Brian Jeffrey
Growth of Data Centers in Southeast Asia
Over the last two years, several prominent tech and cloud companies have revealed plans to establish new data centers throughout Southeast Asia.
According to Adrian Ashurst, CEO of Worldbox Intelligence, Singapore remains the leader in this sector, but it is facing stiff competition from Indonesia, Malaysia, and Vietnam.
Data centers are vital as they serve as the physical locations for data stored in the cloud and are essential for the operation of various services.
The surge in AI, cloud computing, e-commerce, and related technologies necessitates significant processing and storage capabilities, which elevates the demand for data centers.
JLL, a real estate investment consultancy, forecasts that the amount of data created by individuals and businesses will double in the next five years compared to the last decade.
The storage capacity at data centers is projected to rise from 10.1 zettabytes (ZB) in 2023 to 21 ZB by 2027, representing an average growth rate of 18.5% annually.
Southeast Asia’s expanding digital economies are further accentuating the need for local data infrastructure. For example, Savills points out that in Indonesia, out of 275 million people, 200 million are online, predicting that the online retail sector could hit USD 95 billion by 2025. The country is becoming a tech hub with local companies like GoTo raising substantial funds.
A number of data centers have already been constructed in Southeast Asia, and various governments are vying for further investments.
However, this growth raises concerns about energy consumption, potentially stressing limited energy resources as data centers are notably power-hungry.
Singapore’s robust infrastructure and dependable energy supply have made it a preferred destination for data centers. With over 100 facilities, Singapore comprises 60% of the region’s data center capacity. Yet, there are worries about energy availability and land use.
In response to these concerns, the government imposed a moratorium on new data center developments in 2019, which was lifted in 2022 following a sustainability review. Singapore is now boosting construction while requiring new projects to adhere to stricter environmental standards. Currently, data centers account for roughly 7% of Singapore’s total electricity consumption, projected to reach 12% by 2030.
Although Singapore ranks as one of the most attractive spots for data centers globally—second overall and first in Asia—it faces competition from Thailand, Malaysia, Vietnam, the Philippines, and Indonesia, which offer benefits like lower real estate costs and growing investments in data infrastructure.
In Malaysia, with about 50 data centers, incentives such as tax benefits are drawing in investors. Iskandar Puteri City has become a key area for data center projects, especially after Singapore halted new developments in 2019. The Malaysian government collaborates with energy suppliers to ensure consistent power for data centers. In 2023, Kuala Lumpur introduced the 2030 National Industrial Master Plan to prioritize digitization as a growth engine, with cloud leaders like AWS, Microsoft, and Google planning expansions in the country.
Thailand, strategically located in Southeast Asia, has around 30 data centers and has made notable advancements, particularly in November 2023, when major tech firms announced a collective investment of 300 billion baht (USD 8.46 billion) in local infrastructure. AWS is set to invest USD 5 billion over 15 years to build new data centers, while Google is putting in USD 1 billion for similar initiatives.
As of the end of 2023, Indonesia has 73 data centers with 16 more planned. Key regions like Jakarta, West Java, and Batam are drawing attention from both domestic and foreign investors due to their ample energy resources and prospects for renewable energy growth. The skilled workforce and rising demand for digital services also bolster the country’s offerings. Moreover, Indonesian centers can cater to other regions, with Batam poised to meet both domestic and Singaporean market demands due to its availability of energy sources.
Vietnam boasts around 30 data centers with plans for expansion in tandem with its swiftly growing digital landscape. Savills notes that Vietnam’s cloud and data center sectors are among the fastest-growing on a global scale, driven by digitalization trends among SMEs, a youthful tech-savvy population, the rollout of 5G, and a desire for autonomous digital infrastructure.
The Philippines, with approximately 22 data centers, primarily in Manila, is experiencing remarkable growth in this field. In August 2023, the government projected that data center capacity could quintuple, reaching about 300 megawatts (MW) by 2025.
Data centers are essential for driving economic transformation, laying the groundwork for Southeast Asian nations to accelerate their economic growth in the coming decades.
(Source: Febis, Savills)
