The Asia-Pacific data centre market is expected to grow fast for the remainder of this decade. This will be partially due to the deployment of artificial intelligence, which took off in 2023, and will result in higher demands for computing power, in a trend similar to other global regions.
To meet demand, regional data centre providers will need to adapt to challenges including the availability and location of data centres, changing regulatory regimes, considerations like power and sustainability, and whether they are built to handle growth in AI workloads.
Asia-Pacific data centre market expected growth
The Asia-Pacific data centre market is expected to grow to be worth USD $53.58 billion (AUD $81.1 billion) in 2028, according to data from Renub Research, with an expected capital annual growth rate of 12% a year between 2023 and 2028 (Figure A).
With an estimated 14.27 thousand megawatts of inventory in 2024, another report from MordorIntelligence predicts the region’s data centre market will expand to 23.2 thousand MW by 2029, or a CAGR of 10.21% in computing capacity during the report’s forecast period.
SEE: The rise in computing power may put Australian data centres at risk of power failure.
According to the CBRE’s Global Data Center Trends 2023, “data center inventory is growing rapidly across Asia-Pacific, achieving impressive scale.”
Biggest data centre hot spots in the Asia-Pacific region
The leading data centre location by numbers is China, with an estimated 449 data centres according to the latest available data from Cloudscene (Figure B). This is followed by Australia with 306, Japan with 219 and India with 152.
However, the leading data centre locations favoured by global enterprises for consolidation of their regional data centre operations are usually Singapore, Australia and Hong Kong. Recent moves from some jurisdictions like China and Vietnam to tighten regulations around data exports for national security reasons would only reinforce this trend among global enterprises.
Singapore accounts for 60% of Southeast Asia’s data centres. After the 2023 lifting of a moratorium on new data centre capacity, which was driven by the sector’s voracious power demands and issues with sustainability, Singapore has recently been disclosed as a leading buyer of NVIDIA chips as it positions itself for a future rise in AI computing.
Sydney has seen what CBRE’s 2023 trends report calls a “‘second wave’ of interest from global cloud service providers,” which has increased its capacity by 30%. It now has over a half-GW of live power capacity, putting it right there alongside Tokyo and Singapore as regional leaders.
Though traditionally a competitor with Singapore, the Hong Kong market may become less popular among Western companies. According to the CBRE, Hong Kong will be seen as a more risky place for data among heightened geopolitical concerns following China’s crackdown.
Data centre market growth drivers in the Asia-Pacific region
A key driver of Asia-Pacific regional growth and the use of data centre services is the digitisation and digital transformation of regional and global enterprises. As organisations seek to make their operations more efficient through digitalisation, and to use their data to fuel growth in digital services and innovation, demand for cloud computing is on the rise.
However, there are a variety of factors driving data centre growth. China’s lead in pure data centre numbers, for example, comes after the deliberate encouragement of a 30% growth rate in the country’s “big data” sector over a number of years, spurred on by its world-leading rollout of 5G networks. This is due to be followed by the commercial launch of 6G by 2030.
Growth in other markets and hotspots in the region is due to broad trends, such as increased demand for digital services among the region’s 1.2 billion internet users and an expansion in the Internet of Things. Growing demands include gaming and streaming, while new technologies include augmented reality and artificial intelligence.
AI computing will play a big role in the future
The International Data Corporation projects spending on AI will reach USD $78.4 billion by 2027 and 80% of CIOs in the region will leverage organisational changes to harness AI, automation and analytics by 2028.
SEE: AWS predicts generative AI will continue to be a focus into 2024 for Australia.
The rise of AI-driven applications, which demand higher compute capacity in the form of graphics processing units, is expected to drive a new phase of data centre industry growth. However, it will also drive more questions for data centre providers about where they should be located and drive new choices when it comes to technical data centre design.
For example, EY-Parthenon research argues that generative AI may serve to change the format and location of future data centre infrastructure, pushing them away from major cities towards tier-two cities and city outskirts, as they will require access to more electricity and water.