Comprehensive analysis of the Malaysian data center from 0 to 1!

As the housing market has become more and more crowded, it just so happened that data centers are on the rise, drawing attention to the already active industrial industry. Nowadays, companies in different industries make major announcements almost every week, either announcing construction or investing in data centers. The market is hot.

The market has shown a will to develop data centers in different regions of China, and ongoing digital transformation initiatives are also promoting potential large-scale data centers to enter the Malaysian market. This trend and opportunity has shaped the future of Malaysian data centers.

Industrial companies never do business at a loss; they can only invest if they have business opportunities. With a large number of basements, particularly in Johor and Klang Valley, as well as financially sound developers, there is a better chance to seize the opportunity and diversify revenue when this data center storm blows.

As the Singaporean government banned the construction of new data centers in 2019 and conditionally lifted the ban in 2022, Johor, which is close to the water tower, is leading the whole of Malaysia due to its benefits in data center development, and Cybercity, a technology hub, is also catching up in this regard.

As a long-term operating data center, it is expected to become the new favorite of the industrial industry, but how can it attract large industrial companies to enter the market? What factors at home and abroad are stimulating its growth? Can China's hydropower, optical fiber, and digital infrastructure keep up with this surge in demand?

The “Nanyang Commercial Daily” data center series reports let data and facts convince everything.

Malaysia's unique location makes it an ideal location for many global technology companies to set up data centers in Southeast Asia.

In addition to promising prospects and developing revenue streams for developers, Malaysia is also benefiting from trade tension between China and the US because companies can better manage geopolitical risks.

Operating data centers require a stable and reliable supply of water and electricity, and more importantly, the infrastructure for optical fiber connectivity is in place. Due to the high cost of building infrastructure in remote areas, data centers generally do not choose this location; being close to various supply sources is the best choice.

Singapore's emergence as a center for data centers in Southeast Asia is an example of gathering all kinds of advantages.

Looking back at our country, Johor was able to lead Malaysia in data center development, thanks in large part to the ban in Lion City. Being close to Lion City can reduce network latency, make it easier to coordinate operation and management, and water, electricity, and land prices in Johor are relatively cheap. Data centers can be connected using Lion City's network or Malaysia's existing submarine cables, prompting many data center operators to expand their business here.

Currently, major data centers in Johor include Senina Science Park, Yang Zhongli Green Data Center Park, Nusa Cemerlang Industrial Park, and Nusa Jaya Science Park.

In Klang Valley, as a technology center, Cybertron is fully equipped with both internet connectivity and infrastructure, and has always been the focus of data center investment. Societe Generale Investment Bank believes that developers with large tracts of land will make better use of the land and release indirect spillover effects, as other technology companies may follow suit and enter data centers.

Data centers place great importance on safety, stability, reliability and connectivity, and strategic location is particularly important. It will directly affect operating costs and the longevity of the facility, so not all regions are suitable for building data center facilities.

Although Malaysia is outside the volcanic belt of the Pacific Ocean, major natural disasters such as earthquakes, volcanic eruptions, and typhoons generally do not occur, this does not mean that our country will not be affected by floods, man-made disasters, landslides, and severe smog. In recent years, extreme weather has also caused disasters in some parts of West Malaysia.

Water, electricity, and internet connectivity are essential key elements for data centers, and the rest are land and construction costs, taxes, and government incentives.

Electricity supply is particularly important, and electricity costs will account for a large part of operating costs. In selecting a site, consideration should be given to whether it is close to the power grid, the degree of infrastructure in the area, the availability of alternative energy sources, such as solar energy, and the optical fiber resources of the Internet connection or telecommunication infrastructure, and its transmission speed.

Additionally, in order to avoid overheating or failure of information technology (IT) equipment and machines, data centers require large amounts of water to cool the system. One method that can reduce power usage efficiency (PUE) is water evaporative cooling. Removing water from the system will reduce the energy efficiency of the operation.

Societe Generale Investment Bank is optimistic that developers with a large amount of land in suitable locations can seize this wave of business opportunities. In particular, the land has prepared infrastructure, is not far from major cities, and has good internet connections.

Since data centers need to be far from residential and commercial areas due to strict security requirements, developers may choose to build data centers in existing industrial parks.

UEM Sunshine, Morinami Industries, Shida Group, Ma Xing Group, Tengyu Group, and Green Shengshi all meet the above requirements and are expected to benefit from it.

Aerial view of Malaysia's first Google data center and Google Cloud regional location. (Provided by Google)

Developers may have 3 models for entering data centers:

(1) Joint investment;

(2) Build and rent the shell and core facilities to obtain continuous income;

(3) Form joint ventures with data center operators to jointly operate host hosting.

On the 10th of this month, Green Shengshi announced the divestment of RM42.3 million 2,175 to pay Microsoft for 123.14 acres of land in Kulai, Johor.

In May of this year, Tengyu Group sold 34.91 acres of land in Johor to data center operators for RM138 per square foot. The land transaction price between data center operators and developers has certainly set a new pricing benchmark for industrial land near the site.

The other 3 industrial companies that also reached a deal last month are Morinami Industries, Ma Xing Group, and UEM Sunshine.

Morinami Industries will develop Google's first hyperscale data center and cloud area in Malaysia at its Emena Business Park. It covers 49 acres and has 80 megawatts of potential electricity.

Ma Xing Group collaborated with Bridge Data Center Company (BDC) to build the first data center with 100 megawatts of electricity on a 17.55-acre plot of land at its Southville City project in Wanjin, Xuzhou.

UEM Sunshine and LOGOS Infrastructure signed a memorandum of understanding to jointly explore the construction of a data center park at the 30-hectare construction site at the gateway of Nusa Jaya, which will be equipped with 360 megawatts of electricity.

As the new darling of the industrial industry, this news is expected to be a catalyst to encourage more developers to consider investing.

Data centers operate for a long time, and having a range of stable facilities will earn profits for these companies. According to research by global real estate service provider Savills Malaysia (Savills Malaysia), major data centers in Japan have returns of 4% to 5%, Western Europe 5% to 7%, Singapore 6% to 7%, Malaysia 7% to 7.5%, and China 8% to 12%.

In Malaysia, the popularity of social media is one of the key factors in the growth of data center demand. As of 2022, among ASEAN countries, Brunei had the highest social media penetration rate of 117%, Malaysia ranked second with 92%, and Singapore ranked third with 90%.

In line with social media, the smartphone penetration rate reached 87.3% in 2018. As Internet connections become more convenient, it is predicted to rise to 89% in 2025, once again boosting demand for data centers.

Multinational industry consulting firm Jones Lang LaSalle Malaysia (JLL) recently held a seminar entitled “Prospects for Malaysian Data Centers”. Industrial companies, domestic and foreign stakeholders, National Energy, and the Malaysian Digital Economy Authority (MDEC) all sent participants.

Fang Zhiqiang, research and consulting manager at JLL Malaysia, said that Malaysia's current electricity supply to the data center is about 260 megawatts, and is expected to surge to 860 megawatts by the end of 2025. This is estimated based on existing and confirmed projects. Considering all data center projects, the total potential voltage will increase to 2270 megawatts by the end of 2027.

The growth in demand for data centers is mainly driven by cloud computing, big data analysis, internet services, and growing artificial intelligence. Demand comes from various fields, including e-commerce, financial services, telecommunications, and technology.

The percentage of Internet users aged 16 to 64 using social media platforms in Malaysia recorded the highest monthly usage of WhatsApp in January this year, reaching 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. They are hyperscale data center users. Coupled with the demand for cloud services, hyperscale data centers are also growing in Malaysia.

Judging from geographical factors, Malaysia has no locally operated social media platforms. Users are generally connected to data centers located abroad to provide services. Malaysia's high social media penetration rate makes it more and more valuable for these companies to set up data centers here, especially to serve social media platform users.

Malaysia's strategic location can be understood from many aspects. The first is that strong connectivity, perfect telecommunications infrastructure, reliable undersea cable networks, and high-speed internet access enable the Malaysian data center to efficiently meet the needs of local and international markets.

China uses incentives and initiatives to create a friendly environment to attract foreign investment. Government policies support the development of the digital economy, such as tax incentives, funding and support regulations, and an excellent business environment attracts data center operators to settle in.

Furthermore, Malaysia is close to emerging markets in the Asia-Pacific region, such as Singapore, China, India and Australia. This location is an ideal hub for operating data centers. It not only reduces latency and has strong connectivity, but also has a huge customer base.

Compared with other countries in the region, Malaysia has favorable cost structure advantages, such as relatively low land and utility costs, which improve the operational efficiency and competitiveness of data centers.

China's workforce also has a higher education background and technical proficiency, especially in information technology, engineering, and data management. It has sufficient expertise to operate and maintain data centers efficiently and deliver services with high quality.

Malaysia has strong renewable energy potential and can produce solar and hydroelectric power. As data center vendors pay more attention to the environment and sustainability, access to renewable energy sources can help reduce carbon emissions and increase the sustainability of data centers.

The most important thing is to get government support, invest in digital infrastructure, and strongly support data center development through the Malaysian Digital Economy Blueprint (MyDigital) and Digital Free Trade Zone (DFTZ), promote economic growth, create employment opportunities, and improve government efficiency through digitalization, making Malaysia a competitive party in the global digital economy.

The government is also promoting investment in data centers through a number of measures, such as the green channel introduced by China Energy, expanding high-speed broadband networks, and developing submarine cable systems to ensure unhindered data center connections.

Fang Zhiqiang said that currently, data centers in Malaysia are mainly concentrated in Kuala Lumpur and Johor. As of the first quarter of this year, the electricity delivered to the Greater Kuala Lumpur and Johor data centers was 125 megawatts and 137 megawatts respectively. The electricity under construction is 200 megawatts and 500 megawatts respectively. The recommended electricity is 795 megawatts and 1,475 megawatts, respectively.

The next year of data center trends will focus on legislation and regulations to protect data, increase rack density, hosting and consolidation, edge/modular data centers, cloud computing growth, emerging markets, and increased sustainability efficiency.

Industry 4.0 is actively advancing around the world, and its development promotes the construction of data centers to improve technology and digitalization processes in various countries.

Big data analysis technology is one of the emerging digital business models. It is becoming the new normal in the commercial field and is an important part of contributing to the country's economic development.

In terms of economic benefits, every 1 billion dollars invested to build a data center can create 400 to 600 jobs. The estimated contribution to gross domestic product (GDP) is between RM400 million and RM500 million, making data centers one of the most valuable forms of investment in Malaysia.

Currently, only industrial and commercial industries can establish data centers. In particular, in commercial areas, in-depth discussions are needed to meet the development of the surrounding environment.

What is a data center? Simply put, it is a type of building facility used to centrally store IT equipment and infrastructure. It looks like an ordinary factory building with cascading racks, servers, computers, etc., for the purpose of managing data, such as storing, collecting, processing, and distributing data for an organization or company.

According to the World Bank's 2020 “Malaysia Digital Economy: A New Driving Force for Development”, Malaysia has 7,494 secure internet servers per million population, the US has 140,808 per million population, and Singapore also has 128,379.

A secure internet server is a server that uses cryptographic technology for internet transactions.

These figures clearly show that Malaysia's digital infrastructure is too dependent on other countries, which poses a major geopolitical risk and is vulnerable to disruptions in international connectivity. To this end, Malaysia is reversing its disadvantages through massive foreign direct investment (FDI) in data centers.

Foreign data centers that have already entered include GDS Global Data, Bridge Data Centers (BDC), NextDC, Yondr, Vantage Data Centers, Amazon Web Services (AWS), Microsoft, Google, ByteDance, Alibaba Cloud, Equinix, etc.

Investing in the digital infrastructure ecosystem driven by data centers has direct and spillover economic effects, involving major capital expenditure, long-term investment, intellectual property, high energy efficiency, artificial intelligence, etc.

Today, the number of digitally transformed industries is increasing, including finance, logistics, e-commerce, electronic services, e-health, etc., while industries that supply products and services to data centers include the National Energy Company (TNB), renewable energy producers, telecommunications companies, submarine cable suppliers, maintenance service providers, managed service providers, cybersecurity service providers, etc., which shows that data centers have a wide range of economic effects.

How will the data center ecosystem work during information transmission? When the messenger sends data and information, the telecommunication tower will first receive it, then connect the data and information to the data center. The center will begin storing, collecting, processing, and sending, and the processed information will be sent to the recipient.

Johor is regarded by data center investors as an excellent investment destination due to its proximity to Lion City and its potential to become an undersea cable landing site.

Johor is leading the country. In April of this year, a “Johor Data Center Development Planning Guide” was published, which explains in detail the purpose, definition, general guidelines, specific guidelines and implementation mechanisms of data centers, and has become a reference material for the development of data centers in various states.

According to its publication, data centers generally have five key components, namely security, infrastructure, services, cloud storage and exchange, and management.

●safety

Data center design must consider security features to protect against physical and cyber threats such as theft, fire, and cyber attacks. To ensure security, data centers are generally restricted to authorized personnel, and measures such as biometric authentication and surveillance cameras are used.

●infrastructures

Its infrastructure includes servers, storage systems, networking equipment, and power and cooling systems. Data centers require large amounts of electricity to run and require effective cooling systems to prevent information technology (IT) components from overheating.

To ensure uninterrupted power and cooling, data centers often use power storage equipment, uninterruptible power supply systems, and dedicated cooling systems.

●serving

Data centers provide a variety of services, including data storage, management, backup and recovery. They also support email, high-transaction e-commerce, and online community games. They are also increasingly used to support Industry 4.0, such as big data, machine learning, and artificial intelligence applications.

●Cloud storage and exchange

It is a medium that allows users to store data or information online and connect to a virtual server through cloud storage and exchange, and users will be guaranteed data security.

●stewardship

Its management requires expertise, mastery of the latest technology, the efficient and safe operation of the data center, and implementation of best operating practices.

●Operating Company (OP Co):

manage data centers that are leased or leased from building owners and are responsible for attracting potential tenants;

●Industrial Company (Prop Co):

Construct and own data center buildings, rent space to operating companies, and generally do not participate in daily management;

●Joint venture between operating company and industrial company (OP Co & Prop Co):

Simultaneous development and operation of data centers

●Data Center Vendors (DCPs):

Responsible for providing and operating data centers;

●Cloud Service Provider (CSP):

Providing cloud services and operating data centers;

●Digital Service Provider (DSP):

It specializes in providing digital services such as Facebook, Google, Instagram, etc.

●Stay away from disaster risk areas, such as areas where natural disasters such as floods and landslides occur frequently;

●Stay away from environmentally sensitive areas (KSAS), such as beaches, catchment areas, groundwater resources, backers, etc.;

●It is not recommended to build on peatland;

●outside the critical national target radius as defined by the Chief Government Security Officer (CGSO) or state chief security officer;

●Do not be close to high-risk industrial activities, such as the petrochemical industry;

●You must not be close to major highways, train tracks, or within altitude control limits specified by the Malaysian Civil Aviation Authority (CAAM).

According to the guidelines, data centers of different sizes should be equipped with power substations of different capacities.

The capacity of small data centers is 33 kV, and the capacity of large data centers ranges from 132 kV to 275 kV. They should be within a radius of 100 meters from the transmission line or main substation (PMU), and the best power usage efficiency (PUE) must be consulted and followed.

In addition, generators equipped with traditional or green technology are required, depending on the capacity of the data center being built, while using renewable energy to reduce electricity consumption.

Water supply is critical to running data centers. Generally speaking, effective tank capacity refers to the maximum amount of water that can be used for various purposes within 24 hours, so any data center should provide a minimum daily water requirement.

Authorities also need to use renewable energy and cost-saving technologies to achieve efficient water use, such as direct expansion air conditioning systems, environmentally friendly cooling water, and stormwater management systems. For other hydropower requirements, opinions should be sought from the National Energy Corporation, the National Water Commission, etc. before construction.

The Internet requires a wireless network or hybrid network. Each data center must have at least two service providers, and the minimum network speed is 100 Mbps.

●Private data centers:

It is built and managed by the organization or company itself, can be located at its internal facilities (facilities) or other locations (off-site), operated entirely by the organization or company itself, and exclusively provides internal services.

●Hosted Data Centers (Colocation):

Provide physical infrastructure 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 rent to host servers, storage devices, networking equipment, and other IT infrastructure such as Equinix, Bridge Data Centres, AIMS, etc.

●Hyperscale data center (Hyperscale):

It is a facility that can store and process large amounts of data. The main services of such data centers are companies that require large-scale data processing and storage, and are specifically designed to meet their specific needs, such as Google, Amazon, Microsoft, Meta, Apple, etc.

Here are 10 key components within a data center that will ensure the efficient, safe, and reliable operation of the data center to meet the needs of different organizations and businesses.

●Computational requirements

Desktops, servers, racks, and other related hardware.

●network infrastructure

This includes routers, switches, modems, cables, and other components that connect data centers to storage servers and users.

●Uninterruptible Power Systems (UPS)

In the event of a power outage, UPS equipment provides power as an early backup to ensure that all electronic devices can operate normally.

●Cooling/freezing systems

Used to maintain optimal temperature and humidity within the data center, including air conditioners, coolers, and computer room air conditioners (CRAHs).

●Power Distribution Unit (PDU)

Used to control the distribution and flow of electricity within the data center.

●Emergency generator (EPG)

Includes a generator set and diesel engine as a backup system for data center power supply.

●Safety requirements

Data center security features include closed circuit television (CCTV), biometric devices, security gates, firewalls, fire detection and extinguishing equipment, and the need for security guards, guard rooms, and control rooms.

●Access to the computer room (MMR)

It is a space where all cables and optical fibers are gathered for data exchange between different users.

●Main wiring rack (MDF)

Cables and devices connecting network facilities to data centers. All cables providing services to users are distributed to MMR processing data through the MDF room.

●Telco Room

Space to house all service providers.

The data center investment boom has taken the world by storm, and Malaysia is no exception. As more and more companies compete to enter the market, one cannot help but wonder if this wave of investment will eventually collapse like the previous tech bubble?

There are many opinions from market experts. “Nanyang Commercial Daily” interviewed data center operators and fund managers to thoroughly discuss the current state of the data center market, analyze the risk of a bubble, and look forward to its future development prospects.

Data center investment is booming, and many factors such as government policy promotion, technological progress, and growing market demand are indispensable.

At its core, the central processing unit (CPU) and graphics processing unit (GPU) support the entire computing engine. Now that computational requirements continue to evolve, the line between the two is blurred. How are they different from neural processing units (NPUs) used to accelerate AI?

As demand for advanced workloads such as artificial intelligence (AI), analytics, and 3D rendering continues to increase, the role of GPUs in data centers is becoming increasingly important. Through powerful parallel processing capabilities, GPUs can effectively supplement the functions of CPUs, accelerate the output of results and the innovation process. These new use cases require different types of computing power to drive high-performance computing (HPC) and visual cloud computing, and the introduction of GPUs will help meet the increasing growth of high computing and massive data processing.

The combination of GPU and CPU enhances overall computing power. Although both are chip-based microprocessors, each has a different task design.

CPUs are suited to handle a large number of workloads and applications, especially where latency or per-core performance is critical, and can quickly complete a single task with a small number of cores, making it ideal for database and serial computing tasks.

In contrast, GPUs were initially designed to speed up specific 3D rendering tasks, and over time, they became more programmable and flexible.

Bringing GPUs into data centers is an annoyance for builders or owners, but it also has some challenges to overcome. Among them, these high-performance tools consume more energy space and generate more heat during operation, which may affect data center infrastructure, increase power costs, or affect reliability.

Needless to say, addressing power and cooling issues is critical to successfully running a GPU. When deploying GPUs, it is necessary to evaluate rack power distribution units, uninterruptible power supply, and cooling capabilities to ensure adequate power and cooling to avoid impeding performance and availability.

Although combining GPUs and CPUs can meet the high computing needs of emerging use cases such as AI, analysis, and 3D rendering, GPUs take up more space, consume more electricity, and emit more heat than using CPUs alone. By rationally utilizing the advantages of GPUs and CPUs, data centers can meet modern computing needs, promote technological innovation, operate more efficiently, and achieve better results.

The success of investing in data center concept stocks depends on a long-term and in-depth understanding of the company's future business development, including poor information.

Wang Rongyao, executive director of Malaysia DE-CIX, said in an exclusive interview with “Nanyang Commercial Daily” that as a data center operator, although he knows the pros and cons, the data center is full of business opportunities and can drive hidden economic effects.

“It is the cornerstone of the modern Internet and digital economy, providing servers with the necessary power and environmental control to ensure the stability and security of data storage and processing.”

Without data centers, the Internet services that modern life relies on, such as email, social media, online trading, and cloud storage, cannot function properly.

“Electricity and water are the basic elements that make up a data center. There are also perfect fire protection systems, flood control measures and security systems to ensure equipment and data safety. Environmental humidity and air quality management are also very important.”

DE-CIX, headquartered in Germany, signed a joint venture agreement during 2020 to embark on a data center tour in Malaysia. The data center is located in Johor.

Wang Rongyao said that the Malaysian data center industry has very bright prospects. Due to its strategic location and location in the center of Southeast Asia, it can become a regional hub.

Second, the government attaches great importance to the development of the digital economy and has introduced a number of support policies to attract large amounts of domestic and foreign investment. Malaysia has abundant natural resources and relatively low electricity costs, all of which provide favorable conditions for data center development.

“DE-CIX is committed to promoting Malaysia as an important node for global data exchange. Through advanced data center facilities and services, DE-CIX helps Malaysia occupy a more important position in the global digital economy.”

Will this boom dissipate, and eventually there will be a bubble? He pointed out that the digital economy is developing rapidly, internet traffic continues to grow, and demand for data centers has increased significantly, but we must be wary of the risk of excessive investment and market saturation.

Data centers actually have a positive impact on the job market, particularly in the upstream and downstream industries, he said.

On the upstream side, data centers require extensive infrastructure construction, engineering design, and equipment manufacturing, etc., which has created many employment opportunities for construction engineers, mechanical engineers, and skilled workers.

Downstream, the operation and maintenance of data centers requires IT specialists, network engineers, system administrators, and security experts.

This not only promotes the employment of skilled personnel, but also promotes related training and education industries. Overall, the development of data centers has led to the prosperity of the entire ecosystem and created a wide range of employment opportunities.

Future data center technology will move in the direction of being more efficient, green, and intelligent, and there will also be more and more innovative technologies, such as liquid cooling technology, modular data centers, and artificial intelligence, which are gradually changing the way data centers operate.

With regard to the current technology sector, the data center investment boom is sweeping the world. Huang Weihan, founder and CEO of Tradeview Capital, has a unique opinion on this.

“Behind the data center boom is the rapid development of AI technology. AI requires powerful computing power and a large number of servers, driving data center demand. In particular, GPUs play a critical role in supporting the development of AI technology.”

In the past, AI technology has not made breakthrough progress, but since the introduction of OpenAI, AI has been more and more widely used in everyday life, attracting great attention and investment from tech giants such as Google, Facebook, Amazon, and Apple.

As a result, data centers are indispensable as the core infrastructure for storing and processing massive amounts of data.

Huang Yuhan said that government policies have always been very supportive of commercial development, particularly attracting AI-related companies. Policies such as setting up a factory and buying land are relatively relaxed, particularly involving AI or data centers. License approval can be obtained, and there are no previous Aboriginal requirements or employment permit (EP) restrictions.

Malaysia's entire industrial chain, from implementation and execution to approval, is a very fast process. At the same time, land in Malaysia is relatively cheap, which has attracted many big tech companies to develop the industrial chain.

Despite the booming data center industry, Huang Weihan also reminded investors to be wary of the risk of a potential bubble.

He said that many investors and businessmen are attracted to the boom in this emerging field, but data centers are a high-tech industry, and not all investors have sufficient expertise and understanding.

Stock prices rose rapidly after some companies announced memorandums of cooperation and understanding. This phenomenon is a typical characteristic of investment bubbles. “The data center industry is very technology-intensive. It's not something that ordinary businessmen can easily enter. There are indeed many people who want to profit from it. Precisely because of this, there is a certain investment bubble in data centers. Although the potential profit margin is huge, it does not mean that there will be no risk of not being able to rent it out; no one dares to pack a ticket to operate a data center will definitely make a lot of money.”

Huang Weihan believes that in this boom, the real beneficiaries are first developers and land owners, because they can profit by selling land and contracting projects.

However, whether data center operators can attract enough customers remains a key challenge.

The construction cycle for successful data centers is usually 18 to 36 months. In the process, they will face bottlenecks such as development permits and hydropower connections. Ensuring a stable supply of water and electricity is one of the major challenges in the construction process. He said that in order to operate the data center stably and continuously, it is necessary to have a stable cooling system and temperature management. Once the power is cut off, the operating consequences are fatal.

“Choosing the right construction site to ensure adequate power and water sources is therefore a huge challenge.”

Addressing challenges requires detailed planning and forecasting capabilities, including building strong partnerships, ensuring supply chain stability, adopting advanced project management tools, regularly reviewing and adjusting plans, and working with reliable contractors and suppliers.

Huang Weihan stressed that despite the risk of an investment bubble, the Malaysian data center market is still full of potential, driven by policy support and geographical advantages.

Looking forward to the future, I believe data centers will further support the development of AI technology by improving computing capabilities, optimizing energy consumption, and improving security and data management capabilities. Furthermore, data centers will continue to expand infrastructure and adopt new technologies such as quantum computing and edge computing to meet the growing demand for AI applications.

Dr. Wong Kam-wing, professor of economics at Raman University, pointed out that the data center investment boom is a global phenomenon. The main driving factors include technological progress and increased demand, the platform economy, and the rise of regional economies.

“In Asia Pacific and other emerging markets, data center demand is growing rapidly, and enterprises and governments are accelerating digital transformation, and demand for data storage and processing capabilities is increasing.”

The Malaysian government is actively attracting investors through tax relief, rapid approval procedures, and support policies for green energy.

Of course, the development of data centers has a significant impact on enterprise operations and economy, improving operational efficiency and promoting innovation.

Analyzing at a larger level, the specific contribution of data centers to the economy includes construction and operation to drive construction, power supply, and equipment manufacturing, etc., which in turn produces significant economic benefits.

In terms of strategic significance, as an infrastructure for digital transformation, data centers drive the digitization process of various industries, solicit more high-tech investment and foreign investment into Malaysia, and shape the industrial chain ecosystem.

Wong Kam-wing said that the increase in data demand is driving up rental and service costs, and the return on investment is bound to rise.

Data centers require large amounts of electricity, which may put pressure on the national power system, and operators need to continuously upgrade equipment to meet the latest technology requirements, and also require continuous capital investment to establish a high level of network security to prevent the risk of cyber attacks and data breaches.

When asked if data centers are showing signs of a bubble, Wong Kam Wing said that there is currently no clear investment bubble in related fields, as demand continues to increase due to the development of AI, big data, and cloud computing technology, providing a stable market foundation.

Furthermore, construction and operation require high investment and high technical standards, which can limit blind investment.

“Despite this, the market still needs to be wary of future oversupply or investment risks brought about by changes in market demand.”

In terms of the job market, Wong Kam-wing said that since operation and management are highly dependent on automation technology, less manpower is required, but data centers require high technical requirements, so talents with professional skills in engineering, IT, and data management are needed.

“Currently, the most lacking majors and skills are power engineering, refrigeration engineering, data center management, network security, and big data analysis.”

However, he said that if targeted talent training plans are provided through cooperation with universities and training institutions, he believes the talent shortage problem can be gradually alleviated.

The world knows that data centers consume electricity and water. In particular, there has been an artificial intelligence (AI) frenzy in recent years. Data centers use AI to process large amounts of data, and the consumption of water and electricity is really amazing.

When discussing the future development of data centers, the management of electricity and water resources has become a key topic, so whether nuclear power, as a clean energy source, can become a potential solution for data centers has attracted widespread attention.

“Nanyang Commercial Daily” interviewed Dr. Rosley, Director of the Malaysian Nuclear Energy Agency, and Dr. Xie Guoxiong, General Chairman of the Malaysian Environmental, Social and Regulatory (ESG) Association, to explore how data centers are related to energy saving and green, making people wonder, is nuclear power the ultimate solution for data centers?

By exploring in detail the management of electricity and water resources, the viability of nuclear power, and ESG paths, people will have a more comprehensive understanding of data center challenges and solutions in energy and resource management.

Rapid technological developments have made data centers an important cornerstone of the modern economy.

However, in the face of the “big monster” that consumes electricity and water, the high energy consumption and resource requirements of data centers have also posed new challenges.

In order to ensure uninterrupted power supply, data centers require power equipment with a certain capacity. Large data centers require 132 kV to 275 kV substations, and priority must be given to using renewable energy and energy saving technology.

According to Guoneng's guidelines, following the completion of a data center with a capacity of about 635 megawatts last year, 9 more data centers will be built this year, with a total capacity of about 700 megawatts.

These will drive the growth of electricity demand. Guoneng predicts that electricity demand in the Malaysian Peninsula will increase by 2.5 to 3% year-on-year in the 2024 fiscal year.

Today, China Energy is vigorously promoting the Green Channel and is also launching a series of hydro and solar energy projects with a total capacity of about 7,300 megawatts.

ASEAN countries have the highest commercial electricity prices in Singapore, at $0.22 (approximately RM1.04) per kilowatt-hour in the first quarter of 2024, followed by the Philippines at $0.19 (90 cents). Electricity prices in Malaysia, Indonesia, and Thailand are roughly the same; Vietnam has the lowest electricity bill of 0.06 US dollars (about 28 cents).

Singapore and Malaysia stand out in terms of overall electricity supply, yet in terms of supply costs, Malaysia beats Lion City.

According to J.P. Morgan's research, the large consumption of electricity in data centers is often the focus, but the problem of high water consumption is easily overlooked.

In fact, data centers have three major water methods, namely 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, the total water consumption of global data centers will increase by 6% per year from 2017 to 2022. It is estimated that by 2030, global water consumption will rise to 450 million gallons per day, equivalent to 681 Olympic-standard swimming pools. Especially in regions where water resources are scarce, the huge demand for water in data centers may trigger competition, leading to tight water supply and even the closure of data centers.

“Data center cooling systems usually require large amounts of water, and it is particularly important to ensure a sustainable water supply. Therefore, data centers should use efficient cooling technology and recycled water systems, such as direct expansion systems and ecological cooling water systems, which can greatly reduce water waste.”

He recommended that the government develop water efficiency policies on policies and regulations, limit the amount of water used per kilowatt hour (kWh), and promote data centers to build their own water recycling treatment facilities. In addition to using surface water, the use of seawater and groundwater as alternative water resources should also be explored.

Kairuyefendi mentioned that data centers can consider using treated wastewater as cooling water, but this requires solving the challenges of water treatment technology and facility construction first.

He recommended that data centers adopt advanced water-saving technology and management systems, which can reduce water consumption, and use the latest water treatment and management technology, such as stormwater management systems, to significantly improve the efficiency of water resource utilization.

Regarding investment and infrastructure, Kairuyefendi said that the investment to build a new water treatment plant and distribution system could reach several billion ringgit. These investments need to be managed properly to reduce the financial impact on other water users and avoid a sharp rise in water bills in the future.

To this end, he recommended setting different water prices for data centers to cover their water investment costs and encourage the use of more water-saving technologies and practices.

He emphasized that data centers should take more responsibility, such as adopting efficient water resource management technology, being responsible for their water use behavior and environmental impact, and building their own water treatment facilities as much as possible to mitigate the impact on local communities and ecosystems.

He called on industry and government to work together to achieve the sustainable development of data centers through policy guidance and technological innovation.

Nuclear power can provide large-scale and stable power, and its low carbon emission characteristics also help reduce greenhouse gases, which are critical for growing data centers.

However, nuclear power involves significant challenges such as high construction costs, long construction cycles, and waste management and safety issues.

Demand for electricity in data centers has risen sharply, putting tremendous pressure on the grid and the environment. The global data center consumes the same amount of electricity as Italy or Australia's total electricity production each year. As a low-carbon energy source, nuclear power can significantly reduce carbon emissions and help combat climate change.

The energy consumption of data centers in the UK is expected to increase by 500% in the next ten years. By 2030, US data centers are expected to consume 8% of the country's total electricity, which is a wake-up call for countries to re-evaluate their energy strategies and take nuclear power into account.

With the rapid expansion of Malaysia's digital economy, the low carbon footprint of nuclear power is in line with the country's goals of reducing greenhouse gas emissions and promoting sustainable development.

Dr. Rosley, director of the Malaysian Nuclear Energy Agency, pointed out that companies such as Microsoft and Amazon Web Services are currently exploring small modular reactors (SMRs) because of their simple construction and high safety.

However, implementing nuclear power requires huge infrastructure investments, strict regulatory frameworks, and public support. Governments and industry need to address nuclear safety, waste management, and environmental issues. If these challenges can be effectively addressed, nuclear power can support data centers and the growth of Malaysia's digital economy.

He pointed out that technological innovation is the key to the energy transition and future electricity supply. Among them, advances in solar and wind energy technology have reduced costs and increased energy capture rates.

Using advanced energy storage systems such as lithium-ion batteries and solid-state batteries can help solve the intermittent problem of renewable energy and ensure a more stable power supply.

Furthermore, innovations in nuclear power, such as small modular reactors and fusion energy, provide a reliable and sustainable source of future electricity.

Nuclear power needs to be combined with renewable energy to ensure reliable electricity supply and environmental protection, as well as create a stable and sustainable energy mix, reduce dependence on fossil fuels, and enhance grid stability.

“By investing in modern nuclear technology and combining it with renewable energy, Malaysia can achieve a balanced way to meet energy needs on a sustainable basis and support the economic growth of the data center industry.”

Rosley said that nuclear power has the advantage of large-scale and stable power supply. It can generate stable base-load electricity and is efficient, and only a small amount of nuclear fuel is needed to generate a large amount of electricity.

Nuclear power is also a low-carbon energy source. It emits very little greenhouse gas during operation, which helps mitigate climate change.

However, nuclear power comes with high initial capital costs, long construction cycles, and radioactive waste management issues.

Historic incidents involving nuclear power leaks have highlighted the risks, which require strict safety measures and supervision.

Public acceptance of nuclear power, safety issues and objections affect the development of new projects. Planning, licensing, and construction of nuclear power plants takes a long time and greatly delays their benefits, and decommissioning nuclear power plants is a complex and expensive process requiring careful management of the life cycle.

“Balancing these advantages and disadvantages is critical when effectively integrating nuclear power into the energy mix.”

He said that in order to ensure the safety and reliability of nuclear power in data centers, it is essential to go through strict supervision, regular inspections, and a sound waste management strategy.

Through transparent communication and community participation, trust is built and safety issues are addressed, and safety and operational efficiency are further enhanced through research, development, and continuous improvement using best practices.

Rosley said that through policy guidance, technological innovation, and transparent communication, the safe and reliable application of nuclear power in data centers can be used in data center energy supply.

Dr. Xie Guoxiong, General Chairman of the Malaysian Environmental, Social and Regulatory (ESG) Association, pointed out that the water and electricity consumption of data centers must be handled properly, and ESG responsibilities must be included as demand continues to rise.

“Data centers are working to reduce carbon emissions by 45% by 2030 to meet global sustainable development goals while fulfilling social responsibilities by creating high-value jobs and strengthening community participation.”

He said many data center operators are committed to fully using renewable energy as a key part of their ESG strategies by 2025.

Additionally, following Energy and Environmental Design Leadership (LEED) standards and using ENERGY STAR certified equipment is a best practice for data centers to maintain efficiency and reliability while minimizing environmental impact.

As for infrastructure construction, Malaysia is currently strengthening the construction of power grids to meet the expected 40% increase in electricity demand by 2030, particularly to support the energy needs of data centers.

According to the current plan, Malaysia aims to significantly increase the share of renewable energy from the current 20% to at least 45% in order to achieve the goal of carbon neutrality.

He said that by introducing smart grid technology and demand response programs, it is a good news for high-demand data center users.

“Malaysian data centers have limitless potential, but they also face huge challenges. Therefore, we must find a balance between technological innovation and sustainable development, and enhance the level of technology and competitiveness through international cooperation and localized technology transfer.”

Xie Guoxiong said that building a data center in Sarawak has certain advantages because the energy supply is sufficient, and the state's power generation capacity can reach 9,000 megawatts by 2030.

“Shazhou is still increasing hydropower projects and is fully capable of meeting the electricity consumption of future data centers, and this is one of the advantages that West Malaysia lacks. The West Malaysia peninsula still has many miles to go in terms of renewable energy, because building renewable energy is not an overnight thing, and the construction of electric vehicle charging stations is still not up to standard, so the whole thing still needs to be strengthened.”

He believes that through the joint efforts of all parties, Malaysia can achieve sustainable development in the data center sector, promote economic prosperity, and protect the planet.

Data centers are one of the important infrastructures in modern society. However, we need to face up to the problems of bubble and environmental impact caused by rapid expansion of relevant projects.

In order to avoid waste of resources and economic risks, Malaysia needs to formulate reasonable plans and policies to ensure the sustainable development of data centers. At the same time, the high energy consumption of data centers poses a huge challenge to the environment, and there is an urgent need to find clean and stable energy sources.

As a low-carbon and stable source of electricity, nuclear power can provide reliable electricity, but we must not ignore the safety, nuclear waste disposal, and public acceptance issues of nuclear power.

If Malaysia decides to develop nuclear power, the government needs to be fully prepared, including training technical personnel, introducing international cooperation, and carrying out detailed environmental impact assessments to ensure that the development of nuclear power does not cause irreversible damage to the ecological environment.

Overall, it is hoped that the data center will continue to ensure the healthy development of the country's economy and environment.

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