In brief
- Due to rising cloud and AI demand, Malaysia is attracting billions in data centre investments.
- DC Byte’s 2024 Global Data Center Index ranks Johor Bahru as Southeast Asia’s fastest-growing data centre market.
- Malaysia might become Asia’s greatest data centre hub if all its projected capacity is built.
As cloud computing and AI demand rise, Malaysia is becoming a Southeast Asian and continental data centre powerhouse.
The country has received billions in data centre investments from big titans such as Google, Nvidia, and Microsoft in recent years.
James Murphy, APAC managing director at data centre intelligence business DC Byte, says most investments have been in Johor Bahru, near Singapore.
He remarked, “It looks like in a couple of years, [Johor Bahru] alone will overtake Singapore to become the largest market in Southeast Asia, from essentially zero just two years ago.”
Johor Bahru was Southeast Asia’s fastest-growing market in DC Byte’s 2024 Global Data Center Index.
The research said the city had 1.6 gigawatts of data centre supply, including under-construction, committed, and planned developments. Electricity consumption typically serves as a measure of data center capacity.
If all Asian capacity comes online, Malaysia will be only behind Japan and India. Japan and Singapore led the area in live data centre capacity until then.
The index did not detail Chinese data centre capacity.
Changing demand
Traditional markets like Japan, Singapore, and Hong Kong have received most data centre infrastructure and storage investments.
According to global data centre supplier EdgeConneX, the worldwide pandemic accelerated digital transformation and cloud adoption, increasing demand for cloud providers in emerging economies like Malaysia and India.
Murphy said demand for video streaming, data storage, and everything done online or on a phone will increase data centre demand.
Increasing demand for AI services requires specialised data centres to store the massive volumes of data and computational power needed to train and deploy AI models.
Many AI data centres would be created in established economies like Japan, but Murphy said favourable attributes in emerging regions will also draw investments.
AI data centres need plenty of room, energy, and water to cool. Thus, rising markets like Malaysia, where energy and land are inexpensive, have an advantage over Hong Kong and Singapore, which lack them.
Singapore spillover
Malaysia is especially desirable due to data center-friendly policies. In 2023, authorities launched the Green Lane Pathway to streamline power approvals, lowering data centre lead times to 12 months.
Singaporean policy has also played a crucial role in recent years.
Singapore’s skill pool, corporate trust, and fibre connection attract data centres, although the government began limiting capacity growth in 2019 due to their energy and water usage.
Many investments and planned capacity have been moved from Singapore to Johor Bahru.
Singapore recently announced a plan to increase its data centre capacity by 300 MW if more projects meet green energy and efficiency standards. Microsoft and Google have funded such efforts.
Murphy of DC Byte said Singapore is too tiny for large-scale green power generation, thus the market is limited.
Resources strained
Data centres have boosted Malaysia’s economy but raised energy and water issues.
Data centre electricity demand in Malaysia might reach 5 GW by 2035, according to Kenanga Investment Bank Research. Tenaga Nasional Berhad says Malaysia has 27 GW of installed electrical capacity.
According to The Straits Times, local officials are growing concerned about this power usage.
Given the city’s water and power issues, Johor Bahru city council mayor Mohd Noorazam Osman said data centre investments shouldn’t jeopardise local resource needs.
In June, a Johor Investment, Trade, and Consumer Affairs Committee official informed ST that the state would establish stricter green energy requirements for data centres.
Source : CNBC News
