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Malaysia is rapidly becoming a major data center hub in Southeast Asia, driven by increasing demand for cloud computing and artificial intelligence (AI). In recent years, the country has secured billions of dollars in data center investments from tech giants such as Google, Nvidia, and Microsoft.
Much of this investment has focused on Johor Bahru, a small city on the border with Singapore. James Murphy, APAC managing director at data center intelligence company DC Byte, highlighted Johor Bahru’s explosive growth: “In just a couple of years, [Johor Bahru] will overtake Singapore to become the largest market in Southeast Asia from a base of essentially zero just two years ago.”
According to DC Byte’s 2024 Global Data Centre Index, Johor Bahru is the fastest-growing market in Southeast Asia, boasting 1.6 gigawatts of total data center supply, including projects under construction, committed to, or in early planning stages. Data center capacity is typically measured by the amount of electricity consumed.
If all planned capacities come online, Malaysia will rank behind only Japan and India in Asia. Currently, Japan and Singapore lead the region in live data center capacity. The index did not detail data center capacities in China.
Historically, data center investments have been concentrated in Japan, Singapore, and Hong Kong. However, the global pandemic accelerated digital transformation and cloud adoption, increasing demand in emerging markets like Malaysia and India. A report from global data center provider EdgeConneX notes heightened demand for video streaming, data storage, and internet services, all driving the need for more data centers.
The surge in AI services further fuels demand for specialized data centers that can handle large data volumes and computational power necessary for training and deploying AI models. While many AI data centers will be built in established markets such as Japan, emerging markets like Malaysia are also attractive due to their ample space, affordable energy, and cooling resources.
Malaysia’s appeal is boosted by policies favorable to data centers. The Green Lane Pathway initiative, launched in 2023, streamlines power approvals, reducing lead times to as short as 12 months.
Moreover, policy shifts in Singapore have redirected investments to Malaysia. While Singapore’s robust talent pool and connectivity make it ideal for data centers, the government began limiting capacity growth in 2019 due to high energy and water consumption. Consequently, many investments have shifted to Johor Bahru.
Although Singapore recently outlined plans to increase its data center capacity by 300 MW, contingent on green efficiency and renewable energy standards, space constraints and limited green power generation remain significant limitations.
While the data center boom boosts Malaysia’s economy, it also raises concerns about energy and water demands. Kenanga Investment Bank Research estimates potential electricity demand from data centers in Malaysia could reach 5 GW by 2035. Currently, Malaysia’s installed electrical capacity is about 27 GW, according to Tenaga Nasional Berhad, the Malaysian electricity company.
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