Singapore Faces Challenges in Attracting Large-Scale Data Centre Investments
According to a new market report published on June 3 by BMI, a Fitch Solutions firm, Singapore’s aim to expand its data center capacity may be insufficient to attract significant foreign investment. Despite the government’s efforts to increase capacity, the authorized resources are insufficient to fulfill Southeast Asia’s growing data center demands.
The Infocomm Media Development Authority (IMDA) of Singapore recently unveiled a roadmap aiming to provide an additional 300 megawatts (MW) of data center capacity in the near term. There are plans to potentially increase this by another 200MW for operators utilizing green energy. However, this expansion is unlikely to lure large-scale investments from foreign entities.
Based on the BMI assessment, Singapore’s allocated capacity is insufficient to meet the expanding load requirements of Southeast Asia’s data centers. This gap is obvious in comparison to other rising markets in the area, particularly Malaysia, which is fast attracting data center investments.
The prohibition on data centers in Singapore from 2019 to 2022 resulted in a large transfer of these facilities to other Southeast Asian countries. Johor in Malaysia and Batam in Indonesia have emerged as viable alternatives due to their geographical proximity, favorable legislation, and reduced electricity and labor costs.
The BMI report estimates Johor’s data centre capacity at over 1,800MW and Batam’s at 285MW. In contrast, Singapore’s new plans, including permits awarded to major companies like Equinix, Microsoft, GDS, and a consortium between AirTrunk and ByteDance, will only increase capacity by a maximum of 80MW, bringing the total potential capacity to 380MW.
With the additional allocation, the report revises Singapore’s live data center capacity to 1,400MW, a significant increase from the previous 876MW. This figure likely includes multiple cloud and hyperscale data centers owned by major players such as Amazon Web Services, Microsoft, and Google, which typically do not disclose their total IT loads.
However, even with this upsized capacity, the BMI researchers believe it might still be insufficient to meet the current data center IT-load requirements in Southeast Asia. The pressure from artificial intelligence advancements on existing infrastructure further exacerbates this issue.
The BMI report, citing data from Digital Realty, indicates that almost 82.5% of the total leased capacity in the Asia-Pacific region between the first quarter of 2022 and the first quarter of 2024 came from hyperscale customers seeking capacities exceeding 1MW. This trend highlights the increasing demand for large-scale data center capacities, which Singapore’s current plans may not fully satisfy.
This ongoing demand for extensive capacity raises questions about the viability of Singapore’s 300MW allocation. Most customer bookings exceed 1MW, underscoring the necessity for a more robust infrastructure to attract significant investments.
Despite Singapore’s efforts to boost its data center capacity, the country faces stiff competition from neighboring markets offering more attractive investment conditions. The rapid development of data centers in Malaysia and Indonesia, coupled with their regulatory advantages and lower operational costs, presents formidable challenges to Singapore’s ambitions.
To remain competitive, Singapore may need to revise its strategic approach, maybe boosting allotted capabilities and improving incentives for green energy adoption. Furthermore, creating a more investor-friendly environment may be critical to attracting and retaining substantial data center investments in the region.
Singapore’s strategic strategy and anticipated capacity additions are positive developments. Nonetheless, the country faces considerable obstacles in maintaining its position as a key data center hub in Southeast Asia. The rivalry is heating up, and Singapore’s capacity to adapt and scale its infrastructure will determine its success in attracting future investment.
