In today's fast-paced world of technology and digital growth, data has become crucial for the global economy. With the increasing reliance on cloud services, artificial intelligence, Internet of Things (IoT) devices and big data analytics, the need for strong and scalable data centers has skyrocketed. Surprisingly, Asia has become the center of this data revolution, with a remarkable increase in data center developments driving the region towards a digital future.
APAC’s Data Center Market
The Asia-Pacific (APAC) data center market is projected to grow at a compound annual growth rate (CAGR) of over 6% from 2022 to 2027. By 2027, it is expected to reach a value of US$93 billion, compared to US$64 billion in 2021. APAC is considered one of the most dynamic global data center markets, attracting significant investments from colocation providers and hyperscale operators alike.
Moreover, the Asia-Pacific data center market continues to see steady growth, with major investments from industry giants such as AWS, Microsoft, Alibaba, Tencent and Facebook fueling such progress. Additionally, government agencies in several countries across the region actively support the expansion of data centers as part of their efforts to further digitize their nations.
Key Factors Shaping the Asia-Pacific Data Center
The APAC region, specifically Southeast Asia (SEA), is seeing a rise in IT consumption due to factors like a growing affluent population, young demographics and increasing industrialization. This makes it attractive for data center operators who want to bring data and cloud storage closer to consumers in the region.
The rise in mobile usage, particularly driven by a tech-savvy young population and the increasing popularity of social media, is also creating a demand for high-capacity storage solutions. Additionally, the region's internet penetration rate has improved significantly in recent years, with around 415 million people in SEA having internet access. This presents a huge potential for mobile usage expansion in the APAC region compared to countries like the United States and the United Kingdom, where internet penetration rates are already high.
Additionally, the demand for advanced IT infrastructure is increasing, particularly in the areas of IoT, AI and big data analytics. This is leading to sustained growth in the Asia-Pacific data center market, especially for hyperscale data centers.
Countries like India, Indonesia, Thailand and Vietnam are experiencing significant growth in digitalization, e-commerce and digital banking, which presents opportunities for data center operators in these locales. Vietnam's coastline also makes it an ideal location for sub-sea cables, connecting second- and third-tier markets to the global marketplace. Additionally, the deployment of submarine cables in Australia, such as the INDIGO projects, will contribute to the growth of data center facilities by increasing network traffic.
Moreover, countries in the APAC region are prioritizing sustainability in powering and cooling their data centers — a strong example for the rest of the world. Singapore accounts for 60% of Southeast Asia's total data center supply, with 7% of its energy consumption coming from data centers. Though this is expected to increase to 12% by 2030, Singapore remains at the top of the Data Centre Competitive Index for APAC. The country is investing in renewable energy sources such as solar power and exploring the use of hydrogen as an alternative fuel option.
In addition, tech giants like Apple and Microsoft are running their data centers in Singapore solely through solar power. And similar sustainable data center initiatives are taking place in India and Malaysia through joint ventures between companies like Adani Enterprises, EdgeConneX, GSPARX and NTT.
The demand for hyperscale data centers is increasing in the APAC region due to cybersecurity regulations, the growth of e-commerce and ride-hailing industries, and the need for on-demand cloud services. In the future, there might be a shift towards edge locations, like secondary markets and smaller nodes in major cities, as these architectures become more decentralized. This will lead to an increased demand for colocation data centers in secondary markets within APAC.
One thing is clear: with these current parameters as well as future expectations, the economic and societal impact of data centers is sure to grow. And the Asia-Pacific region will continue to embrace this evolution.
