With its proximity to Singapore, lower costs, and strong government support, Johor has become Malaysia’s top data center market and is poised to be the largest in Southeast Asia. It is difficult to believe that Johor’s data center capacity was just 10MW at the start of 2021. By 2024, this capacity has surged to over 1,500MW, according to DC Byte.
Granted, this figure includes data centers under construction, committed supply, and those in the early stages of planning and development. Still, the meteoric rise is unprecedented, marking a once-in-a-generation leap for the state of four million inhabitants.
Once-in-a-generation growth
How did this remarkable growth come about? It arguably began when Singapore imposed a moratorium on new data centers in 2019, ceding the stage for new data centers and causing demand to spill over to Johor and Batam. Johor’s first data center, Keppel’s DC Johor 1, was completed in 2020. Then GDS broke ground on its data center campus at Nusajaya Tech Park in April 2022, and the race is on.
Malaysian authorities quickly capitalised on the initial momentum, using their understanding of what data center operators need by launching the Green Lane Pathway initiative in 2023. This streamlined power approvals for new facilities, reducing the lead time for new data centers from three to four years to as short as 12 months. One of the earliest beneficiaries, Princeton Digital Group (PDG), successfully delivered phase one of its 150MW JH1 data center campus in the Sedenak Tech Park (STeP) within 14 months of acquiring the land.
On a strategic level, Malaysia sought to attract more digital investments. For example, the Malaysian Investment Development Authority (MIDA) and Malaysia Digital Economy Corporation (MDEC) established a Digital Investment Office in 2021 to focus on digital infrastructure development. In 2023, the Ministry of Digital Communications was split into the Ministry of Digital and the Ministry of Communications to better focus on these areas.
Malaysia was able to seize the opportunity because it was prepared. For years, MDEC worked tirelessly to promote Malaysia as a destination for data centers. And Malaysia already boasts a substantial number of data centers thanks to the Multimedia Super Corridor (MSC), with international operators such as NTT setting up shop alongside many home-grown players.
The shape of data centers to come
Johor’s massive growth shows no signs of slowing. Indeed, private conversations and informal exchanges with various data center operators suggest many more data center operators are gearing up to make announcements in the months ahead.
Cloud players are also ramping up their presence. For years, the largest public cloud providers have established their clouds in Singapore, opting to expand their footprint there instead of building new cloud regions in other parts of Southeast Asia. This is no longer the case.
In August, Amazon Web Services (AWS) opened its Malaysia cloud region with three availability zones and says it will invest RM29.2 billion over 15 years. In October, Google broke ground on its US$2 billion data center and cloud region in Malaysia, while Oracle has announced that it will build a US$6.5 billion cloud. In addition, Microsoft is expected to announce the launch of its Azure cloud region very soon.
Could Malaysia’s breakneck data center growth strain resources? This is a real possibility, though it’s more about ensuring the even distribution of power and water than any shortage. Even localised water shortages or power outages won’t sit well with voters, which means government agencies must work overtime to ensure it never happens.
Another concern is the potential of a data center bubble, a possibility many in the industry grudgingly acknowledge is an eventual possibility. For now, data center capacity is snapped up as quickly as it is built; new construction phases are often started immediately after completion of previous phases simply to keep pace with demand.
Empowering the next phase of growth
What lies ahead? As more data is served from Johor, there is an opportunity to build a thriving Internet exchange to support the new data center operators and cloud hyperscalers. Done right, this could position Johor as a key digital hub not only in Malaysia but across Southeast Asia, setting the stage for its next phase of digital growth.
There are additional benefits. Data center investors often seek renewable energy to meet their net-zero commitments. The rapid growth of data centers allows Malaysia to leverage this demand to make the transition to renewable power more quickly than before. Other factors must first be put in place, including legislative changes for an open-access power grid.
Malaysia isn’t just focused on attracting data center operators. It aims to grow the entire data center supply chain ecosystem, from assembling and packaging semiconductors to manufacturing data center equipment and even talent development. Only then can Malaysia maximise the benefits of its data center growth and ensure the healthy, continued development of data centers.
Ultimately, Johor’s transformation into a data center powerhouse could usher in a new era of economic growth, not just for Johor, but for Malaysia as a whole, elevating it to the forefront of the global digital economy.
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This piece was originally published in Issue 6 of w.media Cloud & Data Center Magazine