Developing Data Centre Markets in Asia

Globally, emerging data centre markets are largely serving the needs of their own digital economies but also those of more developed markets.

Top 10 emerging global data centre markets, 2023

A Savills APAC report published last year highlights that Indonesia, Malaysia, Thailand and Viet Nam have fewer data centres compared to Hong Kong and Singapore, despite significantly larger populations. India has fewer data centres than Australia.

Thomas Rooney, Senior Manager, Industrial Services, Savills Ha Noi, says: “The world is now digital, with our populations and economies online. We are seeing notable growth in data centre demand, and Asian nations are working to capitalise on this segment. For example, India, Indonesia and Malaysia have invested heavily in their digital infrastructure.”

In Indonesia, 200 million of its 275 million citizens have internet access, and the country’s online retail market is forecast to reach US$95 billion by 2025. Indonesia is a burgeoning tech hub, with homegrown unicorns including GoTo, which raised more than US$1 billion when it was listed last year. Indonesia’s data centres are also likely to serve other markets. For example, Batam, an island near Singapore, is set to be a future data centre hotspot, serving domestic needs but also demand from Singapore. Batam has conventional and renewable power sources, making it attractive to operators.

Malaysia has also invested in its digital infrastructure, with more underwater cable links, boosted domestic connectivity and 5G. This has sparked interest from foreign companies, such as Australian data centre operator NEXTDC, which is building a 65MW colocation centre; it will be Malaysia’s largest Tier IV facility.

India has the world’s largest population and increasing wealth levels, which are driving the need for data centre development. Savills research highlights that it added 150MW of capacity in 2022 and forecasts expect a further 250MW in 2023, bringing the capacity to more than 1GW. Government-led initiatives such as Digital India, and an emphasis on self-reliance and data protection through data localisation are expected to increase the data volume in India, which will create increased demand for data centres.

Viet Nam’s data centre industry

Viet Nam’s cloud and data centre industry is one of the fastest growing in the world. It is driven by the digitalisation of the local SME sector, a young and digitally literate population, the arrival of 5G, the need for self-sufficiency in digital infrastructure, and data localisation laws.

According to Savills Industrial Whitepaper 2023, Vietnam has 28 data centres with a total capacity of 45 MW with 44 service providers.

Since Q1/2021, enquiries from foreign data centers operators looking for locations and potential joint-venture partners have increased on the back of hyperscales announcing interst in Viet Nam. In August 2022, Amazon Web Services announced the launch of edge data centres in Ha Noi and Ho Chi Minh City.

Most of the players in Viet Nam’s data centre segment are local telecommunications companies such as Viettel IDC, NTT Global Data Centers, FTP Telecom, CMC Telecom, HTC Telecom International (ECODC), VNPT, and VNTT. IT Infrastructure providers include HP, Dell, Cisco Systems, Fujitsu, Hitachi, Huawei, IBM, Lenovo, NetApp, NEC Corp, and Oracle.

The Government aims for Viet Nam to become a key digital hub, and the data centre market is forecast to grow to US$1.04 billion by 2028, up from US$561 million in 2022 and representing a CAGR of 10.7%. According to Viettel IDC, accelerating the commercialisation of 5G technology is essential to meet Industry 4.0 movements like AI, big data, and IoT. 

The Government has a Digital Transformation Program, which aims to transfer 50% of business to digital platforms by 2025. Viet Nam’s 5G connectivity supports edge data centre deployment and offers last-mile connectivity and lower latency services. In February 2022, the Ministry of Information and Communication announced its research plans for developing 6G technology to cater to the fastest growing technology sectors.

The country has five existing submarine cables connecting to APAC and EMEA countries and the US. Two upcoming cables expected between 2023 and 2024 include Asia Direct Cable (ADC) and Southeast Asia-Japan Cable 2 (SJC2).

According to Thomas Rooney, rapid growth could emphasise risks related to data privacy, cybersecurity, sustainable resource consumption, reliability, and quality of service. These issues require legislative and land considerations from the Government. Viet Nam must address the challenges to embrace the opportunities presented by cloud, colocation, enterprise and edge computing.

“There is also potential for building portfolios here in the Asia Pacific, which will take time due to the fragmented nature of current ownership. However, the growth in specialist funds around the globe demonstrates the potential this sector holds. Recent data from Savills World Research highlights that although core investment strategies are likely to dominate in 2024, we are likely to see a rise in opportunistic investment in sectors like data centres,” Thomas said.