An in-depth analysis of data centers in Malaysia from 0 to 1!
Infrastructure construction or land sales to operators, developers vying for data center opportunities.
Exclusive Report: @Jungle lee
【Data Center Series (Part 1)】
With the residential market becoming increasingly crowded, the emergence of data centers has captured significant attention, further energizing the already active industrial sector. Almost every week, different industrial companies make major announcements, either about constructing or investing in data centers, resulting in a hot market.
The market has shown willingness for the development of data centers in various regions of Malaysia, with continuous digital transformation initiatives driving potential entry of super large-scale data centers into the Malaysian market. This trend and opportunity shape the future of Malaysia's data centers.
Industrial companies never engage in loss-making businesses, investment opportunities come with business opportunities. Having a large landbank, especially in Johor and Klang Valley, and financially sound developers, there is a chance to seize opportunities and diversify income when this wave of data center boom hits.
With the Singapore government banning the construction of new data centers in 2019 and conditionally lifting the ban in 2022, Johor, strategically located near water sources, is leading the way in data center development in Malaysia, while the tech hub of Cyberjaya is also catching up.
As a long-term operating data center, it is expected to become the new favorite of the industrial sector, but what benefits can attract large industrial companies to enter? What factors, both domestic and international, are driving its growth? Can our country's hydroelectric, fiber optic, and digital infrastructure handle this sudden surge in demand?
The Nanyang Business daily's series of reports on data centers, letting data and facts convince everything.
Stable hydroelectric network in a strategic location.
Johor's data center leads Malaysia.
Malaysia's unique geographical location is an ideal place for many global tech companies to set up data centers in Southeast Asia.
In addition to promising prospects and revenue sources for developers, Malaysia also benefits from the tensions between China and the United States, as companies can better control geopolitical risks.
According to the Industrial Securities research report titled 'When Technology Meets Real Estate,' developers who have always been active in the industrial sector are expected to have greater opportunities to achieve revenue growth. Either selling land or building data centers, like UEM Yangguang. $UEMS (5148.MY)$, Nami Industry $SIMEPROP (5288.MY)$, Maxin Group $MAHSING (8583.MY)$, Tengyu Group $AME (5293.MY)$ and Green Shengshi $ECOWLD (8206.MY)$。
Operating data centers requires stable and reliable power and water supply, with even more important fiber optic connectivity infrastructure in place. Due to the high cost of building infrastructure in remote areas, data centers generally do not choose these locations; being close to various sources of supply is the best choice.
Benefiting from the prohibition in Lion City
Singapore has become a focal point for data centers in Southeast Asia, gathering various advantages.
Looking back at our country, Johor is able to lead the entire Malaysia in the development of data centers to a large extent due to the prohibition in Lion City. Being close to Lion City can reduce network latency, make operational coordination and management easier. Additionally, Johor's water, electricity, and land prices are relatively cheaper. Data centers can utilize Lion City's network or Malaysia's existing undersea cables for connectivity, leading many data center operators to expand their businesses here.
Currently, Johor's main data centers are Iskandar Puteri Tech Park, Johor Technology Park, Nusa Cemerlang Industrial Park, and Nusajaya Technology Park.
In the Klang Valley, Cyberjaya, as a technology hub, is well-equipped in terms of network connectivity and infrastructure, making it a focal point for data center investment. Industrial analysts believe that developers with large plots of land will better utilize the land and release indirect spillover effects, as other tech companies may follow suit and move into the data center.
Data centers highly prioritize security, stability, reliability, and connectivity. The strategic location is exceptionally crucial, directly impacting operational costs and facility lifespan. Therefore, not all regions are suitable for constructing data center facilities.
Despite being outside the Pacific Ring of Fire, Malaysia generally does not experience major natural disasters such as earthquakes, volcanic eruptions, and typhoons. However, this does not mean the country is immune to flooding, man-made disasters, landslides, and severe haze outbreaks. In recent years, extreme weather has also triggered disasters in some areas of Peninsular Malaysia.
Multiple considerations for site selection.
Water, electricity, and internet connectivity are essential key factors for data centers, along with land and construction costs, tax incentives, and government measures.
Electrical utilities supply is particularly important, and electricity costs will account for a large part of operational costs. When selecting a site, factors to consider include proximity to the electrical grid, the completeness of infrastructure in the area, availability of alternative energy sources such as solar energy, as well as fiber optic resources for internet connectivity or telecom infrastructure and its transmission speed.
Additionally, in order to prevent Information Technology (IT) equipment and machinery from overheating or malfunctioning, data centers require a large amount of water for cooling systems. One method to reduce Power Usage Efficiency (PUE) is water evaporative cooling. Removing water from the system can increase energy efficiency in operations.
There are opportunities with land.
Industrial investment institutions are bullish on developers who have a large number of land banks in suitable locations to seize this business opportunity, especially where the land is equipped with infrastructure, not far from major cities, and with good internet connectivity.
Due to the strict security requirements of data centers, they need to be located far away from residential and commercial areas. Developers may choose to build data centers in existing industrial parks.
UEM Sunrise, Sime Darby Property, IGB REIT, Mah Sing Group, Tropicana Corporation, and Eco World Development Group all meet the above criteria and are expected to benefit from them.
A bird's eye view of Malaysia's first Google data center and Google Cloud Region. (Provided by Google)
3条“进军路线”
发展商多卖地予营运商
发展商可能有3种模式进军数据中心：
（一）共同投资；
（二）建造和出租外壳及核心设施，以获得持续收入；
（三）与数据中心营运商组成合资企业，共同运营主机托管。
至今，发展商主要是卖地块给数据中心营运商。吉星机构 $CRESNDO (6718.MY)$在一年内卖了4块柔佛地皮给数据中心营运商，总面积3.72 million平方尺，交易价是每平方尺120至125令吉。
On the 10th of this month, Lush Times announced the sale of 123.14 acres of land in Johor Kelai for 0.4 billion 2.3 million 2175 ringgit to Microsoft.
In May of this year, Teng Yu Group sold 34.91 acres of land in Johor to a data center operator at 138 ringgit per square foot. The land transaction price between the data center operator and the developer undoubtedly sets a new pricing benchmark for industrial land near the area.
The three other property companies that reached deals last month are Sennah Hill Industries, Maxing Group, and UEM Sunlight.
Sennah Hill Industries will develop Google's first large-scale data center and cloud region in Malaysia at its Amina Commercial Park, spanning 49 acres with a potential power of 80 megawatts.
Maxing Group partnered with Bridge Data Center Company (BDC) to build the first data center with a power of 100 megawatts on a 17.55-acre land in Southville City project in Selangor Wijaya.
UEM Sunlight signed a memorandum of understanding with LOGOS Infrastructure Company to explore the construction of a data center park on a 30-hectare site in Nusa Jaya Gateway, equipped with 360 megawatts of power.
ROI 7% to 7.5%
As the new darling of industrial properties, this news is expected to be a catalyst, inspiring more developers to consider investment.
Data centers are long-term operations that generate profits for these companies with a range of stable facilities. According to research from the global real estate services provider First Pacific Davies (Savills Malaysia), the return on investment for major data centers is 4-5% in Japan, 5-7% in Western Europe, 6-7% in Singapore, 7-7.5% in Malaysia, and 8-12% in China.
The convenient access to the internet on smartphones has increased demand.
In Malaysia, the ubiquity of social media is one of the key factors driving the growth in demand for data centers. As of 2022, among ASEAN countries, Brunei has the highest social media penetration rate at 117%, followed by Malaysia at 92%, and Singapore at 90%.
In line with the development of social media, the smartphone penetration rate reached 87.3% in 2018, expected to rise to 89% by 2025 due to increasingly convenient internet connectivity, further driving the demand for data centers.
Jones Lang LaSalle (JLL) Malaysia, a multinational industrial consulting firm, recently held a seminar titled 'Malaysian Data Center Outlook', attended by industry companies, domestic and international stakeholders, national energy, and the Malaysia Digital Economy Corporation (MDEC).
Fang Zhiqiang, Research and Consultancy Manager at JLL Malaysia, said that the current power supply for data centers in Malaysia is about 260 megawatts and is expected to surge to 860 megawatts by the end of 2025 based on existing and confirmed projects. Taking into account all data center projects, the potential total power by the end of 2027 will increase to 2270 megawatts.
The growth in demand for data centers is mainly driven by cloud computing, big data analytics, internet services, and the increasing use of artificial intelligence. Demand comes from various industries including e-commerce, financial services, telecommunications, and technology.
Urgently in need of a super large-scale datacenter
For Malaysian internet users aged 16 to 64, the social media platform monthly usage percentages in January this year were as follows: WhatsApp recorded the highest at 90.7%, followed by Facebook (84.9%), Instagram (77.0%), TikTok (68.8%), Telegram (64.9%), FB Messenger (56.6%), X (45.2%), Pinterest (31.6%), LinkedIn (30.5%), and WeChat (27.7%).
These platforms are operated by large technology companies, and they are users of super large-scale data centers. Coupled with the demand for cloud services, the demand for super large-scale data centers in Malaysia is also increasing.
From a geographical perspective, Malaysia does not have locally operated social media platforms. Users are generally connected to services provided by these platforms located in foreign data centers. Malaysia's high social media penetration rate makes it increasingly valuable for these companies to establish data centers here, especially to serve social media platform users.
Malaysia's strategic location can be understood from multiple perspectives. One is the strong connectivity, complete telecommunications infrastructure, reliable submarine cable network, and high-speed internet access, enabling Malaysian data centers to efficiently meet the needs of local and international markets.
The country attracts foreign investments through incentives and initiatives to create a friendly environment, supported by government policies promoting digital economic development such as tax incentives, regulations on grants and support. An excellent business environment attracts data center operators to establish a presence.
Malaysia has cost structure advantages.
Additionally, Malaysia's proximity to emerging markets in the Asia-Pacific region, such as Singapore, China, India, and Australia, makes it an ideal hub for operating data centers, not only reducing latency and ensuring strong connectivity but also providing access to a large customer base.
Compared to other countries in the region, Malaysia has advantageous cost structure advantages, such as relatively low land and hydroelectric costs, improving the operational efficiency and competitiveness of data centers.
Our country's labor force also has a high level of higher education background and technical proficiency, especially in information technology, engineering, and data management, with enough experts to efficiently operate and maintain data centers, delivering services of high quality.
Malaysia has a strong potential for renewable energy, capable of producing solar and hydropower. As data center providers increasingly focus on the environment and sustainable development, obtaining renewable energy sources helps reduce carbon emissions and improve the sustainability of data centers.
Most importantly, with government support, investing in digital infrastructure, supporting the development of data centers through Malaysia's digital economy blueprint (MyDigital) and Digital Free Trade Zone (DFTZ) to drive economic growth, create job opportunities, enhance government efficiency, and make Malaysia competitive in the global digital economy.
The government is taking a series of measures to promote data center investments, such as the green channel launched by the national energy company, expanding high-speed broadband networks, developing submarine cable systems, ensuring unobstructed data center connectivity.
Focus on legislation to protect data in the coming year
Fang Zhiqiang said that currently, Malaysia's data centers are mainly concentrated in Kuala Lumpur and Johor. As of the first quarter of this year, the power supplied to the data centers in Kuala Lumpur and Johor is 125 megawatts and 137 megawatts respectively, with planned powers of 200 megawatts and 500 megawatts under construction, and recommended powers of 795 megawatts and 1475 megawatts respectively.
The trend of data centers in the next year will focus on legislation and regulations to protect data, increase rack density, hosting and integration, edge/modular data centers, cloud computing growth, emerging markets and improving sustainability efficiency.
Flexible Publishing releases development planning guidelines to create a new benchmark for data centers.
[Data Center Series (Part 2)]
Industry 4.0 is actively advancing around the world, promoting the construction of data centers to enhance the technological and digitalization processes of various countries.
Big data analysis technology is one of the emerging digital business models, which is becoming a new norm in the business field and is an important contributor to the country's economic development.
In terms of economic benefits, investing 1 billion in building a data center can create 400 to 600 job opportunities. It is estimated to contribute between 0.4 billion to 0.5 billion to the Gross Domestic Product (GDP), making data centers one of the very high-value investment forms in Malaysia.
Currently, only industrial and commercial industries can establish data centers, especially in commercial areas where in-depth discussions are needed to align with the surrounding environmental development.
What is a data center? Simply put, it is a building facility used to centralize the storage of information technology equipment and infrastructure, resembling a general factory on the outside, with stacked racks, servers, computers inside, aiming to manage data such as storing, collecting, processing, and distributing data for organizations or companies.
According to the World Bank's 2020 'Malaysia Digital Economy: New Driver of Development' report, Malaysia has 7494 secure Internet servers per million population, the United States has 0.14 million 808 servers, and Singapore has 0.12 million 8379 servers per million population.
A secure internet server is a server that uses encryption technology in internet transactions.
These figures clearly show that Malaysia's digital infrastructure is overly reliant on other countries, posing significant geopolitical risks and susceptible to international connectivity disruptions. To address this, Malaysia is countering this disadvantage through substantial Foreign Direct Investment (FDI) in data centers.
Foreign data centers already established include GDS Holdings, Bridge Data Centres, NextDC, Yondr, Vantage Data Centers, Amazon Web Services (AWS), Microsoft, Google, ByteDance, Alibaba Cloud, Equinix, and more.
The investment in data centers is driving the digital infrastructure ecosystem, generating direct and spill-over economic effects involving significant capital expenditure, long-term investments, intellectual property, high energy efficiency, and artificial intelligence.
As the industry of digital transformation expands, sectors such as finance, logistics, e-commerce, electronic services, e-health are increasingly involved. Industries supplying goods and services to data centers include the National Energy Company (TNB), renewable energy producers, telecommunications companies, submarine cable suppliers, maintenance service providers, colocation service providers, network security service providers, illustrating the broad economic impact of data centers.
How does the datacenter ecosystem operate during the information transmission? When the sender transmits data and information, the telecommunication tower will receive them first, then connect and send the data and information to the datacenter, which will then start storing, collecting, processing, and sending them. The processed information will be sent to the recipient.
What conditions must data centers meet?
Johor, due to its proximity to Singapore and its potential to become a landing station for submarine cables, is being seen by data center investors as an excellent investment destination.
Johor leads the nation by publishing a "Johor Datacenter Development Planning Guide" in April this year, meticulously explaining the purpose, definition, general guidelines, specific guidelines, and implementation mechanisms of data centers, becoming a reference material for the development of data centers in various states.
According to the content it released, data centers generally have 5 key components: security, infrastructure, services, cloud storage and exchange, and management.
5 key components:
●Security
Data center designs must consider security features to prevent physical and network threats such as theft, fire, and cyber attacks. To ensure security, data centers typically restrict access to authorized personnel only and use measures such as biometric verification and surveillance cameras.
●Infrastructure
Its infrastructure includes servers, storage systems, network devices, electrical utilities, and cooling systems. Data centers require a large amount of electricity to operate and effective cooling systems to prevent overheating of Information Technology (IT) components.
To ensure that the power and cooling are not interrupted, data centers often use power backup equipment, uninterrupted power supply systems, and dedicated cooling systems.
●Service
Data centers provide a variety of services, including data storage, management, backup and recovery, as well as supporting email, high-volume e-commerce and online social gaming. They are also increasingly used to support Industry 4.0, such as big data, machine learning, artificial intelligence applications, etc.
●Cloud Storage and Exchange.
It allows users to store data or information online, connect to virtual servers through cloud storage and exchange, and ensure data security for users.
●management
Its management requires professional knowledge, mastery of the latest technology, to ensure the datacenter is running efficiently and securely, and to implement best operational practices.
3 types of management mechanisms:
●Operating Company (OP Co):
Manages data centers leased or leased from building owners, responsible for attracting potential tenants;
●Industrial company (Prop Co):
Construct and own data center buildings, leasing space to operating companies, usually not involved in daily management;
●Operating company cooperates with industrial company (OP Co & Prop Co):
Simultaneously develop and operate data centers
3 types of operating companies:
●Data center supplier (DCP):
Responsible for providing and operating data centers;
●Cloud Service Provider (CSP):
Provide cloud services and operate data centers;
●Digital Service Provider (DSP):
Specializing in providing digital services such as facebook, google, Instagram, etc.
6 key considerations for site selection:
●Stay away from disaster risk areas, such as regions prone to frequent natural disasters like floods and landslides.
●Stay away from environmentally sensitive areas (KSAS), such as beaches, watershed areas, underground water resources, and areas near mountains.
●Not recommended to be built on peatlands.
●Outside the radius defined by the Chief Government Security Officer (CGSO) or State Chief Security Officer for key national objectives.
●Do not approach high-risk industrial activities, such as petrochemical industries.
●Do not approach major highways, railway tracks, and within the height control range specified by the Civil Aviation Authority of Malaysia (CAAM).
Hydropower and network requirements
Look at the scale of datacenters
According to the guidelines, data centers of different scales should have different capacity power substations.
The capacity of small data centers is 33kV, while that of large data centers ranges from 132kV to 275kV. They should be within a 100-meter radius of transmission lines or main substations (PMU), and need to refer to and comply with the best power usage efficiency (PUE).
In addition, it is necessary to equip traditional or green technology generators depending on the capacity of the constructed data center, while using renewable energy to reduce power consumption.
Water supply is crucial for the operation of data centers. Generally, effective reservoir capacity refers to the maximum amount of water available for various purposes within 24 hours, so every data center should meet the minimum daily water usage requirement.
Authorities should also adopt renewable energy and cost-saving technologies to achieve efficient water usage, such as direct expansion air conditioning systems, eco-friendly cooling water, and rainwater management systems. Other requirements regarding hydropower should be sought from the national energy company, national water affairs commission, etc., before construction.
The internet needs to use wireless or hybrid networks, with each data center having at least two service providers and a minimum network speed of 100Mbps.
There are currently three types of data centers in Malaysia:
●Private Data Center:
Constructed and managed by organizations or companies, it can be located at their own facilities (on-premises) or other locations (off-premises), fully operated by the organization or company, dedicated to providing services internally.
●Colocation:
Provides physical facilities services such as space, racks, and infrastructure to support the construction of data centers, including power supply, cooling systems, network systems, and security measures.
Organizations or companies can lease it for hosting servers, storage devices, network equipment, and other IT infrastructure, such as Equinix, Bridge Data Centres, AIMS, etc.
●Hyperscale Data Centers:
Facilities that can store and process large amounts of data. These data centers mainly serve companies that require large-scale data processing and storage, specifically designed to meet their specific needs, such as Google, Amazon, Microsoft, Meta, Apple, etc.
Internal 10 key components:
Here are the 10 main key components inside the datacenter, which will ensure the efficient, secure, and reliable operation of the datacenter, meeting the needs of different organizations and enterprises.
●Computing Demand
Desktop computers, servers, racks, and other related hardware devices.
●Network Infrastructure
Including routers, switches, modems, cables, and other components that connect the data center to storage servers and users.
●Uninterruptible Power Supply (UPS)
During power outages, UPS equipment serves as an early backup power source to ensure all electronic devices can operate normally.
●Cooling/Freezing Systems
Utilized to maintain the optimal temperature and humidity within data centers, including air conditioning, chillers, and Computer Room Air Handlers (CRAH).
●Power Distribution Unit (PDU)
Utilized to control the distribution and movement of power within the data center.
●Emergency generators (EPG)
Including generator sets and diesel engines, serving as backup power systems for data center electricity supply.
●Safety requirements
Safety features of data centers include closed-circuit television (CCTV), biometric devices, secure access doors, firewalls, fire detection and extinguishing equipment, as well as the need for security guards, guardhouses, and control rooms.
●Main Machine Room (MMR)
It is a space that collects all cables and optical fibers, used for data exchange between different users.
●Main Distribution Frame (MDF)
Cables and equipment connecting network facilities with data centers. All cables providing services to users are distributed through the MDF room to MMR for data processing.
●Telecom Room (Telco Room)
Space used to accommodate all service providers.
AI is rapidly driving data centers. Is it a golden opportunity or a bubble?
【Datacenter Series (Part 3)】
The global wave of data center investments has also swept through Malaysia. With more and more companies rushing in, it is worth considering whether this investment frenzy will end up like previous tech bubbles, ultimately leading to a collapse?
Market experts have mixed opinions on this. "Nanyang Business Daily" interviewed data center operators and fund managers to deeply discuss the current market situation of data centers, analyze bubble risks, and look ahead to their future development prospects.
The rapid investment frenzy in data centers is attributed to various factors, including government policy support, technological advancements, and growing market demand.
At its core, supporting the entire computing engine are the Central Processing Unit (CPU) and the Graphics Processing Unit (GPU). As computing needs continue to evolve, the line between the two has blurred, and what distinguishes them from Neural Processing Units (NPU) used for accelerating AI?
GPU Vs. CPU
With the increasing demand for advanced workloads such as artificial intelligence (AI), analytics, 3D rendering, the role of GPUs in data centers is becoming increasingly important. Through powerful parallel processing capabilities, GPUs can effectively complement the functions of CPUs, accelerating productivity and innovation processes. These new use cases require different types of computing power to drive high-performance computing (HPC) and visual cloud computing, and introducing GPUs helps meet the growing demand for high computing and massive data processing.
The combination of GPUs and CPUs enhances overall computing power. Although both are chip-based microprocessors, they are designed for different tasks.
CPUs are suitable for handling large workloads and applications, especially when latency or per-core performance is crucial, by quickly completing individual tasks with few cores, making them ideal for handling databases and serial computing tasks.
In contrast, GPUs were initially designed to accelerate specific 3D rendering tasks, but over time they have become more programmable and flexible.
Introducing GPUs into data centers is a concern for builders or owners, as it also involves overcoming some challenges. These high-performance tools consume more power and space, generate more heat during operation, which may impact data center infrastructure, increase electricity costs, or affect reliability.
Undoubtedly, solving power and cooling issues is crucial for the successful operation of GPUs. When deploying GPUs, it is necessary to assess rack power distribution units, uninterruptible power supplies, and cooling capacity to ensure sufficient power and cooling, avoiding performance and availability obstacles, as both are indispensable.
While combining GPUs with CPUs can meet the high computational demands of emerging use cases such as AI, analytics, and 3D rendering, compared to using CPUs alone, GPUs occupy more space, consume more power, and emit more heat. By leveraging the advantages of GPUs and CPUs effectively, data centers can address modern computing needs, drive technological innovation, operate more efficiently, and achieve superior results.
Malaysia has the potential to become a regional hub.
The success of investing in concept stocks related to data centers depends on a deep and long-term understanding of the future business development of relevant companies, including any information asymmetry.
Danny Wong, the Executive Director of DE-CIX Malaysia, said in an interview with Nanyang Business Daily that as a data center operator, although he is well aware of the pros and cons, data centers are full of business opportunities and can drive unseen economic effects.
"It is the cornerstone of modern internet and digital economy, providing necessary power and environmental control for servers to ensure the stability and security of data storage and processing."
Without data centers, modern life's reliance on internet services such as emails, social media, online transactions, and cloud storage would not function properly.
"Electricity and water are the basic elements of data centers, along with comprehensive fire protection systems, flood control measures, and security systems to ensure the safety of equipment and data. Environmental humidity and air quality management are also very important."
Headquartered in Germany, DE-CIX signed a joint venture agreement in 2020 to embark on the journey of Malaysian data centers, with the data center located in Johor.
Danny Wong mentioned that the Malaysian data center industry has a very bright future due to its strategic geographic location, positioned in the heart of Southeast Asia as a potential regional hub.
Furthermore, the government places great emphasis on digital economic development, introducing multiple supportive policies to attract a large amount of domestic and foreign investments. Malaysia possesses rich natural resources and relatively low electricity costs, providing favorable conditions for the development of data centers.
"DE-CIX is committed to making Malaysia a key node for global data exchange, helping Malaysia play a more significant role in the global digital economy through advanced data center facilities and services."
Will this wave of enthusiasm dissipate, ultimately just a bubble? He pointed out that the digital economy is developing rapidly, internet traffic continues to grow, datacenter demand is significantly increasing, but we must be cautious of the risks of over-investment and market saturation.
Talent is urgently needed upstream and downstream.
He mentioned that datacenters actually have a positive impact on the job market, especially in upstream and downstream industries.
On the upstream side, datacenters require a large amount of infrastructure construction, engineering design, and equipment manufacturing, creating many job opportunities for architects, mechanical engineers, and technicians.
On the downstream side, the operation and maintenance of datacenters require IT specialists, network engineers, system administrators, and security experts.
This not only promotes the employment of tech talents but also drives the related training and education industry. Overall, the development of datacenters has boosted the prosperity of the entire ecosystem, creating wide-ranging job opportunities.
Future datacenter technologies will move towards higher efficiency, greener, and smarter directions, with more and more innovative technologies such as liquid cooling, modular datacenters, and artificial intelligence gradually changing the operational methods of datacenters.
Investment-wise, opportunities are abundant.
In the current technology field, the data center investment frenzy is sweeping the globe. Tradeview Capital's founder and CEO, Huang Zuhuan, has unique insights on this.
"Behind the data center boom is the rapid development of AI technology. AI requires powerful computing capabilities and a large number of servers, driving the demand for data centers, especially GPUs playing a crucial role in supporting the development of AI technology."
In the past, AI technology did not make breakthrough progress, but since the emergence of OpenAI, AI's applications in daily life have become increasingly widespread, attracting high attention and investment from tech giants like Google, Facebook, Amazon, and Apple.
Therefore, data centers, as core infrastructure for storing and processing massive data, are indispensable.
Huang Zuhuan said that government policies have always been very supportive of business development, especially in attracting AI-related companies. Policies regarding setting up factories, land acquisition, etc., are relatively relaxed, especially involving AI or data centers, which can obtain special approvals without the previous requirements or restrictions of native or employment pass (EP).
Malaysia's entire industry chain, from establishment, execution to approval, is very fast. At the same time, land in Malaysia is relatively inexpensive, attracting many large technology companies to come and develop the industry chain.
Investments carry the risk of bubble burst.
Despite the booming development of the datacenter industry, Huang Shuhan also reminds investors to beware of potential bubble risks.
He said, many investors and businessmen are attracted by the boom in this emerging field, but data centers are high-tech industries, not all investors have sufficient professional knowledge and understanding.
After some companies announced memorandum of understanding for collaboration, their stock prices quickly soared, which is a typical characteristic of investment bubbles. "The technology content of the data center industry is very high, not something that ordinary businessmen can easily enter, indeed many people hope to profit from it, hence there is a certain investment bubble in data centers. While the potential profitability is large, it does not mean there is no risk of not being able to lease out, no one dares to guarantee that operating a data center will definitely make big profits."
Huang Shuhan believes that in this frenzy, the real beneficiaries are developers and landowners first, as they can profit by selling land and contracting projects.
Hydropower supply must not be disrupted.
However, whether data center operators can attract enough customers to settle in is still a key challenge.
The successful construction period of a data center is usually 18 to 36 months, during which it faces bottlenecks like development permits and hydropower connections, ensuring stable hydropower supply is one of the major challenges during the construction process. He stated that to ensure stable and continuous operation of the data center, there is a need for steady cooling systems and temperature management, once power outages or water cuts occur, the operational consequences are fatal.
"Therefore, choosing a suitable construction site and ensuring sufficient power and water sources are enormous challenges."
When facing various challenges, detailed planning and predictive capabilities are needed, including establishing strong partnerships to ensure supply chain stability, adopting advanced project management tools, regularly reviewing and adjusting plans, and collaborating with reliable contractors and suppliers.
Huang Yuzhou emphasized that despite the risk of investment bubbles, driven by policy support and geographical advantages, Malaysia's data center market still has great potential.
Looking ahead, it is believed that data centers will further support the development of AI technology by enhancing computational capabilities, optimizing energy consumption, improving security and data management capabilities. In addition, data centers will continue to expand infrastructure, adopting new technologies such as quantum computing and edge computing to meet the growing demand for AI applications.
Boom Drives Regional Economy
Dr. Wong Kam Yong, an economics professor at University of Malaya, pointed out that the investment boom in data centers is a global phenomenon, driven mainly by technological advancements, increased demand, platform economy, and the rise of regional economies.
"In the Asia-Pacific and other emerging markets, the demand for data centers is rapidly increasing, with enterprises and governments accelerating digital transformation and the need for data storage and processing capabilities growing."
The Malaysian government actively attracts investors by offering tax incentives, fast approval processes, and supportive policies for green energy.
The development of data centers has a significant impact on enterprise operations and the economy, improving operational efficiency and promoting innovation.
Analyzing at a macro level, data centers make specific contributions to the economy including driving construction, power supply, and equipment manufacturing, thereby generating significant economic benefits.
In terms of strategic significance, as the infrastructure of digital transformation, data centers drive the digitalization process of various industries, attracting more high-tech investments and foreign capital into Malaysia, shaping the industry chain ecosystem.
Wong Chin Yung said that the growth in data demand drives up leasing and service fees, inevitably leading to a higher return on investment.
No obvious bubble has appeared.
Due to the high power consumption of data centers, it may create pressure on the national power system. Operators need to continuously upgrade equipment to meet the latest technological requirements, as well as maintain ongoing capital investment, establish high-level network security, and guard against risks of network attacks and data leaks.
When asked about signs of a bubble in data centers, Wong Chin Yung said that there is currently no obvious investment bubble in the related field. The development of AI, big data, and cloud computing technologies has led to increasing demand, providing a stable market foundation.
Furthermore, construction and operation require high investment and technical standards, which restrict blind investments.
However, the market still needs to be wary of future oversupply or investment risks brought about by changes in market demand.
The technical requirements are high.
Regarding the job market, Huang Jinrong stated that due to the high reliance on automation technology for operation and management, less manpower is required. However, data centers have high technical requirements, so talents with engineering, IT, and data management skills are needed.
"Currently, the most lacking professions and skills are in electrical engineering, refrigeration engineering, data center management, cybersecurity, and big data analysis."
However, he stated that by collaborating with universities and training institutions to provide targeted talent development programs, he believes that the talent shortage issue can be gradually alleviated.
Data centers consume water and electricity. Is nuclear power the ultimate solution?
[Data Center Series (Part 4)]
It is well known that data centers consume a lot of electricity and water, especially in recent years with the surge in artificial intelligence (AI) applications in data centers, the water and electricity consumption is truly astonishing.
When discussing the future development of datacenters, the management of electricity and water resources has become a key issue. Therefore, nuclear energy as a clean energy source has attracted widespread attention as a potential solution for datacenters.
Nanyang Business Daily interviewed Dr. Rosli, Director of Malaysia's nuclear energy agency, and Dr. See Kok Liong, President of the Malaysian Environmental, Social, and Governance (ESG) Association, exploring how datacenters are related to energy efficiency and green initiatives. This raises the question, is nuclear power the ultimate solution for datacenters?
By discussing in detail the management of electricity and water resources, the feasibility of nuclear energy, and the ESG path, people will have a more comprehensive understanding of the challenges and solutions in energy and resource management for datacenters.
The rapid development of technology has made datacenters a critical cornerstone of the modern economy.
However, facing the electricity and water-consuming 'big monster,' the high energy consumption and resource requirements of datacenters also pose new challenges.
To ensure uninterrupted power supply, datacenters need to have a certain capacity of electrical equipment. Large datacenters require substations ranging from 132 kilovolts to 275 kilovolts, and should prioritize the use of renewable energy and energy-saving technologies.
All power-related requirements must be consulted and approved by the national energy authorities in advance. It is evident that national energy holds an irreplaceable position in the entire infrastructure. $TENAGA (5347.MY)$and receive advice and approval from the country's energy authorities. It is clear that national energy holds an irreplaceable position in the entire infrastructure.
According to the guidance of State Grid, after the completion of a datacenter with a capacity of about 635 megawatts last year, another 9 datacenters will be built this year, with a total capacity of about 700 megawatts.
These will drive the growth of electrical utilities demand, State Grid expects that in the 2024 fiscal year, the electricity demand in the Malaysian Peninsula will increase by 2.5 to 3% annually.
Currently, State Grid is vigorously promoting the green channel, while launching a series of hydroelectric and solar energy projects with a total capacity of about 7300 megawatts.
Among the ASEAN countries, the electricity prices are highest in Singapore, with commercial electricity prices at 0.22 US dollars per kilowatt-hour (about 1.04 ringgit) in the first quarter of 2024, followed by the Philippines at 0.19 US dollars (90 cents). Malaysia, Indonesia, and Thailand have similar electricity prices, while Vietnam has the lowest electricity price at 0.06 US dollars (about 28 cents).
Singapore and Malaysia stand out in terms of overall electricity supply, however, from the perspective of supply cost, Malaysia slightly outperforms the Lion City.
Total water consumption increases by 6% per year
J.P. Morgan's research points out that while data centers consuming a large amount of electrical utilities often become the focus, the issue of high water consumption is often overlooked.
In fact, there are three main ways in which data centers use water: water for on-site server cooling, off-site water for power generation, and water for the server manufacturing supply chain.
According to Bluefield Research data, from 2017 to 2022, the total water consumption of global data centers has been growing by 6% annually. It's projected that by 2030, global water usage will rise to 0.45 billion gallons per day, equivalent to the water volume of 681 Olympic-sized swimming pools. Especially in water-scarce areas, the significant water demand of data centers may lead to competition, causing water supply shortages and even the closure of data centers.
As one of the potential beneficiaries, Union Sphere Holdings $RANHILL (5272.MY)$Chief Operating Officer Kairouyue Fendi has put forward key insights on water resource management for data centers.
"Data center cooling systems typically require a large amount of water sources to ensure sustainable water supply, so it is particularly important for data centers to adopt efficient cooling technologies and water recycling systems, such as direct expansion systems and eco-cooling water systems, to significantly reduce water waste."
The need to establish water efficiency policies
He suggested that governments develop water efficiency policies for policy and regulation setting, limit water usage per kilowatt-hour (kWh), and promote data centers to build their own water recycling facilities. In addition to using surface water, exploring alternative water resources such as seawater and groundwater should be considered.
Fendi mentioned that data centers could consider using treated wastewater as cooling water, but this requires addressing the challenges of water treatment technology and facility construction first.
He recommends that data centers adopt advanced water-saving technology and management systems to reduce water consumption, and utilize the latest water treatment and management technologies, such as rainwater management systems, to significantly improve water resource utilization efficiency.
Regarding investment in infrastructure, Kallio Iffendi said that investments in new water treatment plants and distribution systems could reach billions of ringgit, and these investments need to be managed reasonably to reduce the financial impact on other water users and avoid significant future increases in water tariffs.
To this end, he suggests setting different water prices for data centers to cover their water resource investment costs and encourage the use of more water-saving technologies and practices.
He emphasized that data centers should take on more responsibilities, such as adopting efficient water management technologies, being accountable for their water usage behavior and environmental impact, building water treatment facilities as much as possible to reduce their impact on local communities and ecosystems.
He calls for industry and government to work together to achieve sustainable development of data centers through policy guidance and technological innovation.
Nuclear power helps reduce greenhouse gases.
Nuclear power can provide large-scale and stable electricity, and its low carbon emissions characteristics also help reduce greenhouse gases, which is crucial for the growing data centers.
However, nuclear power involves high construction costs, long construction period, as well as significant challenges such as waste management and safety issues.
The electricity demand for data centers is sharply increasing, bringing enormous pressure on the power grid and the environment. The annual electricity consumption of global data centers is equivalent to the total electricity production of Italy or Australia. As a low-carbon energy source, nuclear power can significantly reduce carbon emissions and help address climate change.
The energy consumption of data centers in the UK is expected to increase by 500% in the next decade. By 2030, it is estimated that US data centers will consume 8% of the total national electricity, ringing alarm bells for countries to reassess their energy strategies and consider nuclear power.
With the rapid expansion of the digital economy in Malaysia, the low carbon footprint of nuclear power aligns with the country's goals of reducing greenhouse gas emissions and promoting sustainable development.
Dr. Rosliz, Director of the Malaysian Nuclear Energy Agency, pointed out that companies like Microsoft and Amazon Web Services are currently exploring Small Modular Reactors (SMRs) due to their simple construction and high safety levels.
However, implementing nuclear power requires massive infrastructure investments, strict regulatory frameworks, and public support. Governments and industries need to address nuclear safety, waste management, and environmental issues. If these challenges can be effectively addressed, nuclear power can support the growth of data centers and the digital economy in Malaysia.
capabilities, but also signifies the commitment of HaploX Biotechnology in promoting technological innovation.
He noted that technological innovation is key to energy transition and future electricity supply, with advancements in solar and wind energy technologies reducing costs and increasing energy capture rates.
Utilizing advanced energy storage systems such as lithium-ion batteries and solid-state batteries helps to address the intermittency issue of renewable energy, ensuring a more stable power supply.
In addition, innovations in nuclear power, such as small modular reactors and fusion energy, provide a reliable and sustainable future source of electricity.
Nuclear power needs to be combined with renewable energy to ensure reliable power supply and environmental protection, as well as to create a stable and sustainable energy mix, reduce dependence on fossil fuels, and enhance grid stability.
"By investing in modern nuclear technology and integrating it with renewable energy, Malaysia can achieve a balanced way to sustainably meet energy demands, supporting economic growth in the data center industry."
Low-carbon energy
According to Rosli, nuclear power has the advantage of large-scale, stable power supply, producing stable base load electricity efficiently with only a small amount of nuclear fuel.
Nuclear power is also a form of low-carbon energy, emitting minimal greenhouse gases during operation, thus helping to mitigate climate change.
However, nuclear power comes with high initial capital costs, a long construction period, and issues related to radioactive waste management.
The history of nuclear power leaks has highlighted the risks involved, requiring strict safety measures and regulatory supervision.
Public acceptance, safety issues, and opposition to nuclear power affect the development of new projects. Planning, licensing, and building nuclear power plants take a long time, significantly delaying their benefits. Decommissioning nuclear power plants is a complex and expensive process that requires careful lifecycle management.
"Balancing these advantages and disadvantages is crucial when effectively integrating nuclear power into the energy mix."
He stated that to ensure the safety and reliability of nuclear power in datacenter energy supply, strict regulatory supervision, regular inspections, and robust waste management strategies are essential.
By establishing trust and addressing safety issues through transparent communication and community engagement, and further enhancing safety and operational efficiency through research, development, and the continuous improvement of adopting best practices.
Rossi said that by policy guidance, technological innovation, and transparent communication, nuclear power can be safely and reliably applied to the energy supply of datacenters.
Datacenters need to integrate ESG.
Dr. Tham Kok Leong, President of the Malaysian Environmental, Social and Governance (ESG) Association, pointed out that datacenters consume a lot of water and electricity, which must be properly managed. With the increasing demand, it is essential to incorporate ESG responsibilities.
"Data centers are striving to reduce carbon emissions by 45% by 2030 to meet global sustainability goals, while creating high-value job opportunities and enhancing community engagement to fulfill social responsibilities."
He mentioned that many data center operators have committed to fully using renewable energy by 2025 as a key part of their ESG strategy.
Furthermore, following Leadership in Energy and Environmental Design (LEED) standards and using Energy Star certified equipment, data centers adopt best practices to minimize environmental impact while maintaining efficiency and reliability.
Regarding infrastructure development, Malaysia is currently strengthening its power grid construction to meet the projected 40% increase in electricity demand by 2030, especially to support the energy needs of data centers.
According to current plans, Malaysia aims to significantly increase the proportion of renewable energy, striving to raise it from the current 20% to at least 45% to achieve carbon neutrality goals.
He stated that the introduction of smart grid technology and demand response programs is good news for high-demand data center users.
"The development potential of Malaysian data centers is immense, but they also face significant challenges. Therefore, we must strike a balance between technological innovation and sustainability, enhance technological capabilities and competitiveness through international cooperation and local technology transfer."
Sand could become the next key area of focus.
Hsieh Kok Keong mentioned that Sarawak has a certain advantage in establishing a data center in the region due to sufficient energy supply. By 2030, the state's power generation capacity can reach 9,000 megawatts.
"Sarawak is still increasing its hydroelectric power projects, fully capable of meeting the future electricity demand of data centers, which is one of the advantages lacking in West Malaysia. The peninsula still has a long way to go in renewable energy development, as building renewable energy infrastructure is a gradual process. Also, the construction of electric vehicle charging stations is still insufficient, and overall improvement is still needed."
He believes that with collective efforts, Malaysia can achieve sustainable development in the field of data centers, promote economic prosperity, and protect the environment.
Conclusion
Proper planning ensures sustainable development.
Data centers are one of the vital modern societal infrastructures. However, we must squarely face the issues of rapid expansion leading to bubble formation and environmental impacts in related projects.
To avoid resource wastage and economic risks, Malaysia needs to formulate sensible planning and policies to ensure the sustainable development of data centers. Additionally, the high energy consumption of data centers poses significant environmental challenges, necessitating the urgent search for clean and stable energy sources.
Nuclear power, as a low-carbon and stable source of electricity, can provide reliable power, but do not overlook issues such as the safety, nuclear waste disposal, and public acceptance of nuclear power.
If Malaysia decides to develop nuclear power, the government needs to be fully prepared, including training technical talents, introducing international cooperation, and conducting detailed environmental impact assessments to ensure that nuclear power development will not cause irreversible damage to the ecological environment.
Overall, it is hoped that data centers can continue to ensure the healthy development of the national economy and environment.
Concept stocks related to Malaysia are as follows:
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technology sector
Telecommunications Sector
Construction Sector
Industrial Sector
If there are any missing stocks or thoughts on data centers, please leave a comment below to share.
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Source of information: Nanyang Siang Pau
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calvinw : good article
Xyno : Oversupply is a risk to consider, the companies currently having plans to built will do so on scale - only expanding if market demands.
On the flip side, another risk is the supply of power and water - are utilities able to meet the demand when it presents itself and will they be able to deliver ‘just in time’, without ending up with massive oversupply.
Skilled workforce too is an issue. Forget about the universities, they are light years behind. The good news is that a particular commercial organisation currently has a data centre scholarship program helping youngsters and graduates to prepare for the industry.
SMRs are the future. Nuclear power is proven technology and with continuous development to make the technology more safe.
The demand for power not only comes from data centres but more so from the EV car industry.
To meet ESG commitments, and to be able to meet skyrocketing demands, nuclear power is the way to go forward. Johor is an excellent development area to make that happen in the next 10 years.
102242322 : surprisingly Superlon is not in the list
Jungle lee 102242322 : Thats why above gt mention, any stock related can comment here. Hehe
Izzat Rafie : New IPO, UUE,DC related like JTGROUP?
Jungle lee Izzat Rafie : Ya, also consider
103293125 Xyno :
南洋商报 NYSP OP 103293125 : durian tree?
103911561 : Very good, details and useful article, thanks
南洋商报 NYSP OP 103911561 : Thank you for the feedback.
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