By Justin Heyes. 4th June 2024

Johor’s Water and Power Challenges

Amidst the announcement of at least three more datacenters being planned for development in Johor, Johor Bahru city council Mayor Datuk Mohd Noorazam Osman, made an expected but somewhat overlooked statement during The Johor Conversations Conference 2024, which needs to be reiterated “People are too hyped about datacenters nowadays, but the issue in Johor is water and power”. To tackle these issues, he even went on to propose enhanced collaboration between the government and private sectors, including desalination plants for adequate water supply and partnering with developers to create industrial parks with adequate power and water for high-tech industries.

Need for a Broader Strategy

While some of these proposals sound reasonable at first glance, on closer inspection they may not fully grasp the current situation within the industry and the realities that need to be addressed. Yes, Malaysia needs to capitalise on the investment potential the country has within the datacenter industry, but if we continue to take on all developers with no strategy in place, we risk ending up in a not dissimilar situation to Singapore in our southernmost state, and trying to drive the private sector into infrastructure investment will simply reduce the number of interested investors, not provide a solution.

Exploring Other States

The fact is the datacenter industry needs to be looked at with a far wider lens than one state being the answer to all of Malaysia’s digital growth. There are other states which have similar investment appeal to Johor, and an abundance of resources readily available, and with some strategic investment in subsea landing stations, could be beneficial both to international traffic and establishing Malaysia’s position as a regional hub.

Leveraging Subsea Landing Stations

The Satun and Songkhla subsea landing stations in the south of Thailand are seeing an increase in subsea routes being proposed, and being a more direct line, are an ideal way for datacenter developers to service an influx of traffic from Northeast Asia from the north of Malaysia. However, with the Cabotage Policy finally being lifted there is an even greater opportunity for Malaysia to establish its own routes for Northeast Asia and other markets.

Strategic Site Selection

Being realistic about time frames for upscaling potential resource capacity in Johor, while acknowledging the availability of resources in other states and incentivising developers to start building there, seems a far more logical approach than agreeing to more new builds in Johor, and then being surprised when the state seems to be reaching a point of saturation and pressed for water and power.

Adapting to Industry Developments

Another key factor in navigating the challenges that Malaysia faces is recognizing and understanding industry developments that are changing the very nature of datacenters as we know them. Generative AI is the hot topic of the day, and with good reason, the demand for processing power and capacity has been rapidly increased with the uptake of this new development, as every industry is finding new ways of utilising its capabilities to make their work processes faster and more efficient, but we are still not recognising how this is changing the way datacenters are going to behave.

Training and tuning application workloads for AI are not typically latency sensitive. Let us repeat this until it sinks in. Training and tuning application workloads for AI are not typically latency sensitive. This makes the prospect of building a power and water hungry AI hyperscale datacenter near to a population, a rather pointless endeavour, because the primary reason for building it in proximity to begin with, was to reduce latency.

This opens a wealth of potential in Malaysia that needs to be recognised and then capitalised upon. However, datacenter site selection extends beyond real estate considerations; it’s fundamentally a technology and infrastructure-driven strategy. The right site must have a unique combination of essential components, including cost-effective, development-ready land, comprehensive infrastructure, site readiness, and resilience against natural disasters.

As the region’s demand for technologically advanced datacenters grows, it is crucial to identify sites that provide both economic value and strategic advantages. It is imperative for Malaysia to get this right; not merely focusing on the economic returns for developers and landowners, as one might with condos and shopping complexes, but to prioritise the operational and technological functionality of datacenter sites. Treating datacenter development as a traditional real estate exercise would be a critical mistake. This is a matter of national importance that will determine our competitive stance in the global digital economy and should be the primary focus for the country now.