What are data centres, and how come Malaysia is able to attract billions in tech investments for them?

KUALA LUMPUR, Oct 14 — Malaysia is quickly becoming one of the sought-after destinations for data centres, with tech giants pouring billions into the country to establish cutting-edge digital infrastructure.

As the world becomes more dependent on cloud services, streaming, and e-commerce, Malaysia’s unique advantages are positioning it as a regional powerhouse. But what exactly are data centres, and why is Malaysia attracting so much interest?

What’s the big deal about data centres?

Ever wondered how you can store thousands of photos on your phone or stream movies in high-definition quality? That’s all thanks to data centres.

These facilities are the unseen engines behind digital lives, housing countless servers that store and process data at all times.

How does it work?

As technology advanced, equipment became smaller and more affordable, while the demand for data processing surged dramatically. To handle this growing need, multiple servers are networked together to boost computing power.

These servers are connected to communication networks, allowing remote access to the data or services they host. When large groups of these servers and related equipment are housed in a dedicated space, such as a room, building, or even a campus, it forms what we now call a data centre.

Modern data centres often contain thousands of compact, high-performance servers running continuously. Due to the sheer number of servers stacked in rows and racks, these facilities are sometimes referred to as server farms.

They provide crucial services, including data storage, backup and recovery and data management.

Additionally, data centres enable everything from hosting websites and powering email services to supporting cloud applications, handling e-commerce transactions and driving online gaming platforms — all tasks that require significant data processing.

Why is Malaysia a strategic location for data centres?

Data centres need significant amounts of space, energy, and water for cooling. As a result, emerging markets like Malaysia, which offer affordable energy and land, have an edge over smaller city-states such as Hong Kong and Singapore, where these resources are more constrained.

Lower costs

While Singapore has been a major data centre hub for years, the high cost of land and operations there has many companies turning to Malaysia as a more affordable alternative. For example, Johor is just across the border from Singapore, and offers similar advantages at a fraction of the price.

Stable power supply and sustainability focus

Data centres are incredibly energy-intensive, and Malaysia has a reliable and affordable energy infrastructure. Additionally, many data centres in the country are transitioning towards using renewable energy, aligning with global efforts to reduce the environmental impact of digital infrastructure.

Government support

The government has rolled out the red carpet for tech companies, offering tax incentives and grants to attract investment. The Malaysia Digital Economy Blueprint sets ambitious goals for the country to become a digital economy leader by 2030, and data centres are at the heart of this transformation.

While the expansion of data centres offers significant economic benefits, it also raises concerns about energy use and environmental impact.

To ensure the long-term resilience and success of its data centre industry, Malaysia must focus on several key areas such as :-

• Cybersecurity: As data centres store vast amounts of sensitive information, they are prime targets for cyberattacks. Strong cybersecurity measures, including advanced threat detection, intrusion prevention, and data encryption, are vital to protect data and maintain customer trust.
• Talent Development: The industry requires a highly skilled workforce, particularly in fields such as network engineering, cybersecurity, and data centre management. Investment in education and training is essential to build the talent pool needed to meet increasing demand.
• Regional Collaboration: Collaborating with neighbouring countries on data centre development, connectivity, and cybersecurity can create a more integrated and resilient regional data centre ecosystem.

It was also reported that Johor Baru has been recognised as the fastest-growing data centre market in South-east Asia, according to DC Byte’s 2024 Global Data Centre Index.

The city currently boasts a total data centre capacity of 1.6 gigawatts, which includes ongoing projects and those in the planning stages.

Data centre capacity is typically measured by the amount of electricity consumed and if all planned capacities in Asia come online, Malaysia will be ranked just behind Japan and India, with Japan and Singapore currently leading the region in live data centre capacity.

On Thursday (October 10), it has been reported that the Cabinet approved the Data Centre Planning Guidelines (GPP) created by the Ministry of Housing and Local Government (KPKT) through the Town and Country Planning Department (PLANMalaysia).

KPKT Minister Nga Kor Ming saidthat these guidelines aim to standardise and streamline the application and planning approval processes for stakeholders involved.

He also noted that the guidelines support the initiative to enhance business operations, complement the overall ecosystem of the data centre industry, and provide a reference point for those engaged in data centre development.