Southeast Asia data center market: an overview

The Southeast Asia data center market has been experiencing significant turning points in recent times, movements that have turned global attention to the potential of the region as a data center hub. This was amplified in 2023, when a number of tech companies revealed plans to locate new facilities within the data center market in Southeast Asia. 

Growth of the Southeast Asia data center market coincides with the global expansion of data centers. As digitization and data-intensive technologies such as cloud computing or AI become more ubiquitous, data centers represent the foundation from which digital global economies can develop.

However, just like looking at the specificities of the data center markets in the Middle East, several nuances must be considered in order to understand the distinct attributes that shape the Southeast Asia data center market. For instance, cases like the four-year moratorium on new data centers in Singapore (now lifted) signal that the future of facilities in the region will be green data centers or it will not be.

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A look at the Southeast Asia data center market: current trends and figures

With an estimated population of over 650 million people, the Southeast Asia region has been labeled as “one of the fastest-growing consumer markets in the world” by McKinsey, which also projects the region to rank as the fourth-largest economy by 2050.

Building from this massive human and economic potential and an increased digitization, the Southeast Asia data center market has been receiving more attention as a crucial epicenter. Such is the case of a recent ResearchAndMarkets report, which has foreseen the region’s data center market will grow from $10.24 Billion in 2023 to $17.73 Billion in 2029, at a CAGR of 9.59%. 

Additionally, this and other publicly available reports inform of some important current characteristics shaping the data center market in Southeast Asia today:

  • Uptime Tier III and IV certifications are expected to become the norm.
  • While major cities and hub markets were part of the first initial localization strategies, new data center initiatives are expanding to edge locations that allow them to be nearer to end users.
  • Both colocation data centers and hyperscale data centers are looking to the region to expand their operations.
  • Considerations around cooling solutions for data centers have become a central aspect both for operators and public authorities, as we explain below in this article.

While the Southeast Asia data center market is often regarded as a whole, it’s also important to note each country within the region presents its own attributes. 

On the one hand, Singapore has long represented the central hub within the data center market in Southeast Asia. Building from the country’s advanced infrastructure and energy supply capacities, it’s reached over 70 data centers. Preoccupations around land availability and power consumption led to a four-year moratorium in 2019 for new data centers. When lifted, public authorities showed an increased focus on data center sustainability.

At the same time, the moratorium represented an opportunity for other locations within the Southeast Asia data center market to step in. Growing at various speeds beforehand, they represent distinct markets today:

  • Malaysia has taken a stance in welcoming new investments to build the country’s digital infrastructure, particularly around major cities like Kuala Lumpur and Johor. It is now considered as an emerging hub in Asia, expected to be only surpassed by Japan and India in the coming years, according to figures published by CNBC.
  • Indonesia’s Batam City has benefitted from its proximity to Singapore and become another key location within the Southeast Asia data center market. Indonesia’s substantial energy supplies (including renewable energy) have helped in the proliferation of over 70 data centers and plans to expand this number, with Jakarta, West Java and Batam becoming key nodal points.
  • Thailand includes over 30 data centers, a capacity set to be revolutionized in the coming years by major investments from Amazon, Google and Microsoft that were revealed in 2023.
  • The Philippines’ data center capacities are anticipated to surge after the government announced a fivefold increase by 2025, reaching 300 MW.
  • The expansion of Vietnam’s digital economy is also set to increase the country’s data center facilities, with the national market forecasted to reach US$1.26 billion by 2030, as published by official sources. Strong governmental support for pushing the national data center market is expected to make Ho Chi Minh City and Hanoi important regional hubs.

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Key drivers of the Southeast Asia data center market

Strong internet adoption and growing digitization

The World Economic Forum confirms Southeast Asia as “the fastest growing Internet market in the world”, and a region “with 125,000 new users coming onto the Internet every day” that are engaged in activities like gaming, mobile usage or electronic commerce. Additionally, the WEF also cites GSMA figures of data usage growing in the coming years, from 9.2 GB per month per user in 2020 to 28.9 GB in 2025.

These figures position Southeast Asia as a data-hungry region, where a young population and mobile penetration demand infrastructure that is ready to respond to their needs.

Furthermore, major public initiatives in the region’s least digitized economies have pushed efforts in recent years towards digital transformation and progress. Some examples include Malaysia’s Digital Economy Blueprint or Vietnam’s Digital Transformation Agenda (DTA), among others.

Increasing demand for cloud services

The shift towards cloud-based and hybrid solutions is a global trend, and Southeast Asia is no exception. As such, the data center market in Southeast Asia is also expected to expand to accommodate the shift towards a greater cloud adoption.

Global cloud providers such as Google, Microsoft and Amazon Web Services already have a strong presence in countries such as Singapore and Indonesia, and have shown interest in advancing in regions such as Malaysia and Thailand, thus driving demand for increased data center capacity.

Rise of IoT, AI and big data

Data-intensive applications such as IoT, artificial intelligence and machine learning based on big data are expected to shape the global data center market, and that applies to players in the Southeast Asia market as well.

These applications demand higher capacities and ultra-low latencies, and push not only for the expansion of data center infrastructure but also for the emergence of new models, such as strategic localization.

The challenges faced by the data center market in Southeast Asia and strategies to overcome them

Infrastructure and connectivity issues

The favorable government policies mentioned above in the article are meant to accelerate the infrastructure needed to accommodate new data center capacities. 

Strategies to expedite this process vary, from improving connectivity and promoting 5G (with crucial initiatives such as the INDIGO submarine cable) to strategic data center localization to reduce latency.

Energy consumption and sustainability

The now lifted Singapore moratorium drew renewed attention on the emphasis on sustainability and energy efficiency. In a region where tropical climatic conditions are the norm, decisions around data center cooling best practices can be a decisive factor in receiving approval for any infrastructure initiative. Additionally, an efficient use of energy is essential in a context where added strains on energy infrastructure can be problematic.

In this context, the emergence of energy-efficient cooling systems such as immersion cooling stand out as capable of significantly minimizing power consumption and thus as key design strategies for successful opportunities within the Southeast Asia data center market.

Regulatory and compliance issues

As mentioned above in the article, regulations around digitalization have tended to welcome data center investments in the region.

At the same time, the emergence of several stringent data protection and data sovereignty laws has had a significant influence on investors looking at the data center market in Southeast Asia for expansion.

On the one hand, this regulation has been a direct growth driver for the proliferation of local data centers. On the other hand, companies wanting to take part in this upsurge must navigate local regulations in order to guarantee compliance.

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Key players in the Southeast Asia data center

The ResearchAndMarkets report cited above in this article mentions the following companies as current major investors in the Southeast Asia data center market: AirTrunk, Digital Edge, ST Telemedia Global Data Centers, Chindata Group, DCI Indonesia, Digital Realty, Equinix, GDS Services, Keppel Data Centres, NTT DATA, Viettel IDC, among others.

It also cites the following investors as entering the market: CtrlS Data Centres, EdgeConneX, Yondr, YTL Data Center, i-Berhad, Gaw Capital, Evolution Data Centres.

Additionally, prominent data center investors cited by the report include AirTrunk, Amazon Web Services, Beeinfotech, Big Data Exchange, Chindata Group, Converge ICT Solutions, DCI Indonesia, Digital Edge, Digital Realty, ePLDT, Equinix, FPT Telecom, GDS Services, Google, Keppel Data Centres, MettaDC, Microsoft, Meta, NTT DATA, OneAsia Network, Open DC, Princeton Digital Group, Singtel, ST Telemedia Global Data Centres, Telkom Indonesia, VADS (Telekom Malaysia), Vantage Data Centers and Viettel IDC.

Future trends and technological advancements in the Southeast Asia data center market

As seen across the article, the Southeast Asia data center market is set to become a pivotal player in the global context: a privileged location where expectations for economic growth and favorable governmental measures have been followed by major investments in recent years.

Shaping the future of this market are trends that correspond with other global movements in the data center segment. Such is the case of the increasing importance of site selection and data center localization, which are expected to become more strategic and extend to locations where reliable electricity, connectivity and water supplies are possible.

Additionally, one key shift that is expected to determine the future of the data center market in Southeast Asia is an increased focus on sustainable, green data centers. While this is yet another global preoccupation, it is in line with recent regulatory efforts such as the Green Data Center standard in Singapore, which invites operators to enhance their commitments to sustainability while proposing specific measures to align with the country’s specific context.

Supporting this move are the region’s remarkable potential for renewable energies, which are expected to expand their total power production capacities in the next few years. At the same time, data center design will need to respond with advanced sustainability measures, with energy-efficient data centers  anticipated to be the norm, building from advanced data center cooling initiatives.

The incorporation of Thermal Energy Storage (TES) systems and other optimized models for cooling represent an opportunity to achieve cost savings, data center redundancy and the support of public authorities. 

At ARANER, our data center cooling line is ready to align with new requirements for infrastructure that is both economically viable and sustainable from an environmental point of view.

Building from our expertise in thermal applications, we offer specialized data center cooling solutions that adapt to each project’s needs and have energy efficiency and sustainability at their core.

Our innovative cooling system project in the Al Ashghal data center is evidence of how advanced thermal solutions such as TES tanks can take data center projects to the next level in terms of sustainability and efficiency.

Get in touch with us and speak to our team about how we can help you achieve the best cooling system for your project.

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