Malaysia, emerging as a data center powerhouse. Malaysia is emerging as a data center hub in Southeast Asia and beyond, driven by the spike in demand for cloud computing and artificial intelligence. Its key advantages over other ASEAN countries have attracted significant data center investments from MNCs and global hyperscalers like Microsoft, Google, Amazon, and ByteDance.
Connectivity... Malaysia is connected to 25 submarine cables through 6 cable landing stations. These include the Asia Submarine-cable Express (ASE), Asia-America Gateway (AAG), Asia Link Cable (ALC) 2026, Asia Pacific Gateway (APG), Batam Dumai Melaka (BDM) Cable System, and Batam-Rengit Cable System (BRCS). The global submarine cable infrastructure is crucial for ensuring high-speed and reliable global connectivity.
...meets affordability. According to UBS, industrial land prices and utility tariffs in Malaysia are among the lowest in the region. The price of industrial land is only USD50/sqm, compared to the regional average of USD150/sqm. Additionally, Malaysia's industrial water tariff is the third-lowest in ASEAN, standing at USD0.50/cubic meter, while the regional average is USD0.60/cubic meter, with Vietnam and Indonesia having lower rates.
Despite Singapore adding more data center... Although the Singapore government lifted the moratorium in 2022 and plans to increase its data center capacity by another 300MW in the near term, Malaysia still holds a significant advantage with a capacity of more than 3000MW in the pipeline until 2030. Thus, we believe Malaysia's competitive advantage could attract more global hyperscale MNCs, with Johor being one of the major beneficiaries.
...Johor to experience a boom cycle. The geographical advantage of Johor-Singapore has led to a spillover of data center investments from Singapore, as Johor offers (i) lower office rents, (ii) lower factory costs, (iii) attractive tax rates and incentives, and (iv) a duty-free zone in Forest City. This shift is also driven by the anticipation of moving from backend manufacturing and logistics to growing the digital economy under the Johor-Singapore Special Economic Zone moratorium.
China+1 supply diversification. Additionally, Malaysia is one of the beneficiaries of the China+1 strategy, as the US-China trade war has impacted global supply chain sectors like semiconductors and manufacturing. With higher tariffs expected under the Trump administration next year, Malacca Securities in its opinion said it anticipates more investment in semiconductors, especially in higher-value chip activities such as wafer fabrication and IC design in Penang, due to its free trade zone and industrial parks. This could translate to a spillover effect on Johor's data center industry.
