Data centres in Southeast Asia are becoming more prevalent as the region digitalises and positions itself as a hub for global companies. Customers want secure, reliable, scalable, and energy-efficient solutions for storing and managing data. Thus, the market is on target to reach USD 11.17 billion in 2024 and USD 14.41 billion by 2029, representing a 5.23% increase.
Singapore is the key hub in the region because it is more politically and economically stable than its neighbours. The government has developed a robust tech infrastructure countrywide, making it easier to build a data centre where there is adequate space. Plus, the city-state continues adapting its policies and regulations to create a business-friendly environment.
The number of data centres in the Asia-Pacific (APAC) has been growing, with Southeast Asian countries increasingly represented. Singapore led the way with 100 locations, followed by Indonesia with 79, Malaysia with 55, Thailand with 39, the Philippines with 33, Vietnam with 32, Cambodia with 7, and Myanmar with 6. Laos and Brunei did not make it onto the list.
Factors contributing to Southeast Asia becoming a data centre hub
Top companies like Hewlett Packard Enterprise (HPE), Nokia, Nvidia, Hitachi, IBM, Huawei, Lenovo, Broadcom, and Dell are funding or setting up Southeast Asian data centres and their significant projects.
There are several factors contributing to the region's burgeoning popularity as an ideal place to establish a data facility:
- Digital transformation and internet penetration: The Association of Southeast Asian Nations (ASEAN) continues its digital transformation initiatives across various industries, with internet penetration increasing among citizens. Governments are keen to develop smart cities where people can access and use multiple technologies like the Internet of Things (IoT) to interact or exchange data. Also, companies are adopting cloud services as a more affordable and scalable way of managing their data.
- Investments in data facilities: Venture capital (VC) firms, investors, and multinational tech companies are investing in the region and bringing their expertise to the data sector. Governments also have introduced initiatives to attract foreign investments to meet the specific needs of industries like finance and healthcare.
- Favourable location: ASEAN is a favourable location for deploying data technologies. For example, stakeholders investing in artificial intelligence (AI) and large language models (LLM) can benefit from the region's subsea cable infrastructure and access to low-cost energy.
Furthermore, as digitalisation turns startups into data-driven organisations, there is an uptick in demand for colocation—renting out facilities for hosting company servers and computing hardware.
Supportive government initiatives
Southeast Asian governments like Malaysia have supportive policies and incentives to establish a scalable data centre ecosystem. For example, it promotes cloud technology adoption through initiatives like MyGovCloud.
The Philippines government supports data centres by amending the Foreign Investment Act to streamline bureaucratic processes. It also has the National Broadband Program and the Digital Philippines campaign to boost the country's digital infrastructure.
Challenges affecting data centres in ASEAN
Although ASEAN data centres will continue the region's consistent growth and digitalisation efforts, significant challenges must be addressed. They include:
First, data storage inefficiencies complicate managing peak electricity demand and base loads. Additionally, many centres use diesel generators as a power backup, which harms the environment.
Secondly, global and underlying macroeconomic factors are reducing data sector investments. Investors must keep their funds dry while seeking sustainable businesses to back financially. They want startups to have ESG (environmental, social, governance) policies for efficient, streamlined, and eco-friendly operations.
Furthermore, increased cyber attacks on networks and unsecured endpoint devices may also cause data corruption. Therefore, companies must be wary of the threats and set up robust protections for their software and hardware. Furthermore, they should have security to guard data centres physically.
Lastly, there is a risk of data corruption due to unpredictable power spikes or damages to energy provider equipment caused by extreme weather. AI can help manage spikes and automate facility reboots.
Data centres have a promising future
Even though it is expensive to set up the right equipment and use energy efficiently, companies should construct more efficient data centres and install solar-powered battery backups to keep them operational. They must find ideal locations where the facilities can operate without draining the power grids. Also, they must have adequate cooling systems to ensure the hardware does not overheat.
Limited access to experts
The region needs more skilled workers to manage complex data facilities and prevent data loss or equipment failures.
Ultimately, building data centres in Southeast Asia will help the region move toward its goal of becoming a hub for local and global businesses. The current trends show a shift to sustainable and energy-efficient facilities. Rapid urbanisation and digitalisation will continue pushing demand for collecting, analysing, and managing information, driving data centre growth.
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