Malaysia, the next regional data centre hub
17 Apr 2023
The domestic data centre market is projected to grow at a CAGR of 7% to RM7b by 2027
Malaysia is seeing accelerated data centre capacity plant-up and is expected to see a raft of new and emerging investments with over 800-megawatt (MW) capacity projected to come on stream in phases over the next five years due to lower land and energy costs.
Malaysia has evolved into an attractive location for data centre investments, thanks to abundant land and power resources, good international connectivity and supportive government policies, according to RHB Investment Bank Bhd.
Citing a report by Arizton Advisory and Intelligence, it said the domestic data centre market is projected to grow at a compounded annual growth rate (CAGR) of 7% to US$1.6 billion (RM7.02 billion) by 2027 from US$1.1 billion in 2021. Growth is said to be driven by rapid hyperscale investments and strong co-location demands.
Malaysia is already home to some 41 enterprise data centres which include the likes of AIMS Data Centre Sdn Bhd, Bridge Data Centres (M) Sdn Bhd, GDS Services Ltd, Keppel Data Centres Holdings Pte Ltd and TM ONE/VADS Bhd.
The development of the data centre industry is overseen by the Malaysia Digital Economy Corp (MDEC), an agency under the purview of the Communications and Digital Ministry, tasked with advancing the nation’s ICT and digital economy.
Together with the Malaysian Investment Development Authority (MIDA) and the Performance Management and Delivery Unit (Pemandu), they form the data centre task force (DCTF) responsible for facilitating data centre investments into the country.
The DCTF acts as a one-stop shop to assist potential data centre investors looking to establish their presence in the country. The task force works to understand investors’ requirements and specifications, and to connect them with relevant stakeholders such as the utility providers, telecommunication companies, land owners and relevant government agencies. Ultimately, the task force expedites the overall end-to-end process for DC investments in the country.
Hyperscalers Making Landfall
In a report released last week, RHB Research said while the data centre industry has grown steadily over the past decade, MDEC estimates that the overall industry capacity stood at about 100MW at the end of 2021.
“The figure is set to be dwarfed over the next decade, as upcoming hyperscale developments should see an additional 800MW capacity progressively come on stream,” it said.
The local research house views the setting up of cloud regions by Microsoft Corp and Amazon Web Services (AWS) as a major coup with significant upsides for the domestic data centre industry and the economy.
Last month, AWS officially announced a US$6 billion investment to set up a cloud region in Malaysia to meet the strong demand for cloud services in the country and in South-East Asia. To be staggered over 15 years, the sum represents the single largest international technology investment of its kind in Malaysia.
The new AWS region will consist of three availability zones, adding to the 99 availability zones across 31 geographic locations globally (including in Singapore and Indonesia) with each availability zone having its own independent power, cooling, physical security, and connected through redundant and low latency networks.
AWS’s existing customers include Astro Malaysia Holdings Bhd, Axiata Group, Bank Islam Malaysia Bhd, CelcomDigi Bhd, Johor Corp, Payments Network Malaysia Sdn Bhd and Petroliam Nasional Bhd.
Malaysian start-ups and small businesses such as Carsome, Baba Products, Omesti and StoreHub have also been building their businesses on AWS’ cloud offerings.
In April 219, Microsoft established its first data centre region in the country with US$1 billion invested over five years.
“Based on our checks with industry sources, Microsoft Azure is the anchor tenant for Keppel’s maiden Tier-3 data centre in Johor’s Sedenak Technology Park which has a gross floor area of 100,495 sq ft,” RHB Research said.
It noted that Johor has also been the focal point of data centre investments in recent years.
RHB Research said this was likely catalysed by the moratorium imposed by the Singapore government in 2019 on data centre construction.
“Singapore’s decision in early 2022 to calibrate new data centre builds has been a blessing in disguise, with the likes of Equinix Inc, AirTrunk Singapore Pte Ltd, Yondr Group and GDS Holdings Ltd locating their maiden facilities in Malaysia’s southern state of Johor,” it said.
Johor Chief Minister Datuk Onn Hafiz Ghazi was previously quoted by media sources as saying that the state expects to attract some RM15 billion worth of data centre investments over the next decade owing to rising demand for cloud services in the region.
Emerging Data Centre Hub in Asia
RHB Research sees Malaysia as an emerging data centre hub in Asia, with supportive pro-business policies to attract and retain data centres investors.
It noted that the new government is committed to further accelerating digital adoption in the country, which augurs well for the domestic data centre industry.
It said the positive outlook of the data centre sector is also supported by the New Investment Policy unveiled by the Investment, Trade and Industry Ministry (MITI) in October 2022, where the government is looking to boost economic complexity to spur high-value job opportunities.
“The country’s large pool of knowledge and skilled workers portends a significant competitive advantage in catalysing greater foreign direct investments, which is crucial for the data centre space, in our view,” it said.
Aside from AWS and Microsoft, which have committed to setting up cloud regions in the country, it noted that the likes of global data centre names such as GDS, Equinix, and Yondr are pouring in significant capital to construct their maiden facilities in the country.
RHB Research said investment ideas in the data centre fold naturally gravitate towards the traditional fixed line telecommunications, given that data centres are lynchpin assets for enterprise-related services and solutions that complement the vast submarine cable assets owned.
“While there are no pure-play data centre companies on Bursa Malaysia, a play on the data centre theme should also include construction related and/or services-type companies that form part of the broader value chain, in our view.
The research house picked Telekom Malaysia Bhd, TIME dotCom Bhd and Sunway Construction Group Bhd as the core beneficiaries of the data centre boom in the country.
Source: The Malaysia Reserve