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The strong global demand for digitalization drives rapid growth in data centers across Southeast Asia.

A report by Technavio, titled "Data Center Market in Southeast Asia by Component and Geography - Forecast and Analysis 2021-2025," claims that the market will experience a total growth of $12.60 billion between 2020 and 2025. This research report covers data center market segmentation in Southeast Asia, including information technology (IT) infrastructure, electrical construction, mechanical construction, general construction and security solutions. It proves that the Southeast Asian market is highly competitive, as many vendors are competing to increase their market shares.

Factors Influencing Data Center Market Growth

The remarkable growth of the data center market has been fueled by several different factors, such as cloud computing, artificial intelligence (AI), e-commerce, the Internet of Things (IoT), edge computing and 5G.

The need for high-performing IT infrastructure is increasing as more companies adopt IT infrastructure into their operations to ensure their business continuity; this increased implementation would strengthen the data center market in Asia further, especially for hyper-scale data centers due to organizations' desire to ensure the scalability of their business as well.

Another key factor driving market growth in the data center market in Southeast Asia is the relationship to connectivity gateways as well as the existence of solid submarine cable networks.

Internet landing stations, also called connectivity gateways, are locations where submarine cables connect to the network infrastructure of a specific region. Stations like these are strategically located in areas where marine traffic is minimal to eliminate the risk of damage to cables by objects like ships' anchors.

A lot of colocation service providers and cloud service providers (CSPs) are establishing data centers near internet landing stations to reduce connectivity costs and overall latency. This shows the influence of internet landing stations in driving the growth of data centers in various regions. A good subsea cable network has also been one of the essential factors in increasing investments in data centers.

Southeast Asia Data Center Hubs

The MHI magazine Spectra published an article on how Johor, Malaysia and Batam, Indonesia, are becoming interesting destinations for data center operators because of the rising demand for digital services in Southeast Asia. The consistent adoption of cloud services, as well as the importance of digital services during the COVID-19 pandemic, fed this demand. Its large population, particularly tech-savvy youth, also drives organic growth of 10-15% in the data center sector.

A moratorium on new data centers in Singapore, has resulted in operators expanding into its neighboring countries. Indeed, the collaboration between governments and industry has facilitated the development of data centers in Johor and Batam, benefiting from their proximity to Singapore.

Still, it’s important to note that Singapore's undersea cable connectivity has also been a contributing factor that has allowed it to become a popular location for data center operators despite its land constraints. As of May 2020, the comprehensive network of 24 undersea cables linking Singapore to many key areas globally makes Singapore the prime location to connect the region to the rest of the world.

Indonesia is also emerging as a leading data center hub in Southeast Asia due to its growing digital economy. The government's active industry promotion has also led to many projects underway. Among the factors driving this growth are the increasing demand for cloud computing services and Indonesia's large population, which offers a market for data-intensive applications.

The government's supportive regulations and incentives have also attracted investment in the industry. Despite the challenges faced by the data center industry in Indonesia, which include a lack of skilled talent, power outages and developing regulations, the country is still well-positioned to become an essential data center hub in Southeast Asia.

Also, the explosive growth in digitalization, e-commerce and digital banking in India, Indonesia, Thailand and Vietnam will likely present massive opportunities for data center operators in those countries.

In the future, we might even witness demand for data centers shifting to additional locations in Asia. The growing entrepreneurial power across different markets means new organizations with innovative new technologies may place unique demands on data centers. These consistent developments simply mean that data center markets will continue to grow.

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