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Increasing Demand From AI Is Driving Malaysia To Become A Power House For Data Centres

Increasing Demand From AI Is Driving Malaysia To Become A Power House For Data Centres
As demand for cloud computing and artificial intelligence soars, Malaysia is becoming a data centre powerhouse in Southeast Asia and throughout the continent.
The nation has seen billion-dollar data centre investments over the last few years, notably from major IT companies like Microsoft, Nvidia, and Google.
According to James Murphy, the general director for APAC at DC Byte, a data centre intelligence business, a large portion of the investments have been made in Johor Bahru, a tiny city on the Singaporean border.
“It looks like in the space of a couple of years, [Johor Bahru] alone will overtake Singapore to become the largest market in Southeast Asia from a base of essentially zero just two years ago,” he said.
According to DC Byte's 2024 Global Data Centre Index, Johor Bahru is the Southeast Asian market with the quickest rate of growth.
According to the research, the city has 1.6 gigawatts of total data centre supply, including committed, under-construction, and early-stage planned facilities. A data center's capacity is commonly determined by how much power it uses.
The only countries in Asia that will beat Malaysia in terms of capacity if all projected capacity comes online are the bigger nations of Japan and India. In terms of live data centre capacity, Singapore and Japan had previously led the area.
A comprehensive breakdown of China's data centre capacity was not included in the ranking.
The established markets of Singapore, Japan, and Hong Kong have historically received the great bulk of investments made in data centre infrastructure and storage.
However, according to a research by global data centre supplier EdgeConneX, the epidemic accelerated the adoption of cloud computing and digital transformation worldwide, creating a boom in demand for cloud providers in developing nations like Malaysia and India.
"There will be a greater need for data centres due to increased demand for video streaming, data storage, and anything done online or on a phone," Murphy stated.
Specialised data centres are needed to store the massive volumes of data and processing power needed to develop and implement AI models, which is a result of the growing demand for AI services.
Murphy stated that emerging economies would also draw investments because of their advantageous features, even if many of these AI data centres will be constructed in developed nations like Japan.
AI data centres need large amounts of electricity, water, and space for cooling. Because land and energy are less expensive in rising markets like Malaysia than in smaller city-states like Hong Kong and Singapore, these resources are more advantageous.
Furthermore, enticing to investors are Malaysia's accommodating rules regarding data centres. In 2023, the government started the Green Lane Pathway project to expedite electricity permits, cutting the lead time for data centres to as little as 12 months.
Nonetheless, legislation in Singapore across the border has been a significant motivator in recent years.
Although Singapore's corporate trust, talent pool, and fibre connection make it a desirable location for data centres, the government started limiting the increase of data centre capacity in 2019 because of the large amounts of energy and water they use.
As a result, throughout the years, a significant amount of projected capacity and investment has been moved from Singapore to the nearby Johor Bahru.
Recently, Singapore announced plans to increase the capacity of its data centres by 300 MW, provided that any projects fulfil criteria for renewable energy and environmentally friendly efficiency. Investments in these initiatives have come from Microsoft and Google.
However, Murphy of DC Byte noted that there are still many restrictions on the market since Singapore is too tiny to support large-scale green power generation.
Although the growth of data centres has boosted Malaysia's economy, there are also worries about the country's energy and water needs.
According to research conducted by Kenanga Investment Bank, by 2035, Malaysian data centres might require a maximum of 5 GW of power. Approximately 27 GW of installed electrical capacity are now present across Malaysia, shows data from the Malaysian electricity company Tenaga Nasional Berhad.
According to a recent story from The Straits Times, local officials are growing more worried about the amount of this electricity use.
Given the city's problems with its water and electricity supplies, Johor Bahru City Council Mayor Mohd Noorazam Osman allegedly stated that data centre projects should not jeopardise local resource demands.
A representative of the Johor Investment, Trade, and Consumer Affairs Committee informed ST that further requirements regarding the usage of green energy by data centres will be implemented by the state government in June.

Christopher J. Mitchell

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