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ASEAN is rapidly emerging as a global hotspot for data center investment. While traditional hubs like Singapore face constraints, Malaysia, Indonesia, Vietnam and Thailand are seeing unprecedented investment inflows from major cloud providers, hyperscalers and industrial investors.
Shifting geopolitical dynamics, tightening regulatory frameworks and the rapid evolution of digital services are redefining the requirements for data infrastructure across ASEAN. These forces are pushing companies to rethink their data center strategies in the region, driving demand for more localised, scalable and resilient facilities.
ASEAN’s evolving data center landscape is unlocking new business models, investment strategies and infrastructure innovations. Operators, equipment manufacturers and investors stand at the forefront to benefit from this growth trajectory fast growth of the market, which includes:
In the context of accelerating investment in digital infrastructure, this whitepaper helps stakeholders navigate the evolving landscape by providing insights into market dynamics and emerging opportunities.
Southeast Asia is rapidly positioning itself as a global leader in digital adoption, with the digital economy significantly outpacing global growth rates. The region’s Gross Merchandise Value (GMV) is expected to reach USD 600 billion by 2030, growing at an annual rate of approximately 15%[1].
This momentum is driven by several key trends that are reshaping ASEAN’s data and technology landscape:
Collectively, these trends are driving the region to undergo a rapid digital transformation, which has been fueled demand for data infrastructure in the region, thereby solidifying its role as a critical hub for technology, connectivity and data-driven growth.
By 2029, data center investment in ASEAN is expected to grow at a CAGR of 9.6%, exceeding the global average of 8.2%, reflecting the region’s potential to become a key player in the global digital economy[2].
This exponential growth highlights ASEAN’s increasing need for high-performance computing, energy-efficient infrastructure and strategic connectivity, making it a prime market for investors, cloud service providers and data center operators.
The region’s emergence as a digital powerhouse is fueled by both demand-side and supply-side factors reshaping the investment landscape. Below are the five key growth drivers that are fueling the growth of the market.
Population growth, rising incomes, and ASEAN’s role as a growing manufacturing and outsourcing hub are driving digital adoption at an unprecedented pace. Expanding middle-class consumption, e-commerce penetration, and cloud-based services are intensifying the need for scalable, high-performance data infrastructure. The surge in demand puts a high pressure on ASEAN’s digital infrastructure in data center capacity to keep pace. By 2024, the capacity of data centers in Southeast Asia is planned to increase by ~1.5X within SEA (vs 13% increase expected across APAC)[3] .
The rise of AI, machine learning, and high-performance computing (HPC) is pushing demand for power-intensive, scalable data centers. ASEAN is emerging as a key market for hyperscale and edge data centers, supporting real-time processing needs for fintech, gaming, industrial automation, and smart city applications.
Governments across ASEAN – especially Indonesia, Malaysia, and Vietnam – are actively incentivizing data center investment. They are offering tax breaks, investment-friendly policies, and regulatory clarity to attract global players.
ASEAN’s geographic location provides seamless access to global submarine cable networks, making it a prime data center destination. Singapore remains a critical connectivity hub with 24 undersea cables, but land and power constraints are limiting further expansion. In response, regional hubs like Johor (Malaysia), Batam (Indonesia), and Bangkok (Thailand) are emerging as preferred alternatives, benefiting from lower land costs and increasing government support.
Furthermore, growing national confidence across ASEAN is driving regulation to demand more in-country positioning of digital infrastructure, such as data centers. This shift reflects a broader trend toward data sovereignty and localized digital infrastructure investment.
With data sovereignty laws tightening in Thailand, Vietnam, Malaysia and Indonesia, companies are required to store and process data locally. This regulatory shift is forcing cloud providers, hyperscalers, and enterprises to invest in regional infrastructure, accelerating data center growth across ASEAN.
Shifting global geopolitical dynamics are accelerating data center investment in ASEAN, as businesses seek stable, compliant, and geopolitically neutral locations for digital infrastructure.
Rising US-China trade tensions and data security concerns have led multinational corporations to rethink their data storage strategies, prioritizing risk diversification and regulatory compliance. Many firms are relocating their regional data center operations from Hong Kong, following the shifting political climate, to ASEAN markets that offer stronger data sovereignty frameworks and reduced political risk.
Additionally, governments worldwide are tightening data localization laws, compelling companies to store and process data within national borders. This shift is driving hyperscalers and cloud providers to expand ASEAN-based infrastructure, leveraging the region’s growing network of compliant, cost-competitive data hubs.
Recent high-profile moves – such as TikTok migrating US user data to Oracle servers and Naver relocating backup data from Hong Kong to Singapore – highlight a broader trend: ASEAN is solidifying its position as a preferred destination for secure, scalable and geopolitically neutral data center investment.
ASEAN’s digital economy is attracting unprecedented investment from global technology leaders, including the Magnificent 7 US-tech behemoths and global investors, e.g. from the Middle East, all racing to expand their regional data center footprint. These investments are not just accelerating but also decentralising, with companies increasingly diversifying beyond Singapore as the traditional hub to establish infrastructure across Malaysia, Indonesia, Thailand and Vietnam.
This shift is driven by three primary factors:
Singapore has long been the dominant data center hub in ASEAN, leveraging its strategic geographic location, business-friendly policies and world-class connectivity. With over 600 MW of colocation capacity, the city-state has been the go-to destination for global cloud and enterprise infrastructure. However, new constraints are shifting investment flows toward emerging ASEAN markets.
Among the emerging ASEAN data center markets, Malaysia has firmly established itself as the region’s new hub, attracting significant investments from major global tech firms, including the Magnificent 7. The country’s data center sector is projected to grow at a staggering 22% CAGR from 2023 to 2029, outpacing its regional peers[4] .
Malaysia’s strong value proposition for data center investors is underpinned by:
Major US cloud giants and technology firms have already set up large-scale facilities, reinforcing Malaysia’s growing status as the preferred ASEAN alternative to Singapore for data center investments.
Meanwhile, significant movement is also observed in Thailand, where the Board of Investment (BOI) approved several data center and cloud service investment projects totaling USD 2.7 billion on 17 March 2025[5]. Three different operators are planning to provide 350 MW capacity, opening a possible pathway where Thailand may grow even faster than projected in the above graph. Indonesia, in fact, sees investment ongoing in a similar dimension as Thailand.
As data center demand surges, investments are no longer concentrated in capital cities or traditional hubs. Instead, a wave of decentralisation is unlocking opportunities in tier 1 and tier 2 cities. Key locations such as Johor (Malaysia), Batam (Indonesia), Hanoi (Vietnam) and Chonburi (Thailand) are seeing strong data center development driven by local demand, government incentives and improved infrastructure.
This geographic diversification supports the rise of new economic hubs, fosters technology transfer, job creation and regional development beyond primary metropolitan areas. By spreading infrastructure investments across multiple cities, ASEAN is ensuring a more balanced and resilient digital economy while reducing congestion and over-reliance on traditional data center markets.
With the growing demand for advanced digital infrastructure across the region, data center operators are under increasing pressure to deliver reliable and sustainable solutions. Equipment manufacturers (EMs) hence collaborate much closer with operators in the data center setup process to create tailored solutions.
This section explores five key opportunities from the perspective of the following stakeholder groups:
Rising technical requirements – driven by the need for higher-quality equipment and stricter sustainability demands from host locations – are prompting companies to clearly define their market positioning amid an expanding range of business models and operational strategies. Simultaneously, growing interest from major tech players is elevating investment ticket sizes, encouraging further specialisation across the data center ecosystem. Equipment manufacturers are also increasingly involved in data center setup.
ASEAN’s growing data center market is giving rise to new business models designed to address increasingly diverse customer requirements. To remain competitive, operators must differentiate themselves through factors such as hyperscale versus colocation models, energy efficiency, specialized services and distinct ownership structures. These decisions significantly influence the data centers’ architecture, operational scale, connectivity, security standards and service quality, ultimately determining their ability to attract long-term tenants and capture market share.
Exponential energy consumption is becoming a defining challenge for the industry. AI-powered applications, high-performance computing (HPC) and cloud workloads require significantly more electricity than previous generations of data centers. For example, according to the IEA, a ChatGPT query consumes about 2.9 watt-hours of power, almost. 10 times that of a traditional Google search, illustrating the mounting power requirements.
These challenges are accelerating the adoption of green data centers. Companies are investing in renewable energy sources, high-efficiency cooling and sustainability-linked financing to align with ESG mandates while controlling long-term operating expenses (OPEX).
The ASEAN data center market is set to grow at a CAGR of 9.6% through 2029[7] , with construction-related investments expanding at 11.2%. This growth is driving demand for high-performance equipment, particularly cooling systems, which are expected to reach USD 5.7 billion[8] by 2029 (10.1% CAGR).
Balancing CAPEX and OPEX remains a critical challenge. Equipment accounts for 40-50% of total capital expenditure, forcing operators to balance upfront costs with long-term operational efficiency. While lower-cost equipment may reduce short-term expenses, inefficiencies often lead to higher lifetime costs. As a result, investors are prioritising performance-driven solutions in cooling, energy efficiency and power management to optimise long-term competitiveness and sustainability.
ASEAN’s data center market offers one of the most attractive investment opportunities globally, with profit margins of 15-40%[9] and payback periods of 4 to 10 years[10]. This draws real estate developers, industrial estate operators and infrastructure investors seeking stable, long-term returns.
Data centers benefit from predictable, long-term contracts (typically three years or more), ensuring stable cash flow and MW-based billing models that generate recurring revenue. While green data centers require higher upfront CAPEX, they align with ESG mandates in Malaysia and Singapore, making them increasingly attractive to both regulators and sustainability-focused investors.
Among ASEAN markets, Indonesia is the largest revenue-generating country (USD 3.1 billion in 2023), followed by Thailand (USD 2.2 billion) and Vietnam (USD 2.0 billion)[11]. This underscores the region’s strong digitalisation trends, cost advantages and infrastructure expansion, reinforcing its investment appeal.
The transition to sustainable data centers in ASEAN is being driven by key stakeholders across regulatory bodies, investors, data center operators and equipment manufacturers, each playing a critical role in shaping the region’s infrastructure.
Together, these stakeholders are driving rapid advancements in sustainable data center infrastructure, reinforcing ASEAN’s position as a key hub for digital expansion and green technology adoption.
The rapid expansion of ASEAN’s data center market unlocks targeted opportunities across the value chain, particularly benefiting three core stakeholder groups crucial to the sector’s future growth: Operators, Equipment Manufacturers and Investors. These stakeholders can take decisive steps today to capitalize on Southeast Asia’s digital transformation
Rapidly diversify footprint: Accelerate deployment in Vietnam, Indonesia and Thailand to meet rising demand driven by data sovereignty laws and latency requirements.
Invest in AI and renewable energy: Implement AI-driven optimization and renewable power sources to achieve competitive operational efficiency and sustainability benchmarks.
Build strategic grid partnerships: Collaborate proactively with local utilities for energy integration and advanced storage solutions, ensuring reliable uptime and reduced operational costs.
Develop specialized ASEAN-centric technologies: Create AI-enhanced, high-efficiency cooling and energy management solutions specifically tailored to tropical climates and local regulatory requirements.
Lead joint innovation initiatives: Establish co-development partnerships with data center operators to deliver integrated grid storage, innovative cooling and climate-adaptive infrastructure solutions.
Proactively align with regulatory standards: Ensure product development strategies anticipate and exceed evolving ASEAN regulatory frameworks around efficiency and environmental sustainability
Fund integrated infrastructure platforms: Invest strategically in end-to-end data center ecosystems – covering real estate, power supply, and advanced connectivity – to leverage vertical integration opportunities.
Champion green and sustainability-linked finance: Deploy ESG-compliant funding mechanisms to attract sophisticated capital pools, achieving competitive differentiation and higher returns.
Drive market consolidation proactively: Identify and execute strategic M&A deals and partnerships to rapidly gain scale in high-growth markets, leveraging early-mover advantages in Indonesia, Malaysia, and Vietnam. EU-based companies are uniquely positioned to leverage their expertise and resources to secure significant roles within ASEAN’s rapidly expanding data center ecosystem. Contact us today to begin your successful expansion into this vibrant and strategically important market.
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[1] Bain, Google and Temasek Report 2024
[2] Arizton
[3] Google, Bain and Temasek Report 2024
[4] Globe Wire Research
[5] Thailand Board of Investment Updates
[6] The stakeholder icons beneath each process represent the key stakeholders involved at that particular stage.
[7] Alarar Capital Group’s Analysis
[8] Arizton
[9] Alarar Capital Group’s Analysis
[10] Expert interviews
[11] Maybank
[12] Channel News Asia, W.Media
[13] Dorna Singtel, Fintech News, EdgeConnex
[14] Channel News Asia, W.Media
[15] AirTrunk, EdgeConnex, W.Media
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