The data center market in Vietnam is certainly growing, but in most discussions there is always one point of concern. Is the country equipped with enough electricity to power its own ‘Silicon Valley’?

There are around 30 data centers in Vietnam and more may be on their way, as the Government has invested $1.4 billion in new facilities as well as millions in local startups.

The country’s new Cybersecurity Law requiring data to be stored locally by international companies is also expected to drive demand for more data centers. 

With a growing focus on cloud computing and 5G services to establish a Vietnamese Silicon Valley. The country is experiencing a year-on-year growth rate of 17% in the cloud sector, bringing in US$2.4 billion. Vietnam was also one of the first countries to trial 5G with a vision to launch the technology commercially this year.

The need for more data centers will increase to keep up with these advancements.

Last month, Apple announced it would build a data center in the country, confirming plans to invest $1 billion in Vietnam three years ago. The tech giant will join established data center players like CMC Telecom, Viettel IDC and FPT Telecom.

While low startup costs and natural gateways for undersea cables make the country’s potential immense, the power shortages impacting the country are a growing concern.

Power problems could be unsustainable

The threat of blackouts is typical of most fast-growing economies like Vietnam. 

The rising demand for electricity and delayed electricity projects are increasing the risk of power outages in the country. This may not be a good sign for data centers, as any downtime could cost the country around US$260,000 per hour.

The Executive Vice President for International Operations of Schneider Electric, Luc Remont, said: “We provide energy with high reliability to ensure no outage for hospital surgeries. The same goes for data centres where we can’t afford even one second of power loss.”

Vietnam’s reliance on fossil fuels and also puts the country at risk of falling behind. And the country’s likelihood of using renewable energy supplies for data centers in the next 15 years is very slim.

How is Vietnam solving their energy shortages to power their data centers?

Data centers in Southeast Asia have started to look towards clean energy with the increasing global pressure of lowering carbon footprints.

Vietnam is following suit by aiming to produce 23% of its energy through renewables by 2030. Data centers in the country are also doing their part with Delta Electronics and HTC-ITC signing a contract to build Vietnam’s first green data center.

Viettel IDC also celebrated being the only data center service provider in Vietnam to be awarded with a prestigious data center certification by Singapore’s Enterprise Products Integration. The certification acknowledged that the data center provider met environmental control and electricity standards set by the American Telecommunications Industry Association.

Investors should be ready for Vietnam to power up

The country’s rate of digitalisation is growing rapidly with 75 million expected to be using the internet by 2023 and a young, tech-savvy talent pool driving the market.

Vietnam’s digital economy grew by 40% in 2019 and could add US$162 billion to its GDP by going digital. The Government is supporting this campaign by increasing investment, speeding up reforms encouraging businesses to adopt new technology, committing to building smart cities and providing universal internet connectivity.

Despite the energy challenges, data center providers and investors should keep on the lookout for opportunities in Vietnam. There is no doubt that Vietnam is making great strides to power up as a leader in the IT and data center industry.