Malaysia is rapidly rising in Southeast Asia and across the entire Asian region, becoming a powerhouse in the data center industry. According to the "2024 Global Data Center Index" by DC Byte, Johor Bahru is the fastest-growing data center market in Southeast Asia. This market has attracted billions of dollars in data center investments from tech giants like Google, NVIDIA, and Microsoft. James Murphy, the Asia-Pacific General Manager of DC Byte, notes that Johor Bahru is expected to surpass Singapore in the coming years to become the largest data center market in Southeast Asia.
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With the global digital transformation and the growth in cloud adoption, the demand for cloud computing and artificial intelligence has surged. Emerging markets like Singapore, Malaysia, and India have also seen a spike in demand for cloud services. According to a report by data center provider EdgeConneX, the increased demand for video streaming, data storage, and internet and mobile applications means further growth in demand for data centers. Additionally, the surge in AI services requires specialized data centers to store vast amounts of data and conduct training.
Although many AI data centers will be built in mature markets like Japan, Murphy indicates that emerging markets are also attracting investments due to their favorable conditions. AI data centers require substantial space, energy, and water for cooling. Therefore, emerging markets like Malaysia, with cheaper energy and land compared to small city-states like Hong Kong and Singapore, have certain advantages.
Moreover, data center investments and planned capacities in Singapore have shifted to Johor Bahru at the border. While Singapore has outlined a roadmap to expand data center capacities, there are still many limitations, such as the inability to conduct large-scale green energy generation due to its small size. The data center investment boom in Malaysia not only drives economic growth but also raises concerns about energy and water resources.
Kenanga Investment Bank Research estimates that by 2035, the potential power demand for data centers in Malaysia will reach 5 gigawatts, while the current installed power capacity for the entire Malaysia is approximately 27 gigawatts. Mohd Noorazam Osman, the Mayor of the Johor Bahru City Council, states that data center investments should not compromise local resource needs, especially given the challenges in water and power supply in the city. Meanwhile, the Johor state government will also introduce more guidelines on the use of green energy for data centers in June.