Malaysia’s location, natural resources, and investor-friendly government are perfect for data centers, turning part of the country into an AI-fueled boomtown.
What’s new: Data center construction is flourishing in the southern Malaysian state of Johor, where companies including ByteDance and Microsoft are spending billions of dollars on facilities, The Wall Street Journal reported. These data centers will provide processing power for AI, cloud computing, and telecommunications.
How it works: Data center construction has slowed in established areas like Ireland and Northern Virginia as space and resources have become scarce. All regions face shortages of electrical power, analysts say, and some U.S. locations face public resistance to new projects. Johor has emerged as an attractive alternative.
- Johor has space, energy (mostly coal), water for cooling, and proximity to Singapore, a global communications hub that lacks the land and power to host many new data centers. The Malaysian government and local politicians streamlined the permitting process and advocated for additional infrastructure, such as water desalination plants, to support such projects. Moreover, Malaysia’s strong relationships with both the U.S. and China reduce political risks for companies that operate in the region.
- Data center investments in Johor will reach $3.8 billion this year, according to regional bank Maybank. ByteDance allocated $350 million for data center construction in the region. Microsoft purchased land nearby for $95 million and announced a plan to spend $2.2 billion. Oracle expects to invest $6.5 billion in Malaysia.
- While some tech giants are building their own data centers, independent operators are building facilities to serve companies like Amazon, Alphabet, and Meta.
Behind the news: The Asia-Pacific region is second to North America in data center construction, according to one recent report, ahead of Europe, South America, and the Middle East and Africa. As Johor builds out its data-center inventory, it will compete with established Asia-Pacific markets in Hong Kong, Mumbai, Seoul, Singapore, Sydney, and Tokyo.
Why it matters: AI is poised to transform virtually every industry, but doing so requires ample processing power. The data-center buildout will help fuel improvements in AI as well as spread the technology to new industries and bring its benefits to people throughout the world. Malaysia’s role as a data center hub is also bound to bring huge economic benefits to the country itself.
We’re thinking: Many data centers have been built near users to reduce latency. But the cost of processing compute-intensive AI workloads is so high relative to the cost of transmitting data that it makes sense to transmit AI-related data long distances for processing. (As Andrew wrote, the gravity of data is decreasing.) We hope the increasing flexibility in siting data centers will enable more nations that aren’t traditional tech hubs to participate in the tech economy and reap significant benefits from doing so.