The ongoing trade tensions between the United States and China have led to a significant shift in the relocation of data centres to emerging markets like Malaysia. This trend is expected to have a ripple effect, positively impacting various sectors across the value chain, according to Moody’s Ratings vice-president and senior credit officer, Nidhi Dhruv.
Beneficial Impact Across Multiple Sectors
Speaking at the ‘Asia Pacific (APAC) Data Centres – Rapid Expansion Offers Benefits for Property and Telco Sectors’ webinar, Nidhi highlighted that the relocation of data centres to Malaysia would benefit a wide range of industries. These include telecommunications, real estate, semiconductors, heating and cooling system providers, and computing equipment manufacturers.
“When we look a little bit further, mining companies that focus on future-facing commodities such as copper would also benefit from this activity,” she noted during the webinar, which was part of Malaysia Rating Corp Bhd’s two-day Malaysian Bond and Sukuk Conference 2024.
APAC Data Centre Market Growth
The data centre capacity in the Asia-Pacific region currently stands at over 10,500 megawatts (MW) and is expected to grow to 24,800MW by 2028. Key markets driving this growth include China, Japan, Australia, India, and Singapore. From a global perspective, APAC data centres account for approximately 30% of the worldwide capacity development planned over the next five years, requiring an estimated investment of more than US$564 billion by 2028.
“There is already a robust development pipeline of around 4,400MW under construction, which we anticipate would be completed by year-end,” Nidhi added.
Malaysia’s Readiness and Government Support
Nidhi emphasized Malaysia’s readiness to capitalize on this growth, highlighting factors such as cloud infrastructure presence, land availability, subsea cable connectivity, data localization requirements, and governance. “Governments across the region have introduced a variety of policies and initiatives that directly or indirectly promote investments in local data centres. These measures include tax relief, subsidies, preferential electricity rates, and a reduction in import duties, and Malaysia particularly scores high on government support,” she said.
Impact on the Utility Sector and Renewable Energy
Spencer Ng, Moody’s vice-president and senior credit officer for Public, Project, and Infrastructure Finance, noted that the rapid expansion of data centres will also positively impact the utility sector, especially in terms of the need for additional power to meet data centre demands.
“Power grid operators will also need to invest in network expansion and strengthening to support power delivery,” Ng said, estimating an incremental power requirement of about 5.3 gigawatts across APAC.
In Malaysia, Moody’s expects the power requirement for data centres to double to about 500 MW in the next two years, which is manageable given the current power reserve margin of about 30%. Ng also pointed out that these new investments will contribute to the substantial investments necessary for the net zero transition, emphasizing the importance of further expansion in the renewable energy sector.
Conclusion
The shift of data centres to Malaysia, driven by US-China trade tensions, is poised to boost various sectors across the economy. With strong government support, robust infrastructure, and a growing emphasis on renewable energy, Malaysia is well-positioned to become a key player in the global data centre industry. This development not only enhances Malaysia’s role in the digital economy but also presents significant opportunities for growth and investment across multiple sectors.
