Market Insights

Data Centers in Southeast Asia: Expansion and Opportunities Amid Rising AI Adoption

Computing engineer working in a Malaysian data center

Southeast Asia (SEA) is experiencing a significant surge in data center development, driven by the rapid adoption of artificial intelligence (AI) and a growing demand for cloud computing. In 2023, the region’s data center market attracted $10.23 billion in investments, with projections reaching $17.73 billion by 2029, reflecting a CAGR of 9.59%. The data center construction market is expected to grow at an 11.18% CAGR, reaching $5.29 billion by 2029.

This growth is supported by SEA’s expanding digital economy, increased internet penetration, and rising need for robust digital infrastructure. Countries like Singapore, Malaysia, Thailand, and Indonesia are leading this transformation, positioning SEA as a global digital hub.

Globally, the data center market was valued at $141.16 billion in 2023 and is projected to grow at a 26% CAGR, reaching $711.72 billion by 2030. In contrast, SEA’s market, with its 9.59% CAGR, highlights the region’s crucial role and the increasing demand for digital infrastructure driven by AI, cloud computing, and data sovereignty regulations.

These trends underscore the rapid investments and technological advancements in the global data center landscape, with SEA playing a vital role in this expansion.

Graph showing SEA’s data center market (2023 - 2029)

Factors Driving Growth

The expansion of data centers in Southeast Asia (SEA) is driven by technological advancements, rising data consumption, and supportive government policies. Key factors include the adoption of AI, cloud computing, IoT, edge computing, and 5G, which are increasingly integrated into business and government operations. This integration amplifies the demand for advanced data infrastructure, especially in sectors like finance, healthcare, and e-commerce.

Internet penetration and digital services usage in SEA have surged, adding approximately 125,000 new internet users daily, making it the world’s fastest-growing digital market. Data-intensive activities such as video streaming, online gaming, social media, and e-commerce necessitate expanded data center capacity. Monthly data usage in South and Southeast Asia is projected to rise from 9.2 GB in 2020 to 28.9 GB per user by 2025.

Initiatives like Malaysia’s JENDELA broadband project aim to enhance digital infrastructure, supporting the rapid growth of data centers. Stringent data sovereignty regulations in SEA, such as Malaysia’s Personal Data Protection Act (2010) and Vietnam’s Cybersecurity Law (2014), require local data storage and processing, driving investments in local data centers. These regulations also present challenges for international companies, including increased operational costs and legal complexities. To navigate these, companies are investing in advanced data management technologies and partnering with local firms to leverage local expertise and infrastructure.

Thai billionaire Sarath Ratanavadi is making significant investments to expand data centers in response to the rising demand for AI services. His company, Gulf Energy Development Pcl announced a 271 million USD investment to double the capacity of their data center to 50 megawatts in Bangkok. The expansion includes enhanced data storage, processing power, and reliability, which is also expected to create numerous job opportunities in various sectors like construction, IT, and facility management.

In addition, Gulf Energy has also partnered with Alphabet Inc., Google’s parent company, to enhance cloud operations in Thailand. This collaboration taps into Google’s cloud technology to support the region’s growing data infrastructure needs, aligning with increased global tech investments in Southeast Asia.

Key Players and Market Dynamics

Global technology companies like Google Cloud, Amazon Web Services (AWS), and Microsoft Azure are investing heavily in Southeast Asia (SEA) to expand their data center presence. AWS plans to double its investment in Singapore to 23.5 billion SGD (over 17 billion USD) by 2028, with additional commitments of 6 billion USD in Malaysia by 2037 and 5 billion USD each in Thailand and Indonesia over 15 years. Microsoft CEO Satya Nadella announced investments of 1.7 billion USD in Indonesia and 2.2 billion USD in Malaysia for cloud and AI infrastructure.

Local and regional companies are also crucial players. SingTel, a leading Singaporean telecom operator, runs over 20 data centers in Singapore and offers a range of cloud and data solutions across SEA. ST Telemedia Global Data Centers (STT GDC), headquartered in Singapore, operates data centers in six major SEA economies, including Singapore, Malaysia, Thailand, Indonesia, the Philippines, and Vietnam, with over 500 megawatts of capacity.

Partnerships, collaborations, mergers, and acquisitions are common strategies in the region’s data center market. Notable examples include Gulf Energy’s alliance with Alphabet Inc. to enhance cloud services in Thailand and STT GDC’s acquisition of Tata Communications’ 26% stake in data center assets, significantly boosting its footprint in Singapore.

Economic and infrastructure impact

A. Economic growth and job creation

Global investors like Bain Capital, KKR & Co., Blackstone, PGIM, and Warburg Pincus are significantly investing in data centers across Asia and Southeast Asia, driving economic growth and job creation. Bain Capital’s 3.2 billion USD acquisition of Chindata Group will create numerous positions in construction and maintenance. KKR’s 800 million USD stake in Singtel’s data center business will generate roles in IT management and network engineering. Blackstone’s new data center platform in Asia will create jobs in design, construction, and operations.

PGIM plans to invest up to 3 billion USD in data centers in key Asia-Pacific markets, boosting jobs in construction and IT services. Warburg Pincus, through Princeton Digital Group, has expanded its investments in Malaysia and Indonesia, creating jobs in construction and facility management. These investments will spur both direct job creation in construction and IT and indirect job creation in support industries, enhancing local economies, driving technological innovation, and improving digital infrastructure.

B. Technological advancements

The rise of data centers in Asia, particularly Southeast Asia, is transforming the digital landscape by improving connectivity and internet infrastructure. Initiatives like the INDIGO submarine cable and strategic data center placements reduce latency and enhance service reliability. Major investments from tech giants and investment firms are accelerating cloud computing and storage solutions, bringing data closer to users and increasing efficiency.

Advanced IT infrastructure supports IoT integration, enabling real-time data processing and smart city projects. Robust data centers bolster e-commerce and digital banking growth in India, Indonesia, Thailand, and Vietnam, ensuring secure online transactions. Additionally, Asian data centers are leading in sustainability, with significant investments in renewable energy and eco-friendly operations by companies like Apple and Microsoft.

The demand for decentralized edge computing drives the development of colocation data centers in secondary markets, supporting real-time applications critical for industries like autonomous vehicles and industrial IoT. These advancements highlight the crucial role of data centers in shaping Asia’s future and solidifying its position as a rapidly evolving market.


A. Labor

Southeast Asia faces a severe shortage of skilled workers in the data center industry due to inadequate education and training, lack of career awareness, and insufficient infrastructure investment. This problem is part of a broader tech labor crisis, with a predicted global shortfall of 4.3 million workers by 2030. The region’s lack of specialized data center programs results in few trained professionals. Additionally, many potential workers are unaware of opportunities in the industry, complicating recruitment. Insufficient investment in necessary infrastructure also hampers data center development and maintenance, making it difficult to attract skilled workers. As more data centers are built, the demand for skilled labor increases, but the supply does not keep up. The complexity of operating data centers means that human errors can lead to severe consequences, such as equipment failure and data loss.

B. Energy demand

Data centers in Southeast Asia face high energy demands and environmental impacts due to heat and humidity, necessitating extensive cooling systems. AI integration further raises electricity use and carbon emissions. Balancing efficiency with sustainability is vital. In 2024, regulatory demands to reduce carbon emissions will spur innovation in cooling and sustainable energy practices. Data centers must adopt advanced technologies to meet strict regulations, lower costs, and support sustainability.

Effective cooling is crucial in tropical climates to prevent system failures. Indonesia, Malaysia, and Singapore must use methods like air conditioning, liquid cooling, and free cooling, considering cost and efficiency. Managing energy involves using advanced cooling, renewable energy, and enhancing AI efficiency. Collaborative efforts are needed to reduce environmental impacts and ensure sustainability. Future strategies must minimize environmental impact while promoting growth and innovation.

Outlook and Prospects

The future of data centers in Southeast Asia looks promising, but foreign companies will face several complex challenges. These include navigating diverse regulatory requirements across different regions, managing high energy consumption, and meeting increasing demands for sustainability and energy efficiency. The push for greener and more efficient facilities will result in stricter environmental regulations, influencing the development and location of data centers. Additionally, companies must deal with land acquisition issues and varying infrastructure quality across the region.

Additionally, local partnerships will become increasingly important as foreign firms grapple with complex regulatory environments that their local counterparts may not face. The trend towards self-reliance in many Southeast Asian countries could lead to sudden regulatory changes, complicating investment opportunities. To thrive, foreign companies must closely monitor regulatory developments, assess the strengths and weaknesses of various locations, and devise strategies to comply with evolving requirements. Long-term sustainability and environmental concerns will remain a key focus, requiring innovative solutions that balance efficiency, regulatory compliance, and environmental responsibility.

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