As the world rapidly shifts to 5G connectivity, the imperative to accommodate colossal volumes of data and traffic has never been more evident. With favourable government policies and cost-effective construction opportunities, Southeast Asian countries have emerged as the most sought-after destinations for data centre establishments. A look at data centre adoption in various Southeast Asian countries…
Philippines
The Philippines is one of the primary emerging data centre markets in Southeast Asia. According to SPER Market Research, the growth of the Philippines data centre market is primarily attributed to the government’s efforts to promote digitalisation and e-governance initiatives, as well as the increasing adoption of cloud-based services and rising demand for data storage and management solutions. Further, the Philippines’ data centre market is being driven by the tremendous growth in international digital connectivity. The capital city of Manila is the Philippines’ primary data centre hub, hosting the majority of the country’s facilities. Additional facility development is not solely limited to Manila; other cities are also experiencing a rapid increase in data centre investment.
Indonesia
Indonesia is emerging as a prominent data centre hub in Southeast Asia, driven by its rapidly growing digital economy and the government’s active promotion of the industry. Major projects are underway, and key factors driving this growth include the increasing demand for cloud computing services and Indonesia’s large and growing population, which offers a market for data-intensive applications. As per a report by Mordor Intelligence, Indonesia’s data centre industry will grow at a compound annual growth rate (CAGR) of 14 per cent from $2.06 billion in 2023 to $3.98 billion in 2028.
This growth has attracted multinational cloud service providers such as Amazon Web Services (AWS), Google, Microsoft and Alibaba to establish data centres in the country. Indonesia already has over 90 data centre providers. The development of data centres in Indonesia is also part of the government’s efforts to accelerate digital transformation across all ministries, government agencies, and state-owned enterprises. Coupled with the high domestic demand for digital services, Indonesia’s data centre industry offers foreign investors an opportunity to profit from this relatively untapped sector. The government is also building four national data centres with Tier 4 certification, which offer the highest resistance against threats such as natural disasters, power outages and equipment failures.
Malaysia
The Malaysian data centre market is projected to register a CAGR of 16.64 per cent between 2023 and 2029. The IT load capacity of the Malaysian data centre market is expected to increase steadily and reach 1,358 MW by 2029, while the country’s total raised floor area is expected to increase to 7.7 million square feet by 2029. Due to evolving digital trends, data centre companies see significant potential in the country. The Malaysian data centre market has begun to experience significant growth, aided by the penetration of digitalisation and the adoption of advanced technologies, which has led to an increase in co-location demand.
Among the key drivers of the growing emphasis on data centres to meet escalating data consumption one the availability of a skilled workforce and the cost advantages of operating in Malaysia, which make it an attractive location for data centres. This is coupled with stringent safety and quality regulations governing the quality of digital services. The Tier 1 and 2 segments of the Malaysian data centre market reached an IT load capacity of 0.59 MW in 2021, which increased to 2.39 MW in 2022. This segment is expected to reach a capacity of 3.59 MW by 2029, recording a CAGR of 5.99 per cent. In contrast, the Tier 3 segment recorded an IT load capacity of 257.85 MW in 2021 and is expected to grow from 457.66 MW in 2022 to 1,379.11 MW by 2029, registering a CAGR of 17.07 per cent. The Tier 3 segment has a higher growth rate than all other tiers. However, the Tier 4 data centre segment is expected to remain stagnant in the near future but will see increased opportunities over the coming years.
Singapore
The Singapore data centre market is well connected to several major markets, with approximately 25 submarine cables. Thirteen additional submarine cables are currently under construction and will connect Singapore to major markets worldwide. The increasing adoption of cloud-based services in the country is driving the establishment of cloud regions by major cloud services providers such as AWS, Microsoft, Facebook, Google and Oracle. The Tiers 3 and 4 segments of the data centre market are expected to account for the largest market share during the forecast period. The Tier 3 segment is expected to hold the highest market share of 71.5 per cent in 2023. However, its share may decrease slightly to 61.4 per cent in 2029 due to the upcoming Tier 4 data centres. Singapore’s digital infrastructure is formidable, with an impressive roster of 100 data centres, 1,195 cloud service providers and 22 network fabrics.
Thailand
The Thailand data centre market is expanding due to multiple factors, including an increase in mergers and acquisitions, and investments by local and foreign businesses, as well as the government’s promotion of renewable energy. Enterprises are flocking to the cloud because of its scalability and low cost. Several cloud service providers from around the world have announced their availability zones in Thailand, particularly in locations such as Bangkok and Nonthaburi, due to their strong fibre connections and proximity to clients. The data centre market is expected to grow at a CAGR of 5.2 per cent between 2023 and 2028, reaching from $2.48 billion to $3.37 billion. Thailand has no facilities certified with Tier 1 or Tier 2 certification. The Tier 3 data centre segment reached an IT load capacity of 71.48 MW in 2021 and is expected to grow from 74.33 MW in 2022 to 199.55 MW by 2029 at a CAGR of 15.15 per cent. The Tier 4 data centre segment achieved an IT load capacity of 20 MW in 2021 and is expected to grow from 20 MW in 2022 to 50 MW by 2029 at a CAGR of 13.99 per cent. The Government of Thailand is incentivising the development of the data centre industry through a variety of initiatives, including the Board of Investment (BOI) promotion plan (2023-27), which offers a variety of tax advantages and other benefits to businesses that invest in data centres in Thailand. This, in conjunction with other favourable incentives, presents Thailand with the opportunity to become a premier data centre hub in the burgeoning market.
The way ahead
The Southeast Asian data centre market is poised to experience significant growth, reaching a valuation of $14.19 billion by 2028, up from $9.68 billion in 2022. This represents a CAGR of 6.57 per cent, demonstrating the region’s commitment to embracing digital transformation. Overall, Southeast Asia is emerging as a front runner in the global adoption of data centres. The region’s rapid adoption of digital technologies, burgeoning data consumption, supportive government policies, and cost-effective construction opportunities are expected to propel the data centre market to unprecedented heights in the coming years.
