KUALA LUMPUR: Malaysia, especially Johor, is positioning itself as a cost-efficient alternative to Singapore for data centre investments, thanks to its abundant land, availability of energy infrastructure and attractive investment incentives.
Moody’s Ratings in a report today said Johor’s attractiveness to hyperscale companies is further strengthened by its geographical proximity to Singapore and the ability to leverage the republic’s strong international ties.
“With around 897 megawatts (MW) of installed capacity and significant projects under development, Johor is increasingly being integrated into Singapore-related deployment strategies to meet regional demand.
“Johor has successfully leveraged regional capacity constraints to position itself as a leading destination for hyperscale companies,” the report said.
It added that this is evidenced by significant investment commitments from Microsoft and Oracle, in addition to the launch of a new cloud region in Johor over the past year, which builds on ByteDance’s initial deployment in the state.
Moody’s Ratings said Singapore remains the largest and most mature data center hub in the region, with an estimated 1.0 gigawatt (GW) of installed capacity, supported by its role as a regional connectivity gateway with an extensive submarine cable network and a stable regulatory framework.
However, capacity expansion is becoming increasingly limited due to land and energy constraints, as well as sustainability requirements that are driving operators and hyperscale companies to adopt a model of centralizing core operations, while the support network is located around them.
This means Singapore serves as a core control and interconnection node, while additional capacity is developed in surrounding markets.
Additionally, Moody’s Ratings stated that Malaysia, one of the fastest growing data center markets in South and Southeast Asia, benefits from the availability of power and transmission infrastructure, supported by strong energy reserve margins, thus enabling rapid expansion of data center capacity.
The credit rating agency said that although Peninsular Malaysia currently has a strong energy reserve margin of around 25 percent, it needs to implement the large investments that have been planned for both generation and energy grid upgrades in the coming years.
This is necessary to support further growth in data center demand, as large data center project developments have been announced relative to the size of its energy market.
“Failure to implement these energy sector initiatives is likely to limit Malaysia’s ability to support further growth in data centre development, as energy demand from data centres is already significant and increasing.
“The total energy supply allocated to data centres will exceed 7.0 GW — around 25 percent of the current generation capacity in Peninsular Malaysia — if all data centres that have signed energy supply agreements with local utility companies are developed to their full capacity,” he said.
Data centers will account for four percent of total energy consumption in 2025 and are a key driver of demand growth.
The share of utilization is expected to continue to increase in line with the increase in operations of existing projects, even before taking into account new additional projects, he added.
— BERNAMA
