Changes In The Way The Datacenter Industry Thinks

By Justin Heyes. 9th July 2024

We are at a fascinating point within the datacenter industry. As previously discussed, the introduction of generative AI and a number of other factors has seen a once in a lifetime surge in demand for capacity within the digital economy. And while datacenters are being built to meet the demand, they are being challenged to innovate in new ways to meet ESG regulations despite the need to house more resource hungry racks to be able to cope with the density of the data they are housing. 

This boom in innovation is essential to pay attention to, especially for a newly emerging hub like Malaysia. With reports showing that the number of datacenters is expected to double from the existing 45 sites nationwide, with an additional 44 sites in the pipeline (New Straits Times, 2024) the country is facing a potential challenge in accommodating these facilities, balancing capitalizing on an opportunity to grow its digital economy, while trying to avoid the fate of countries like Singapore and overstretching its resources. 

One way to do this would be to study larger, more established markets approaching the demand for new builds and the innovations that are being considered. Uniquely for this Malaysia may want to turn away from examining its neighbour Singapore, and instead turn its attention to markets such as America and China. The reason being that both countries, like Malaysia, have an abundance of land available and are not so severely constrained in terms of their resources.

Datacenters In Remote Areas

The site selection model for datacenters is seeing a significant shift in its approach. While the traditional model saw datacenters being built as close to large population centers as possible, to reduce latency, in both China and particularly in the US, with AI in part alleviating latency requirements, the new approach seems to be going in the opposite direction. 

Recent project announcements shed light on this trend. Amazon Web Services (AWS) is investing $35 billion into new datacenter infrastructure throughout Virginia, with the bulk of that going to the state’s interior counties. AWS also announced that it plans to spend $10 billion to construct two datacenter campuses in Madison County, Mississippi, near the capital of Jackson (AWS, 2024).

Meta announced that it plans to invest $37 billion to expand its digital infrastructure this year. Two of the company’s largest projects are in Kuna, Idaho, and Temple, Texas. Meta and AWS are spending billions to erect new datacenter campuses in Central Ohio (Meta, 2024).

Microsoft has submitted plans to build up to $10 billion in new datacenter campuses on two sites in New Albany, Ohio (Microsoft, 2024), while Google will soon top $3.7 billion in spending on campuses in Columbus, New Albany and Lancaster (Google, 2024).

The common theme among all these investments? Rural areas, as far away from population centers as is practical, the concept being to alleviate existing grid systems and not compete for resources with the public, to ensure a consistent supply for the sizable facilities they are constructing.

Self Sufficiency

Approaches to power are also changing. Again, in both America and China, the trend of hooking into the existing grid system, has seen a move towards developing independent power for the datacenter.

In America nuclear power has been the backbone for the datacenter industry for a while, and Amazon had recently announced that it will be looking into deploying SMRs within its future datacenter campuses to ensure sufficient power for operations.  In China there are currently 150 reactors planned for development in the coming years (Orano, 2024), while these are not attached to datacenters, the country is taking a proactive stepped in its ESG initiatives, that move away from coal-based power and look to act as a backbone for resource heavy industries such as datacenters.

Interestingly there also seems to be a correlation between the remote locations chosen for datacenter development and sun intensity, a critical component in solar farming. With the drive for more renewable energy to be utilised in fueling datacenters it may well be the case that the larger developers within the industry are already looking at establishing their own supply, rather than depending on the government initiatives to do so.

There are lessons to be learnt here, and worth looking into if Malaysia is to continue to grow as a regional hub without disruption. Key takeaways being that datacenters do not need to cluster in one area to service a population and can operate successfully in new locations where they do not overload an already heavily burdened area. Datacenters can also look at ways to alleviate this further given the right incentives, by creating their own power sources, in what would commonly be referred to as an island grid system, however for this to be feasible Malaysia would have to look at changing its policies to do so. The models are shifting to make the continuing growth of the datacenter industry more feasible, and Malaysia should be looking to adapt to this if it wants to continue to expand its presence in the market.


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