"Southeast Asia's 'Shenzhen', Attracting Nearly 5 Billion Investments from ByteDance and Microsoft | Going Global New Land"

Author | Ye Danxuan

Editor | Yuan Silai

Johor, known as the "Southern Gateway" of Malaysia, is separated from Singapore by only a causeway.

The Johor-Singapore border is one of the busiest border crossings in the world. Due to the significant disparity in economic development and exchange rate levels between Singapore and Malaysia, workers with the same qualifications can earn three times as much in Singapore as in Malaysia. Therefore, in the past three decades, nearly 150,000 Malaysians have commuted between Singapore and Johor every day, and these people are called "cross-causeway commuters".

The life of the "cross-causeway commuters" reminds people of the office workers commuting between Shenzhen and Hong Kong. Johor and Singapore are similar to the relationship between Shenzhen and Hong Kong in the past. Malaysian officials also admit this. In May this year, the Menteri Besar of Johor openly set the goal of the Iskandar Malaysia (Johor-Singapore) Special Economic Zone as "the Shenzhen of Southeast Asia".

Giselle Chan is a member of the large "cross-causeway commuters" group. She works in the data center of a communications company in Singapore. Starting from five in the morning, the border crossing that Giselle commutes through every day is already brightly lit, and there are always a dense line of cars queuing up at the entrance to the Johor-Singapore Causeway to cross the bridge. Giselle told Yingke that in order to arrive at her workstation on time, she needs to take the border connection bus more than two hours in advance every day.

In the near future, the fatigue of "cross-causeway commuters" like Giselle will be alleviated to a certain extent.

Oil palm forests and rubber plantations are the most common landscapes in Johor. But in recent years, large areas of palm trees are being knocked down, and in their place are modern technology park buildings. Multinational giants such as Google, Microsoft, Amazon, and NVIDIA have all announced their entry into Malaysia.

It is obvious that the data center market in Malaysia is growing rapidly. A report by the market research institution Research and Markets shows that the data center market in Malaysia will surge by 72% starting from 2022, reaching 2.25 billion US dollars by 2028, with a compound annual growth rate of about 9.4%, higher than the 6.57% of the overall Southeast Asian market.

Among them, the area around Johor Bahru in Johor is an important place for data center construction. According to the first half of 2023 report of the Malaysian real estate agency Zerin Properties, only the Johor region is expected to attract 17 billion Malaysian ringgit (about 4.9 billion US dollars) in new data center investments in 2024.

01 Giants Betting on the New Wave of Data Centers

Since 2023, many Malaysians have found that the names of tech giants are increasingly being associated with Malaysia. When interviewed by Yingke, a Chinese even optimistically called this year the "the beginning year of Malaysia's technological rise".

In March 2023, Amazon announced that it plans to invest a total of 6 billion US dollars in Malaysia by 2037 to strengthen the construction of cloud service infrastructure. In December of the same year, NVIDIA also disclosed that it plans to build a 4.3 billion US dollar artificial intelligence data center in Malaysia.

This year, the actions of multinational technology companies in Malaysia have become more intensive. In May, Google announced an investment of 2 billion US dollars to build a data center in Malaysia and establish a new Google Cloud region; at the same time, Microsoft announced that it will invest 2.2 billion US dollars in Malaysia in the next four years to develop cloud computing and artificial intelligence services.

In June, Microsoft acquired a data center development site in Johor, Malaysia for approximately 85.5 million US dollars. The Malaysian Trade Minister publicly announced that ByteDance will invest 2.13 billion US dollars to build an artificial intelligence center locally.

Recently, Oracle also announced a 6.5 billion US dollar plan to build a cloud service data center in Malaysia.

According to statistics from Yingke based on public information, in the past two years, Malaysia has attracted more than 25 billion US dollars in investments in data center bases. According to a report released by IQI, there are currently more than 30 data centers in Malaysia, and more than ten are under development.

Tan Qingyun, a Malaysian Chinese, lives in Kulai, Johor, on the Federal Highway connecting Kuala Lumpur and Johor Bahru, the center of Johor. She recalled to Yingke that this small county has been undergoing large-scale construction since 2023.

The large-scale solar data center park of the Malaysian local giant YTL Group is being built here. According to public information, the park covers an area of 664 hectares and will become the first solar-powered data center in Malaysia and the largest of its kind in Southeast Asia.

It is worth noting that YTL Group is the partner of NVIDIA in the planned construction of an artificial intelligence data center in Malaysia.

The real estate in Johor is also becoming popular. Several Malaysian residents confirmed to Yingke that since 2022, the real estate industry in Johor has been booming, with existing houses in high demand and the sales cycle of pre-sale houses being very short. At the same time, the rent of houses in Johor has also been rising rapidly, doubling compared to two years ago.

02 Building a New Northern Virginia

Currently, the largest data center market in the world is located in Northern Virginia, USA.

Every day, 70% of the Internet traffic on the planet flows through here, and Ashburn, a city in the state, is the first in the world where the overall data center capacity exceeds 1 billion watts. Since the 1990s, technology companies such as Google, Amazon, and Microsoft have built large data centers here.

Ashburn has become the world's first data center capital thanks to its abundant electricity, water, and land resources.

It is not impossible for Johor to become the next Northern Virginia.

In fact, the initial target for data center construction by multinational technology giants in Southeast Asia was Singapore. As early as 2011, Google established its first data center in Southeast Asia in Jurong West, Singapore. As of 2022, Google has three data center facilities in operation in Singapore.

However, the shortage of various energy sources in Singapore is an unavoidable problem. Google's data center construction strategy in Singapore is an "upward" multi-story urban data center, covering only 2.45 hectares.

What really brought a direct opportunity to Johor was the policy announced by the Ministry of Trade and Industry of Singapore in May 2019: The government temporarily stopped releasing state-owned land for the construction of data centers and approved the development of data centers on existing land to slow down the growth of data centers.

At that time, large areas of oil palm forests and rubber trees had not yet been felled from the land in Johor. According to public information, the land cost in Johor is only 1/4 of that in Northern Virginia. At the same time, compared with Singapore, the electricity supply in Malaysia is relatively stable and the price is reasonable. Johor, which is rich in resources and only separated from Singapore by a causeway, quickly became a new choice for technology companies.

The strong support of the Malaysian government has also become an important driving force for the rapid growth of the data center volume in Johor. Currently, the mainstream data transmission method is submarine cables. In addition to being adjacent to Singapore, which has the densest intersection of submarine cables in the world, the Malaysian government is also actively promoting the construction of submarine cables. As of 2021, Malaysia has 20 international submarine cables. According to the Malaysian Digital Economy Blueprint, the goal is to achieve a leading position in the landing of submarine optical cables in Southeast Asia by 2025.

The enthusiasm of the locals for Johor to become a data center capital is not as strong as that of the government. Several Malaysian Chinese told Yingke that data centers and the job opportunities they provide are relatively low-end "leftover bones" and "dirty work" in the technology industry chain.

The ambition of the Malaysian government goes beyond this. In May this year, Malaysian Prime Minister Anwar Ibrahim announced that 60,000 local semiconductor engineers with high technical skills will be trained, and Malaysia hopes to move towards becoming a global chip center. According to the National Semiconductor Strategy announced by the Malaysian government, the treasury will allocate at least 5.3 billion US dollars in the next 5 to 10 years to cultivate relevant talents and develop local companies.

Amidst a series of positive news, there are still hidden concerns in Johor. Behind the rapidly increasing number of data centers is the huge power and water consumption. A large amount of tap water needs to be used for the cooling system. According to public data, Google's data center needs to use an average of 1.7 million liters of water per day.

A report by Industrial Bank Research shows that the only tap water supplier in Johor, Ranhill SAJ, has received water application requests from data centers from this year to 2035 at 439.67 million liters per day, but it can only support 316.38 million liters per day, with a shortage of 28%.

Becoming a new data center capital may mean higher salaries and more job opportunities for Malaysians. However, at present, the hidden concerns of the "competition for water with the people" by data centers and the "premature decline" problem caused by the massive consumption of resources are still bothering Malaysia.