By Justin Heyes. May 14th 2024
Within the South East Asia datacenter industry, it is arguably evident that Malaysia has the most potential for growth, currently being estimated at 0.71 thousand MW in 2024, and with an expectation to reach 1.36 thousand MW by 2029, growing at a CAGR of 13.73%. Furthermore, the market is set to generate colocation revenue projected to reach USD 2,038.2 million by 2029, growing at a CAGR of 19.45% (Mordor Intelligence, 2024).
With the advent of generative Artificial Intelligence (AI), the country’s strategic location within the APAC region, an abundance of land for development and resources, stable grid and connectivity network, as well as open policies for international investors, datacenter development and geopolitical neutrality make for a natural choice for those attempting to meet the demand for capacity.
However, as industry experts call for the government to invest in infrastructure to facilitate this potential economic boon, there are some dissenting voices who believe Malaysia should focus on other industries, with some factors that need to be discussed. Taking these into consideration, could be a worthwhile practice, as approaching an opportunity with an understanding of all perspectives tends to yield greater results.
The first argument is how resource intensive datacenters are. While this cannot be denied, datacenters are the backbone of our current digital lives. While projections suggest the number of facilities could explode ten-fold over the next five years (The Star, 2024), contributing to the drive behind this are major sectors witnessing high adoption of AI such as healthcare, fashion, education, smart factories and warehouses, as well as legal and finance, that could fall behind, or potentially grind to a halt without them (Mordor Intelligence 2023).
We are also fortunate that Malaysia’s infrastructure is currently more prepared to handle this expansion more so than any of its neighbours. While this does not negate the need to seriously ramp up power production over the coming years, it does at least allow time for preparations to begin.
The adoption of innovations in the industry such as immersion cooling have been shown to reduce energy use by up to 40% and water consumption by up to 96% (Icetope, 2024), and could see a significant reduction in overall demand. Additionally investments in renewable energies and cleaner energies, such as solar, wind and even nuclear could see the knock on impact of increasing the country’s ESG capabilities and expanding another industry in the process.
Which leads to another point of contention, job creation. With the amount of resources required, how does the investment in datacenters stimulate the local job market?
A recent case study would be Microsoft’s announcement of an investment of US$2.2 billion over the next four years to bolster Malaysia’s digital transformation. 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. Creating jobs and industry expertise in a critical global market and positioning Malaysia at the forefront.
In a study by Oxford Economics it was shown that in the United States in 2022, Google had created 57,804 total jobs through their datacenter investments, generating nearly $4.0 billion in income for workers, and added $6.4 billion in economic activity as measured by GDP, throughout the United States. A similar study in Singapore in 2020 showed Google had supported 2,013 jobs in Singapore, generated US$110 million in income for workers, and added US$216 million in economic activity as measured by GDP.
This is not even beginning to look at or calculate the jobs that have emerged within countless industries as they invested in digitalisation. With companies utilising cloud servers, cybersecurity has come to the forefront in many companies handling sensitive data, companies have emerged offering programs and services to streamline the process of digitising and with data now being a critical factor in the operation of running a business there has been a noticeable increase in the number of roles in data analytics within the last five years.
A final discussion could go into a larger issue. Where do we find the talent to fill these newly created technical positions? Without going into an essay pertaining to Malaysia’s issues with the neatly coined “Brain Drain” problem, where young, well educated Malaysians look to pursue career opportunities in other countries with better salary prospects, the fact is that a number of industries are finding themselves short on available talent owing to this phenomenon. And datacenters could actually be a solution.
Jobs in AI, Internet Of Things (IoT), cloud and datacenters pay markedly higher than in other industries. In the aforementioned study, job’s supported by Google’s datacenter operations exceeded the national average income per job by 14% (Oxford Economics, 2022). With the right initiatives in education, Malaysia could be potentially training generations of young talented individuals, to enter into a continually expanding market with appealing salaries for the next 10 years and beyond.
With all considerations as to the direction a nation should take in how to shape an economy and provide opportunities for the population, there is never an easy answer. However with the AI Boom creating a potential datacenter wave for Malaysia to capitalise on; strengthening the economy, positioning the country internationally as a digital hub at the forefront of innovation and showcasing a viable career path for future generations of the population, it is not to be dismissed and should be a priority discussion for the government to consider.