The data center industry in the Philippines has been growing steadily in recent years, driven by the increasing demand for digital services and the government’s efforts to promote the country as an attractive destination for business process outsourcing (BPO) and IT services.
According to a report by Mordor Intelligence, the Philippines data center market is forecasted to grow at a CAGR of 11.2% during the period 2022-2027 and is expected to continue in the coming years.
Philippines as a Viable Market for Data Centers
In a 2022 report by Quisumbing Torres titled Developing and Operating Data Centers in the Philippines, the Philippine data center industry is anticipated to reach $535 million by 2026, with a compound annual growth rate of 11.4% between 2021 and 2026.
The Philippines, which holds the second-largest subscriber base in the Asia Pacific region, logged one of the highest growth rates as an emerging data center market alongside Malaysia and Thailand, supporting the active digital profile of Filipinos. As a result, hyperscalers are driven to develop their technology and communications infrastructure across the archipelago.
The high level of digital consumption in the Philippines has drawn data center operators. In 2021, the Gross Merchandise Value of the Philippine internet industry increased to USD 17 billion due to government initiatives and widespread digital adoption brought on by the pandemic. According to data, there were 89 million active social media users in the Philippines in 2021, up 22% from 2020 and 6.1% from the year before.
The current data suggest that the Philippines has 74 million internet users who spend 10.5 hours online, the longest in the world, making them a sizable tech-savvy population in addition to their high number of internet users.
Data Center Demand in PH
The Philippines is regarded positively because of its regulations that support business, its great pool of engineers and IT professionals, and its potential to run data centers on renewable energy.
Hyperscalers like Alibaba Group, Microsoft Corp., and Amazon Web Services, Inc. are thinking about making an investment in the Philippines.
Accordingly, there will be an ongoing demand for data center space and investment as the number of activities that require data storage and processing grows and as individuals continue to migrate more functions to the internet and the cloud from their personal to their professional life.
In 2021, the Philippine digital economy was worth P1.87 trillion (US$34 billion), accounting for 9.6% of the overall economic output of the entire country. Data centers are necessary and critical for fostering this expansion because it is a valuable and significant part of the economy.
However, according to Alain Charles J. Veloso, a partner with the Quisumbing Torres law firm, in order to successfully implement data centers, the Philippines and authorities must address issues including bolstering telco infrastructure, enhancing corporate accessibility, and maintaining a steady supply of power.
Lack of Steady Power Supply
Power demand will climb exponentially. Overall, energy is a foundation for advancement, especially for digital transformation, which requires a lot of energy.
The industry estimates that the ICT sector will require 300 to 500MW of reliable baseload capacity until 2026, in addition to the conventional capacity of 600 to 800MW required to support the country’s economic growth aspirations.
According to Gary Ignacio, ePLDT Chief Data Center Officer, the Philippines is still at the growth stage, because looking at total capacity, it’s still at sub-100 to maybe a little over 100MW. Clearly, that’s just for commercial data centers, not even counting yet the smaller ones that each company operates. So in three years, that can easily grow to 300MW to 500MW if they (targeted investments) happen – because these hyperscalers are trying to check if the Philippines is going to be the best destination.
“Whether it is industrial or digital transformation, it would need a significant amount of energy, so it must be prioritized. – particularly if we want to realize the very bullish foresight of a lot of spectators, the likes of Google, that are around saying — it’s really for us to make things happen.” said Ignacio
He stated that many foreign corporations are keeping a close eye on the Philippines, considering if it is a viable investment site capable of hosting them on fully operational cloud regions and availability zones.
However, industry players said that the DOE doors remain closed for prospective investors to knock on, therefore the tough issue of power supply is one key concern that has been delaying investment decisions for many multinational corporations looking to relocate their operations to the Philippines.
Since the development gestation period for base load power plants is typically 4-5 years, the Philippines may already be behind schedule on this actionable item. While solar capacity may be faster to deploy, the intermittent nature of its generation does not provide the kind of power supply reliability that hyperscalers have been pushing for at this juncture, though they do aspire for sustainability in the coming years.