As foreign cloud service providers and data center operators invest billions of dollars to establish new centers in developing countries like Thailand, Indonesia and Malaysia, Southeast Asia is fueling the growth of the globe's cloud infrastructure.
The third data center that Japan's NTT Group will construct in Bangkok will cost $90 million as it tries to meet the growing demand from cloud service providers. Earlier this month, Amazon's cloud computing division agreed to invest $6 billion in Malaysia over the next 14 years.
However, in a price-sensitive market that is still outpaced in size by other regions, servicing that demand in a manner that is environmentally responsible could be difficult.
Southeast Asia's cloud infrastructure $2.18 billion in revenue in 2022, up 25% from the previous year, according to U.S. market researcher IDC. While Singapore made up around half of the total, other countries with yearly growth rates of over 30% were the Philippines, Indonesia, Vietnam, Thailand and Indonesia. These countries outperformed the rest of Asia and the world markets, which grew by 25% and 29%, respectively.
Sutas Kongdumrongkiat, president and CEO of NTT's Thai unit, told Nikkei Asia in a recent interview that the Asia-Pacific region is a key growth region. He explained, “We see quite a huge potential of data center consumption. We have plans to expand more.”
The Bangkok 3 Data Center (BKK3), which is expected to open in 2024 and is located on the Amata Nakorn Industrial Estate in Thailand's Eastern Economic Zone, will be about an hour's drive from the heart of Bangkok. With a maximum power capacity of 12 megawatts, the 4,000 square meter area will have more than twice the capacity of its second site.
Hundreds of server racks owned by a global cloud service provider, which NTT requested not be named, run continuously inside the four-story BKK 2 data center.
Sutas said, “Meeting huge capacity [demand] in the short term is difficult. [They] can provide their services to companies much [more] quickly.”
While the rapidly expanding economies of Southeast Asia struggle with erratic power supplies, NTT has noticed an increase in demand from businesses with mission-critical operations, including banks and cloud service providers.
With redundant systems that enable workers to maintain equipment without taking it offline and various channels for electricity and cooling, the third data center will adhere to so-called “Tier 3” requirements.
In comparison to previous sites in Bangkok, the location has improved flood protection. Sutas continued by saying that NTT has “already reserved the land” in a nearby location in order to be “prepared for future expansion” and to construct its fourth and fifth locations in order to satisfy the needs of purported hyperscale cloud vendors.
The most recent expansion of NTT's presence in Southeast Asia is the new Bangkok location. It finished building its third data center in Jakarta in April of last year, and with an expenditure of more than $50 million, it plans to finish building its sixth location in Malaysia's multimedia hub Cyberjaya, on the borders of Kuala Lumpur.
In the region, Singapore has been the market leader for data centers, but as the city-state has grown, local businesses like Temasek-backed ST Telemedia Global Data Centers (STT GDC) have also been growing internationally, including in Thailand.
With $338 million in revenue in 2022, Thailand was the next largest regional market after Singapore, followed by Indonesia ($313 million) and Malaysia ($221 million), according to IDC data.
Other than the acceleration since the COVID-19 epidemic, which increased online data consumption in the area, some of the key factors influencing this rise include the introduction of Chinese global suppliers like Huawei Technologies and Alibaba Cloud as well as investments by U.S. companies.
According to analysts and local businesses, Huawei joined the Thai cloud market in 2018 and offered services for about one-third the cost of competitors. After AWS and Microsoft, the business rose to third place in just two years.
The Chinese IT company wants to expand in other countries in a similar way. After its expansion into Singapore and Thailand, Huawei entered the Indonesian market in November with a new data center and a commitment to spend $300 million over the following five years.
Players from the U.S. have been expanding, including AWS, the major business in the area. After a similar $5 billion pledge in Indonesia the year before, it said last year that it would invest $5 billion in Thailand over the following 15 years.
Nonetheless, despite its rapid growth, the cloud infrastructure business in the region still only contributes 2% to global revenues. Cloud providers want to offer more than just cheap data storage; they also want to help users get the most out of their systems. One method to do this is by processing stored data with AI and machine learning tools.
IDC research manager Prapussorn Pechkaew believes more regional businesses will choose services with higher security and more advanced technical capabilities. She told Nikkei Asia that “amid the recessionary concern, the cost factor could become what companies would put more weight on,” but in the short term.
Higher standards of environmental sustainability will be difficult for the region to satisfy in the long run. By the year 2030, Google wants to have all of its cloud data centers running continuously on carbon-free energy. By 2040, Amazon, including AWS, wants to have zero carbon emissions.
Yet, the region's renewable energy resources are constrained, even in developed markets like Singapore. According to the International Energy Agency, the region's power generation in 2022 was mostly based on coal and gas, which met 43% and 29% of the demand, respectively. Renewable sources accounted for 27% of the total. This was less than the Americas (36%) and Europe (40%), combined.
IDC's Prapussorn stated, “Eventually, regional companies' demand will be in the more efficient and sustainable data centers. It will be the main concern for the new setup.”
