The exponential rise of artificial intelligence (AI), Augmented Reality (AR) and the Internet of Things (IoT) is reshaping the digital landscape and driving unprecedented demand for additional hyper-scale data centers across Asia. However, infrastructure providers find themselves at a crossroads as they grapple with the challenge of selecting optimal locations for these critical facilities, balancing economic considerations, evolving government regulations, ESG and sustainability agendas, and being aware of the various political factors shaping Asia’s booming data center market.
Economic Considerations and Regulatory Hurdles
While economic rationale might advocate consolidated data center facilities, Asian governments are tightening data usage and sharing regulations, posing a dilemma for transnational data center providers. China and Vietnam, in particular, have enacted stringent data protection and control regulations under the mask of national security. China’s recent proposal to reduce data export security controls needs more clarity, leaving global businesses seeking further undertakings about the potential consequences of data transfers out of this country. Additionally, Vietnam recently implemented a Personal Data Protection Decree (PDPD) in July 2023, mandating draconian impact assessments before transferring Vietnamese citizens’ personal data abroad and placing general limits on data export.
Data Consolidation Trends
Despite regulatory challenges, most firms in the Asia-Pacific region are leaning towards data center consolidation. Companies are looking for a more efficient and secure approach rather than opting for multiple data centers for each market. Not only is this approach cost-effective, it maximizes access to transmission capacity, reduces latency to major international markets, and ensures streamlined and secure data storage arrangements.
Preferred Jurisdictions and Growth Drivers
Due to increasingly stringent data and cybersecurity laws in some Asia countries, Thailand and Australia are emerging as popular choices for data center consolidation. The rapid advancement of AI, IoT and AR fuels this immense demand for data centers, particularly in Asia, if only due to population density and technological uptake. Other factors, like the move towards a cashless society, the rollout of 5G and the upcoming 6G networks, and the rising demand for digital sovereignty, contribute to the sector’s growth. Thailand benefits from latency and a low-cost footprint compared to Australia but has just recently provided sufficient incentives to international data center companies.
The Asia-Pacific data center market is poised for substantial expansion, with a projected compound annual growth rate of 12% from 2023 to 2027. Consultancy firm Renub Research estimates the market will reach a staggering $48 billion by 2027. As of the end of 2023, China boasts the highest number of data centers in the region, with 449 facilities, followed by Australia, Japan, and India, according to Cloudscene.
Expansion Beyond Traditional Hubs
The explosive growth in data has prompted a shift in the data center industry, expanding beyond its traditional hubs of Hong Kong, Singapore and Australia. Southeast Asia, particularly Thailand, is experiencing robust demand as societies rapidly transition to digital platforms. Despite retaining regional or global headquarters in Singapore, most Asia-focused companies are now expanding their portfolios into other countries like Thailand, driven by cost, connectivity and regulatory considerations.
Challenges and Double-Edged Sword
While the growth of hyper-scale data centers promises improved backup and redundancy, it also presents challenges. The surge in endpoint device usage and interconnected facilities increases vulnerability points susceptible to hacking. Ongoing U.S.-China and Russian tensions further complicate the landscape, with updated export controls adding another layer of complexity for sectors relying on localized technology and data.
Data centers are also power-hungry and require careful planning due to their infrastructure needs.
Thailand’s Data Center Market
Amid this dynamic landscape, Thailand’s data center market is poised for triple-digit growth over the next two years. ST Telemedia Global, a hyper-scale data center firm, puts this down to Thailand’s appeal to global cloud service providers and companies. The CEO of STT GDC Thailand recently emphasized Thailand’s potential as a strategic regional hub driven by geopolitical advantages, political neutrality, and robust regional transport connectivity.
Thailand’s Move to Green Data Centers
Thailand’s commitment to renewable energy aligns with developing a green digital infrastructure in the region, contributing to sustainable economic growth. With data centers managing substantial data, the need for larger spaces and increased energy becomes inevitable. However, this often involves electricity from fossil fuels, raising concerns about greenhouse gas emissions and volatile electricity prices.
Recognizing digital transformation as a crucial element for enhancing overall economic competitiveness under the framework of Thailand 4.0, sustainability has emerged as the guiding principle in infrastructure planning. This commitment was evident during the 2022 APEC Summit, emphasizing Thailand’s endeavor to balance performance and sustainability. As Thailand focuses on post-Covid recovery and growth, the Srettha government has pledged to prioritize consistent, sustainable development to ensure long-term prosperity.
Thailand’s industrial estates actively respond to this increasing demand for green data centers by designing their estates with cutting-edge alternate energy technology and resource recycling, which is a significant step towards achieving sustainable digital infrastructure.
As the spotlight on sustainability extends to data centers, Thailand’s industrial estate developers are at the forefront of this movement, hosting some of the region’s most advanced co-location and cloud services data centers, exemplified by SUPERNAP (Thailand). This joint venture between leading Thai companies and Switch, a global leader in data ecosystems and designs, stands out as one of the region’s few Tier IV colocation and cloud data centers, with most of its power coming from a solar panel farm. The data center’s solar panel farm reduces the carbon footprint for co-location and cloud clients and mitigates the impact of energy price fluctuations.
The coming year will see sustained growth in hyper-scale data centers in Thailand, and it is a sector with significant opportunities for foreign investors and providers seeking inroads into regional markets.
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