How Edge Computing will exponentially grow the China market

Over the past decades, there have been paradigm shifts from centralised to decentralised IT environments: from mainframe server to on-premise server and from mobile to cloud environments. In many ways, it seems like an electronic dance music loop.

Nowadays, the industry is continuing to see growth of Cloud computing, which experts believe will continue to lead the ICT infrastructure market. In that space, Edge Computing will become an exponentially growing market in itself, with the increasing penetration of network-related technologies and initiatives, such as 5G and IoT.

According to Reply’s new research ‘From Cloud to Edge’, edge computing will be an exponentially growing market in all “Europe-5” (Italy, Germany, France, Netherlands, Belgium), and “Big-5” (USA, United Kingdom, Brazil, China, India) clusters’ countries due to the growing usage of 5G and IoT solutions. It is expected that Edge computing marketing would reach a value of $8294.5 million by 2025, according to Reportlinker.com.

All the industries that require the computing tasks as close to where data is originated as possible will benefit from Edge Computing. It’s time for global enterprises to design and implement architectures that leverage the best of Edge and Cloud Computing, “while ensuring privacy and cybersecurity” commented Filippo Rizzante, CTO reply.

China: 100+ Edge Projects Deployed in China Leveraging 5G and IoT Infrastructure

According to a new GSMA intelligence report ‘Edge Computing in the 5G Era: Technology and Market Developments in China’, noted that China’s leadership in edge computing is being driven by government support for new technologies and operator investments in new 5G and IoT networks. According to the ECC, there are currently more than 100 edge computing projects up and running in 40 cities in China across various sectors.

However, even as “China’s 5G numbers might look overwhelming, the quantity is well ahead of the quality.” Explained Robert Clark, a news analyst. “The real challenge in China will be in the industrial Internet.”

Though it’s still early, as networks become virtual or software-based, 5G will be the impulse for the next wave of multibillion-dollar infrastructure spending to spur innovation across many industries along with edge computing.

Take Chinese Grids’ Transformation as an example, China’s State Grid Corp (SGCC), government-backed biggest electricity distributor, has adopted a new focus for its smart grid development to build an electricity network plus IoT (E-IoT, essentially, is to deploy blockchain, AI, cloud computing, 5G, edge computing, and other digital/tech solutions upon the physical grid operation) by 2026.

Start from 2019, SGCC has already took steps to run its digital transformation. In 2020, Kou Wei, the current chairman of SGCC set off a landmark “white paper” for the e-IoT development, which set a grand vision to “establish an initial construction of the E-IoT network by 2021 and complete the E-IoT network development by 2026.” At the same year, working with Huawei and China Telecom, a largest-scale 5G-based smart power grid project in Qingdao of Shandong province was completed. Innovations in 5G telecommunication technology applications are applied e.g. DP facility suitable for 5G distribution power lines is equipped which can automatically eliminate faults of the lines within dozens of milliseconds (the one-way latency of the DP device is lowered to 8 milliseconds and the protection can last for 50 milliseconds).

SGCC has already taken further initiatives to build edge infrastructure nationwide in the next few years to advance its E-IoT network, a source who did not wish to be named told W.media.

“Creating a favourable ecosystem environment that supports technology developments and fosters innovation will ultimately determine the pace and magnitude of edge deployments in China and beyond.” explained Sihan Bo Chen, Head of Greater China, GSMA.

In the next few years, we will see more breakthroughs brought about by edge computing in BFSI, medicine, transport, industry, agriculture and the home. Edge computing gains an ‘edge’ in performance with data processing in an intelligent way as near as possible to its source that will bring practical benefits to help with the digitization of various industries.

The year of the Ox has dawned in China, named after a zodiac animal noted for its slow-but-steady approach. The description of China’s emerging 5G private network market could not be more accurate.

How Data Centers in China Are Heading Towards Carbon Neutrality

After Chinese President Xi Jinping pledged that by 2030 China would cut emissions per unit of GDP by “at least” 65 percent compared with 2005 levels at the virtual Climate Ambition Summit, China has sped up its decarbonization and development of a low carbon economy.

The announcement was met with a mixed response with some environmental observers questioning whether China can go this far.

“The most challenging part of the shift is not the investment or magnitude of renewable capacity additions but the social transition that comes with it,” said Wood Mackenzie analyst Prakash Sharma.

In China, representing the information backbone of an increasingly digitalized society, data centers are still a net producer of Greenhouse Gas (GHG) emissions and major electrical power users. Research from Greenpeace and North China Electric Power University estimated that China’s data center consumed 161 billion kilowatt hours of electricity in 2018, equivalent to 2 percent of the country’s total usage. The power consumption is projected to grow 66 percent by 2023, to 267 billion kilowatt hours, which means 163 million tonnes of carbon emissions are produced assuming China’s energy mix remains the same.

Tier-I cities in China such as Beijing, Shanghai and Shenzhen have applied strict PUE rules as a method to push the industry towards greener operations. While Beijing has implemented a complete citywide ban on new data center construction, Shanghai only allows new data center with a PUE of 1.3 or below and refitted ones with a PUE of 1.4 or below. Meanwhile in Shenzhen, data centers with a PUE of over 1.4 receive no subsidies and those with less than 1.25 could obtain a subsidy of over 40 percent. Besides, central government policy on more use of renewable energy remains one of guidance and encouragement. China manufactures around 70 percent of solar energy equipment such as PV panels and modules.

Renewed Renewable Energy push

Different from traditional infrastructure like roads and railways, construction of “new infrastructure” in China is boosted to remain the primary driver of energy consumption in the foreseeable future. With data centers rapidly expanding and depleting environmental resources, the energy and climate impacts are being one of top considerations in China, as well as the world in general.

Intensive energy use can be costly both in terms of the data center’s operating budget (often representing more than 50 percent of the budget) and the impact on the environment.

Interest in renewable energy in China has been growing for several years, and leading Chinese companies have already undertaken the exploration of renewable energy use.

Research from Greenpeace and North China Electric Power University also states that China is outpacing the US in renewable energy, and has made huge progress in developing solar and wind projects.

However, nearly three quarters of (data centers’) power comes from coal, said Ye Ruiqi, a climate expert from Greenpeace. “To prevent this, China’s data centers need to decouple their electricity consumption from their carbon footprint by relying more on wind and solar energy. They can build their own renewable energy capacity, buy clean energy on the market or purchase green certificates to offset their emissions,” she added.

A Turning Point

In the backdrop of all this, China’s proposal to achieve net zero emissions by 2060 aims can be seen as a turning point. To fulfill the goal of carbon reduction and pollution prevention, China’s tech giants, state-owned energy companies and other important players are encouraged to make great efforts, from advancing technologies that produce less greenhouse gases or air pollution, accelerating energy transition and taking more social responsibilities.

In December 2020, China Three Gorges Corporation, a Chinese state-owned power company operating the China Yangtze Three Gorges Project (one of the biggest hydropower-complex projects in the world), announced plans to construct its Dongyue Temple Data Center. It is planned to build about 28,000 cabinets and invest 5.5 billion CNY (around $855.8 million). In Stage I, about 4,400 cabinets will be put into use by October, 2021, with an investment of 830 million CNY (around $ 129 million).

Responding to Chinese government’s pledge of “carbon neutrality” and the scheme of “New Infrastructure”, the group will further utilize the advantages of clean energy, stock land and real estate to promote the big data industry. Although it has been involved in the big data industry since 2017, it is the first time that the group announces its ambition to expand business with such massive spending on the ICT market.

Chinese private enterprises seem to have got off the block. On January 12, Chinese internet giant Tencent released its plan of achieving zero carbon emissions with the help of technology. With this announcement, Tencent became one of the first Internet companies to take action in achieving carbon neutrality.

“As China announces its carbon peak and carbon neutrality targets, Tencent will also accelerate its carbon neutrality plan. At the same time, we will also increase the exploration of the potential of cutting-edge technologies represented by artificial intelligence in coping with the major challenges of the earth, and make great strides to promote the application of technology in industrial energy conservation and emission reduction,” said Tencent’s founder Ma Huateng (also known as Pony Ma).

Chindata Group, a leading carrier-neutral hyperscale data center solution provider in China, also releases its roadmap to be carbon neutral for all its next-generation hyperscale data centers in China with its 100% renewable energy solution by 2030.

As China becomes a more developed economy, accelerated efforts of decarbonization to accelerate technology innovation and industrial upgrading are made. China’s transition to a low carbon economy is not only possible but can be a driver of high-quality growth while bolstering the development of digital transformation.

How Far Behind

Since 2018, institutions globally are moving towards achieving carbon neutrality, even as concerns have been raised at the way in which this is computed.

Although more Governments and businesses are committing to achieve carbon neutrality by 2050, the world is still falling far short of that goal, UN Secretary-General António Guterres said in November in his latest push for a cleaner, greener future. Guterres reported that so far, the European Union, Japan and the Republic of Korea, along with more than 110 other countries, have made the pledge, while China is set to join them by 2060. “The window of opportunity is closing,” he warned.

In January, following the inauguration, President Biden signed an executive order at the White House, to reverse the previous administration’s withdrawal from the 2015 accord, which returned the United States to the worldwide fight to slow global warming and reduce greenhouse gas emissions. Alongside China, the United States is the world’s most carbon emitter.

Financial institutions have been accused of funding “dirty capital” into traditional power projects. All this is changing.

Goldman Sachs has ruled out direct finance for new or expanding thermal coal mines and coal-fired power plant projects worldwide, as well as direct finance for new Arctic oil exploration and production.

The policy makes a clear mention of protecting the Arctic National Wildlife Refuge,

Goldman Sachs said in a statement. Further, the bank has also committed to a phase out of financing for significant thermal coal mining companies that do not have a diversification strategy. Goldman Sachs’s new policy tightens the screw on thermal coal by including underwriting, and explicitly committing to phase-out, not just reduction.

This is a crucial step forward, as other US bank coal finance restrictions have geographic loopholes, industry watchers said.

While other major banks have committed to reducing credit exposure to coal mining, their approach restricts only lending, ignoring the large amounts of capital the banks facilitate for the coal industry from the underwriting of issuances of stocks and bonds. Activists have been vehement in their criticism of global financial institutions, which they say are turning a blind eye and undermining the Paris Agreement when it comes to phasing out coal-based energy production. Other financial institutions have followed suit too.

Jason Opeña Disterhoft, Climate and Energy Senior Campaigner at Rainforest Action Network (RAN), said that Goldman Sachs’s updated policy shows that U.S. banks can draw red lines on oil and gas, and now other major U.S. banks, especially JPMorgan Chase – the world’s worst banker of fossil fuels by a wide margin – must improve on what Goldman has done.

“The writing was already on the wall for coal financing. Goldman Sachs’s new policy puts that writing in flashing neon,” he added.

According to research by non-profit organisations like Urgewald, BankTrack and 30 others, banks and other financial institutions from January 2017 to September 2019, they have provided lending finance and underwriting services to 258 coal plant developers in the world. According to Heffa Schuecking, director of Urgewald, this has amounted to channeling $745 billion.

Countries like India have also committed to reduce energy emissions intensity by 30 – 35 percent from 2005 levels by 2030 and increase the share of non-fossil fuel energy to 40 percent of India’s energy mix by 2030.

Internationally, there is broad recognition of the need to reduce power use and emissions. This motivates greater efforts in developing future policies, and changes in regulation, taxation and electricity market. In the changing global landscape, data center, an increasingly critical part of the infrastructure for the digitalised society, have outsized importance in climate change mitigation efforts. This is the time when this industry needs to take responsibility and look at sustainability beyond lip service.

For more insights on China, do check out our digital event China Datacenter Market Insights happening on March 5!

Why the Transformation of State-owned Chinese Companies Will Take Time

China’s ‘new infrastructure’ plan has become a buzzword for attracting more players and investments. Even as plans are afoot to attract new companies, traditional state-owned companies, more popularly known as Public Sector Enterprises (PSEs), are also keen to expand their role, so that they can catch up with the wave.

Since China’s reform and opening-up of the economy, CCP (Chinese Communist Party) has been striving to gradually allow the markets to play a decisive role in resource allocation, the situation in China’s state-owned companies is much more complex. Some big state-owned enterprises are entering the ICT market or considering to enter the market but things are not going well. Case in point – the acquisition of Global Switch by a Chinese consortium led by Chinese steel maker, Jiangsu Sha Steel Group.

Traditional Industry Faces Challenges

In the 2019 annual competitiveness ranking by World Steel Dynamics, five Chinese steel companies were among the top 50 companies.

The top Chinese steel maker is China Baowu’s Baoshan Iron and Steel Co Ltd (Bao Steel) which was ranked at No 15. It was followed by China Steel in Taiwan at 22, Anshan Iron and Steel Group Co Ltd (An Steel) at 24, Maanshan Iron and Steel Co Ltd (Ma’gang/ Ma Steel) at 31, and Jiangsu Shagang Co Ltd (Sha’gang/ Sha Steel) at 34.

As a key fundamental industry of the national economy, the steel industry, like other traditional industries, is facing challenges such as overcapacity, cost reduction, efficiency increase, energy conservation and emission reduction. Digitalization is the only way for the transformation and upgrade of the steel industry.

Bao Steel, the leader, is the first to have led the consolidation in the Chinese steel sector in the last decade, and has consistently expanded output through several mergers and acquisitions. In August 2000, Baosteel established a subsidiary called Bsteel which is fully owned by Baosteel to delegate its own e-business implementation and maintenance to a separate business unit. At the end of 2006, Bsteel transferred its ICT coding and development business to a similar company fully owned by Baosteel: Baosight (/Bao’Xin Soft). Baosight focuses on Baosteel’s internal ICT platform, ERP, production specific applications, ICT infrastructure operations and user support activities.

Now, Baosight has a bunch of data center facilities. Backed by the Baosteel group, Baosight enjoys significantly resources and cost discount, benefitting by the parent company’s extensive networks and partnerships. From October 2013, Baosight has completed the construction of Baozhiyun Phase I/II/III IDC project through a series of equity financing and self-financing in Baoshan District, Shanghai. The largest data center industrial base in Shanghai focuses mainly in wholesale business and then service outsourcing business (including maintenance and repair of information system, rail transit vehicle system control components, cloud computing operation service, IDC operation service) with an industrial scale of nearly 20,000 cabinets in 2018. The operating income has reached 1.29 billion Yuan at that time. In 2019, the fourth phase of Baozhiyun plans to add 9,000 cabinets so that the four phases of Baozhiyun reached total 27,500 cabinets. Besides, in 2019, the Wuhan Iron and Steel Big Data Industrial Park is set to be built with 18,000 cabinets in the following two years (Phase I: 2216 cabinets in 2019).

State-owned companies in steel industry has boosted a lot of initiatives to heighten its corporate competitiveness in the age of ‘big data’, steer its business direction to meet the market demands for information, and optimize the synergy between the traditional industry of steel manufacturing and the new industry of information technology. Despite the success of the transformation of Bao Steel, the other four Chinese steel giants are not going well when exploring new business.

Being a well-established enterprise in the steel manufacturing industry, Shagang (Sha Steel) has also committed to a business diversification to data and information technology since 2017. It became the controlling shareholder of Global Switch in 2019. Recently, the owners of Global Switch are exploring a sale that could value the London-based data center operator at 8 billion pounds ($10.9 billion) or more.

Challenges and Dilemma

From the time Deng Xiaoping unleashed market reforms in an effort to increase investments in China, the onus was always on the government to whole heartedly lead the investment symphony. The scenario continues till this date. Recently, China has begun rolling out its ‘new infrastructure’ campaign all around the nation, which provides an opportunity for all market players. Compared with the traditional infrastructure, the main force for the investment of the ‘new infrastructure’ are market players instead of the government. Favorable policies have been issued not only for domestic investors but also for foreign ones.

Now, China is working on expanding and opening up policies to foreign investment, even more.

Under the ‘New Infrastructure’ push, it seems that the strengths of state-owned companies are weakened (although still have great advantages especially in resources) and they are brought to the same starting point in the race with other players. The difference is that they have their own responsibilities and path to step forward.

‘New infrastructure’ is not a strong stimulus, but a new economic growth engine for China in the future, which also serves as the most active and productive driver that is full of opportunities for productivity factor optimization and potential improvement. As the new infrastructure is closely connected with the development of new technology, all state-owned enterprises need to achieve their industrial upgrading before they explore new fields.

Besides, in terms of investment, it involves new form to attract public investments. In the process of promoting the ‘new infrastructure construction’, more attention will be paid to explore the innovation of investment and financing mechanism, so as to further stimulate the enthusiasm of private investment, foreseeably through Real Estate Investment Trusts or REITs.

Over years of development, the marginal utility and earnings of the traditional infrastructure decreases progressively. The ‘new infrastructure’, backed by technological innovation, will create jobs and increase earnings in a short period, and facilitate structural transformation and upgrading, thereby bringing along a sound economic development in the mid-and-long term.

Although the role of State-owned companies has been proved to be important in this economy as they have traditionally assisted the government in reforms, they face the challenges they never met before. Not to mention the state is encouraged to divest from other industries by decreasing its ownership.

With the geopolitical situation entering another new normal with the election of Joe Biden and the US President and a pandemic that still continues to hover, investment flows in the future will strongly depend on how age-old enterprises adapt in the post-COVID world. The sooner State enterprises realise this fact, the better.

For more insights on China, do check out our digital event China Datacenter Market Insights happening on March 5!

How China’s Data Center Industry is Likely to Shape Up in 2021

The year 2021 could be termed as a “Year of Renewal”. The world is still in chaos with continuing uncertainties, while at the same time rapidly accelerating and transforming.

As a distinct growth pole of global economy, China’s rapid recovery from the Covid-19 has been commendable. Since the last two decades, it has benefited from fast economic growth, and the country has stood out in the developing world for its unique strengths in its market size, diversity and vitality.

Moreover, with the renewed emphasis on infrastructure in its Five-Year Plan and long-term strategy as well as the new policies boosted to empower the digital economy, new infrastructure development and significant increase in demand for data center is being seen on the ground. Case in point- the undersea data center in Zhuhai.

New Infrastructure Push

Fueled by a surge in demand for local demand for digitalization of business and consumer environment, the construction of new infrastructure including 5G and data centers has developed into a strategy, which enables it to meet the twin urgent goals of increasing employment and preparing for new changes in the global economy.

At the 2020 National People’s Congress, the CCP first emphasizes a digital infrastructure public spending programme. Now, building ‘new infrastructure’ has already become a top development priority for China. Since the Covid-19 outbreak, China has witnessed the potential of cutting-edge technologies like artificial intelligence, big data, and cloud computing.

Several tech giants in China have announced plans to scale up their data centers. Following China’s ‘new infrastructure’ initiative, Chinese internet giant Tencent revealed its $70 billion investment on key sectors over the next five years towards making advances in cloud computing and artificial intelligence (AI) while Chinese e-commerce behemoth Alibaba announced to invest $28.7 billion into its cloud and data center infrastructure over the next three years. Also, Baidu, the leading search engine in China, has planned to set up 5 million servers in the next 10 years.

Real Estate Investment Trusts (REITS) it is!

The National Development and Reform Commission of the People’s Republic of China (NDRC) and the China Securities Regulatory Commission (CSRC) jointly issued the ‘Notice Concerning Work in Relation to Advancing Infrastructure Real Estate Investment Trust Trials’ in April, with an aim to channelise personal savings and private capital into infrastructure projects.

Then in August, NDRC announced that it had recently issued the ‘Notice Concerning Effectively Performing Infrastructure REIT Trial Project Application Work’, which indicates that the Chinese government will give priority to “national key strategic” infrastructure projects when receiving applications for REIT trials, as well as “encourage the undertaking of trials for new forms of infrastructure.”

The Notice further indicates that “national key strategic” infrastructure projects will include those associated with regional development plans for the Beijing–Tianjin–Hebei (Jing-Jin-Ji) area, Xiong’an New Area in Hebei province, the Yangtze River Delta, the Greater Bay Area, and the Hainan Free Trade Port.

As per this new initiative, China expedites infrastructure REITs so that fresh capital could be converted into investment capital in the long term while reducing leverage. Dozens of companies have begun preparing for launching publicly tradable REITs since the trial released. However, the applications are still under consideration as the requirements are very strict.

In the next three to five years, such products are likely to provide about 6 trillion Yuan (around $900 billion) in financial support for China’s infrastructure construction, thus further improving the speed and efficiency of China’s infrastructure build out.

New Area

This is closely linked to new development and is being framed in new ways. ‘New Area’ has rocketed to ubiquity, especially when we consider the site selection. Government influence may steer investors’ location preferences here in China.

To promote urbanization and industrialization, and now digitalization, many new areas and zones have been established to concentrate investments and the labor force as well as resources within designated region with more flexible management systems.

For example, Xiong’an New Area, in Hebei province, was announced to be a National New Area as the “Millennium Plan, National Event” by the State Council and the Central Committee of the Communist Party of China. It has become the third new special zone with “national significance” after Shenzhen SEZ and Shanghai Pudong New Area while the other two have already driven the rapid development of the Pearl River Delta and Yangtze River Delta respectively. Xiong’an New Area connects the Silk Road Economic Belt and the 21st-century Maritime Silk Road with the Guangdong–Hong Kong–Macao Greater Bay Area, so as to drive the development of the Beijing–Tianjin–Hebei economic triangle in Northern China.

Currently, China is speeding up its digital transformation of economy with a plan to build industrial ‘big data’ centers nationwide, enabling massive amounts of information to be used for developing more efficient industries. Supported by government, construction of data center is boosted in these regions such as the Beijing–Tianjin–Hebei (Jing-Jin-Ji) area, Xiong’an New Area, the Yangtze River Delta, the Greater Bay Area, and the Hainan Free Trade Port.

Power Usage Efficiency (PUE)

The word ‘PUE’ never loses its power. The availability and cost of electricity are important factors influencing data center site selection in China. The energy consumption quota of data centers must be approved by governmental agencies including National Economy and Informatization Commission and National Development and Reform Commission.

Electricity resources in coastal areas and tier I cities are restricted as local electricity generation is insufficient to meet consumption, meaning that obtaining approval for large energy consuming businesses can be problematic.

In order to ensure effective control of energy consumption, improving energy efficiency in major energy fields and accelerating the application of energy-saving and low-carbonizing technologies have become the main goals and tasks of local government during the 13th Five-Year Plan period.

China’s Tier-1 cities, with their high concentrations of data centers and infrastructure, have been first to act, guided by the central government’s 13th Five Year Plan targets for energy use and intensity. Beijing, Shanghai and Shenzhen have already applied strict PUE rules when approving new data centers, pushing the sector towards greener operations with higher energy efficiency.

Although Beijing, Shanghai, Shenzhen, Guangzhou and other coastal areas are the major data center markets in the country, areas like Inner Mongolia, Gansu, and Guizhou pop up to be players under central policy support. National-level big data and data center pilot projects sprout up in these renewables-rich provinces for they offer ample electricity supply and cheap tariffs. Local governments in these areas also offer discounts for electricity consumption by data centers, which can further reduce operating costs.

Built-to-suit Data Center

Data center investment continues to rise in China with growing interest. Larger population bases, more social media activities, data protection and cyber security legislation forcing users to switch to onshore data centers. Does it mean that to invest in this market never fail? Of course not. The consensus of ‘Customer-centric’ is being embraced by players in China market.

As a part of this, ‘built-to-suit’ data center was developed. Customizing a data center, ‘built-to-suit’, is a much different, more challenging undertaking for a certain type of business buyer, or even specific client.

Different from before, one-size-fits-all data center solutions are no longer a priority at a larger scale. More data center service providers are looking to be in tune with clients from pre-development and align with their expectations.

At the same time, built-to-suit also provides a cost transparency and speed to market. As it is specifically designed to fit the clients’ every need, built-to-suit data center can meet the goals with best practices. In 2020, Dictionary.com selected “Unprecedented” as the word of the year. In 2021, it could be “Transformation”.

For more insights on China, do check out our digital event China Datacenter Market Insights happening on March 5!