The Billion Dollar Question: Can Malaysia Capitalise On The AI Boom?

By Justin Heyes, Director, Marketing & Business Development AREA Group of Companies

Microsoft’s announcement of a groundbreaking investment of US$2.2 billion over the next four years to bolster Malaysia’s digital transformation, outlines the largest investment in the company’s 32-year history in the country. The investment encompasses several key initiatives aimed at driving economic growth, fostering innovation, and empowering communities across Malaysia.

I welcome the government’s vision, and their agencies MDEC and MIDA for their work in realising this ambitious project. Recently, sceptics have been flooding social media with negative articles on Malaysia’s datacenter boom claiming that it does not contribute anything to the Malaysian economy in terms of GDP or employment. The announcement on the 2nd May seems to have effectively silenced them.

The investment includes the development of cloud and Artificial Intelligence (AI) infrastructure in Malaysia, which will serve as a catalyst for the nation’s digital advancement. This infrastructure will support the adoption of advanced technologies, including generative AI, and enhance Malaysia’s productivity, competitiveness, resilience, and overall economic growth.

This also comes with a commitment to establishing a national AI Centre of Excellence and enhancing the nation’s cybersecurity capabilities, providing AI skilling opportunities for an additional 200,000 people in Malaysia, as well as helping 2,000 Malaysian developers become AI subject matter experts.

Overall, Microsoft’s investment demonstrates a profound commitment to developing Malaysia as a hub for cloud computing and advanced technologies. By expanding digital capacity, providing skilling opportunities, strengthening partnerships, and empowering developers, Microsoft aims to fuel Malaysia’s digital transformation and position the country for sustained success in the global digital economy.

Believe me, the likes of AWS, Google, Facebook, ByteDance and other huge industry players are aware of this potential and will be following Microsoft’s lead.

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BuHoweverHNaANAnd yet, this is no time for complacency. To capitalise on these opportunities, we need to start seriously investing in providing the country with world class infrastructure ready to cater for these investments.

The ongoing generative AI boom underlined by Microsoft’s commitment and exemplified by the explosive popularity of ChatGPT and other tools, is the latest addition to a laundry list of new technological strides that have kicked off a rush for new datacenters.[AL1]  According to analysts at this year’s Bloomberg Intelligence Summit, models for projecting required capacity have grossly underestimated demand.

In Malaysia, the local demand itself is enough to seriously consider increasing infrastructure. Our population is young, digitally savvy, and upwardly mobile. Only about 8% are of retirement age, while 23% are aged 14 and younger, and given time will add to the overall demand. Meanwhile, 89% of Malaysians are smartphone and internet users. That is one of the highest rates in Southeast Asia (MIDA, 2023).

However, building more facilities to process and store the ever-increasing amount of data isn’t quite as simple as it sounds. Datacenters require numerous considerations in their construction as they maintain constant uptime, quietly running in the background night and day.

Establishing where to build these datacenters is the current challenge facing us in Malaysia. Site selection is dictated by key requirements that are essential to a datacenter’s operation and those sites must be scalable, so as to cater for the inevitable growing demand.

What’s the solution?

We need to first identify and then develop well designed, dedicated datacenter campuses.  These will require large strategic land areas [300-600 acres] with connectivity to the National Grid, access to green energy, demonstrate the availability of surplus of power to account for surges, ample water to provide cooling to ensure racks continue running at an optimal temperature and, most critically, access to dark fibre cables which are the lifeline of a datacenter, ensuring faster transmission of data and reduced latency. 

So, where should we build them?

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.

Furthermore, the term “one size fits all” cannot be applied to datacenter site selection. Facilities must be strategically placed to handle specific operational demands, whether serving high-performance computing, cloud services, or storing sensitive data, ensuring compliance with regulatory requirements and optimal performance based on user needs. These elements are vital to support the high demands of modern datacenters and to ensure their continuous operation under various conditions.

To date, Malaysia’s datacenter industry has been primarily serviced in Cyberjaya and more recently in Johor. However, the current sites for datacenters are beginning to reach a maximum capacity, with multiple datacenter clients now competing for limited resources which include new dark fibre cables required to be delivered to serve the new structures being built.

Having alternative sites provides datacenter providers with greater capacity, the availability of redundancy, enabling them to transfer data between sites during downtime, and opens new opportunities with less competition for resources.

As Malaysia’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 prioritize 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.

If we can catch the wave of new opportunities from the AI boom, we will be able to ride it for years to come, make Malaysia the digital capital of ASEAN and finally bring a new era of prosperity to Malaysia. This will take considerable foresight and planning, but we cannot afford to fail.


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