With one of the highest mobile phone usages in the world and one of the highest ecommerce and internet penetrations in the world, it is just a matter of time before growing demand for artificial intelligence, cloud services and data storage fuel a boom in data centers in the Philippines. It’s almost a given that this nation of 7,700 islands would wind up becoming the next data center powerhouse in Southeast Asia. Most analysts are of the view that the next 2-3 years will see significant transformation in the digital landscape in the Philippines. “Expect some big announcements within the next six months,” said Steven Davis, Chairman & Co-Founder of Data Center Association of the Philippines.
The figures look pretty impressive so far – the Philippines Data Center Market was valued at USD 633 million in 2024, and is projected to reach USD 1.97 billion by 2030, rising at a CAGR of 20.89%, according to Research and Markets report. Foreign big players like Amazon Web Services (AWS) or Microsoft Azure have all expanded their data center footprint here. Local players are also busy building in anticipation of surging demand. There is an increasing number of strategic partnerships between local companies and international players as more new entrants emerge in the market.
The ingredients for impressive growth are all there – favorable business environment, strategic location, sufficient land mass, adequate power and water resources, and an adaptable workforce, amid an increasingly digitalized economy. Most notably, the government’s strong push to develop its digital economy has played an outsized role in facilitating the transformation. A recent survey commissioned by Alibaba revealed that 85% of Philippines businesses intend to undergo a comprehensive cloud migration by the end of 2026. All these follow a familiar pattern of how a hub is created when all favourable factors converge at the right time.
The upward trajectory is not without road blocks however. Improving the connectivity infrastructures, cooling the increasingly high density data centers and sourcing for renewable sources of energy, remain some of the biggest challenges in tropical Philippines. Extra care is also needed when it comes to sourcing for a proper site for a DC. This is due to the country’s earthquake-and-flood-prone location within the Ring of Fire.
The high electricity rates in the Philippines relative to its ASEAN peers (second only to Singapore) has created a great emphasis on using renewable energy sources such as wind and geothermal. Well aware of the massive power requirements of data centers, the government has introduced a lot of incentives such as income tax holidays, duty-free imports, and zero per cent VAT in a bid to attract more foreign investments into the renewable energy sector. It plans to increase its renewable energy capacity to 35% by 2025, and 50% by 2040. Some data centers are already designed to fully utilize renewable energy such as Digital Halo’s data center MNL1 in Manila.
Philippine Data Center Market Image Credit: Research and Markets
More AI-ready data centers are also being built, for instance, in December 2024, ePLDT announced plans to construct a new AI-ready hyperscale data center in South Luzon with a power capacity of around 100 MW. With more power-hungry AI-ready data centers in the pipeline, the demand for liquid cooling solutions is also expected to grow.
Since 2024, the market has seen notably more new entrants such as AyalaLand Logistics Holdings & FLOW Holdings, Digital Halo, Edge Centers, etc. Meanwhile, those longer in the market like ePLDT and Globe Telecom are making great headway. A subsidiary of PLDT, ePLDT operates some of the largest and most secure data centers in the Philippines.
Major cities like Manila, Cebu, Davao, Batangas and Cavite are becoming key hubs for data centers, housing at least Tier III facilities that provide high security, redundancy, and uptime.
Meanwhile, a very supportive government has laid the foundation by establishing laws to facilitate a more conducive environment for data center investment and expansion. This includes the Philippine Digital Transformation Roadmap and the National Broadband Plan, in addition to three significant pieces of legislations, namely the CREATE MORE Act, Green Lanes for Strategic Investments Act, and Open Access Network Act. On top of that, the government has launched a number of educational and training programmes for the country’s youth.
The story continues to unfold …