub, and the data-centre market is forecast to grow to US$1.04 billion by 2028, up from US$561 million in 2022, representing a CAGR of 10.7%.


Manila leads the Philippines charge


The Philippines is home to around 22 data centres, with Manila the top spot for building these facilities. The industry is enjoying rapid growth. In August 2023, the government said it expects a fivefold increase in the capacity of data centres in the country, reaching approximately 300 megawatts (MW) by the year 2025.


All of these countries are likely to be winners in the end, whichever emerges as the leading data-centre operator. The facilities are key to the digital transformation of economies – and, by attracting massive investment, Southeast Asia is helping to construct the base upon which further rapid economic growth can take place in the coming decades.



1 - https://www.us.jll.com/content/dam/jll-com/documents/pdf/research/global/jll-data-center-outlook-global-2024.pdf

2 - https://www.savills.com.vn/blog/article/214096/vietnam-eng/viet-nam-s-data-centre-industrial-is-one-of-the-fastest-growing-in-the-world.aspx

3 - https://www.savills.com.vn/blog/article/214096/vietnam-eng/viet-nam-s-data-centre-industrial-is-one-of-the-fastest-growing-in-the-world.aspx



Source: Worldbox

About Worldbox Business Intelligence


Worldbox Business Intelligence, headquartered in Switzerland, is a Global API data solution provider of business intelligence and used in data analytics.


With the Global API solution Worldbox Business Intelligence enables clients and partners a frictionless real time onboarding, KYC and compliance verification, while rapid global investigations are provided, if needed.


Worldbox Business Intelligence provides global data in a standardised structure on more than 200 Million companies worldwide. It’s global network of subsidiaries, branches and desks allows the precise and efficient collection of data on key target territories for clients and partners."


"Worldbox Business Intelligence - Bringing Swiss Precision To Data“

Write a comment

Comments: 0