Rising AI demand to double APAC data centre capacity by 2028

Data centres in the region to see $564b investment over the next five years

Asia Pacific (APAC) data centre capacity is forecasted to grow more than double by 2028, driven by rising adoption of artificial intelligence and cloud computing preference.

In its latest report, Moody’s Ratings said data centre capacity in the APAC region is projected to increase at a compound annual average rate of almost 20% through 2028 from the current capacity of over 10,500 to about 24,800 megawatts (MW).

The rating agency added that the region would constitute about 30% of global capacity expansion over the next five years — involving an investment of over $564b.

“There is a strong pipeline of over 4,400 MW under construction in key APAC markets, about 75& of which is in China, Japan, Australia, and India, and most of this should be completed in 2024-2025,” the agency reported.

Here’s more from Moody’s:

Capacity in emerging data centre markets, including India, Indonesia, Malaysia, Thailand, and the Philippines will record growth rates of 29% to 48% through 2025, given the smaller amount of existing capacity today, coupled with governments' digital agendas and investor support.

In more established markets such as mainland China—APAC's largest data centre market with 3,956 MW current capacity—Japan, Australia, Singapore, Hong Kong SAR, China, and Korea, data centre capacity will also continue to grow, but at a slower pace of 4% to 20% given the larger base of existing capacity, geopolitical, and data sovereignty concerns, and land availability. 

Geopolitical tensions to disperse growth

Geopolitical tensions will fuel a shift in new capacity toward emerging data centre markets in Asia, with control of data in focus in the US-China technology conflict. Aside from the storage of data, the tensions have impacted data flows as the US established the Clean Network Initiative which effectively bans new subsea cables directly connecting it to China.

A combination of regulation and incentives will amplify growth in emerging data centre markets. Rising concerns over data sovereignty and protection have spurred many APAC countries to place restrictions on cross-border data transfer and data localisation rules.

Data privacy laws usually dictate that certain data, especially sensitive personal data or activity, must be stored, managed and processed within a country’s borders. As a result, providers are increasingly housing data within different facilities across different countries, rather than in a large central hub, with some new capacity moving to emerging data center markets.

Telcos to benefit despite risks

Expansion in data centres provides opportunities across the value chain and benefits several sectors including telcos and computing equipment manufacturers. However, data centre investments are capital-intensive and take time to generate income, which could pressure the balance sheets of developers and investors. 

Developers also face execution risks as they expand into less established markets in the region, which could result in increased regulatory risk over time. In addition, new data centres will be exposed to carbon transition risks until there is sufficient low-carbon energy capacity to meet the power demand.

However, investment in data centres will still allow telcos to diversify and adapt their revenue streams, as income declines in the legacy mobile businesses. More available capacity for data processing and storage benefits telcos by improving network reliability and reducing latency as data consumption grows. 

It also complements other offerings such as cloud, and information and communication technology services. Telcos can further benefit by cross-selling data centre services to their enterprise customers.