Moving up the DC value chain

The Star

7 hours ago

KUALA LUMPUR: The data centre (DC) phenomenon globally has taken on a new course, moving from being mainly cloud DCs to being more artificial intelligence (AI) based for the future.
And with that, the sentiment has gone from the idea of sheer expansion of the industry to how each country can shape what is coming next.
Malaysia has proven itself as a successful and tantalising hub for DCs starting from the 2000s, and this was strongly accelerated during the Covid-19 pandemic.
The Malaysian Investment Development Authority's (Mida) chief executive officer Datuk Sikh Shamsul Ibrahim Sikh Abdul Majid said the DC journey is no longer about chasing megawatts, lower latency or faster deployment, but rather about building a digital spine for the nation – one that is resilient, sustainable, inclusive and future ready.
'The world is undergoing a generational shift. Generative AI, quantum breakthroughs and large-scale automation are not theoretical futures, they are life-evolving systems. And DCs are at the heart of this transformation,' he said during Bursa Malaysia and Hong Leong Investment Bank Bhd's 19th edition of the Stratum Focus Series, themed 'Data Centre 2.0: The Ecosystem and What's Next for Malaysia' here yesterday.
According to Sikh Shamsul, the global shifts have been evident enough that this should serve as a call to action for Malaysia.
Within the country for the first quarter, he noted there were RM89.8bil approved investments. Of this, RM35.1bil went to the information and communications sub-sector, with over 93% flowing into DC projects.
He added that from 2021 until March 2025, the Digital Investment Office (DIO) facilitated RM310.7bil in digital investments. The DIO is a joint initiative by both Mida and the Malaysia Digital Economy Corp.
'We have surpassed our national target of RM130bil well ahead of schedule. More than 92,000 new jobs have been catalysed, with many in frontier domains like cloud engineering, AI operations and cybersecurity,' he said. However, Sikh Shamsul said he acknowledged that many viewed DCs as power-hungry assets that yield limited local benefits, but this was not true.
'This perspective may not fully capture the broader and deeper value that DCs bring to the economy. Beyond direct employment, DCs support entire value chains, from civil engineering, and mechanical and engineering services to cloud application development and digital transformation for SME's,' he said.
Sikh Shamsul also said to sustain momentum, the domestic ecosystem must be deepened, which is why Mida's Data Centre Nexus 2025 was vital for the industry.
'This initiative brought together eight global operators and 16 Malaysian vendors, unlocking commercial dialogues that are now progressing into tangible partnerships.
'We would like to see more Malaysian companies be potential vendors or suppliers to these hyperscalers or DC operators,' he added. Still, he cautioned that unchecked growth will carry risks such as greenhouse gas emissions.
'We must avoid the trap of scaling fast without scaling responsibly. This is why sustainability is not an afterthought, it is a strategic imperative in which the government has said it is committed to steering for the industry,' he noted.
Meanwhile, JLL Malaysia Data Centre Transactions Lead director Kent Seet said the country was not short of advantages of why its location is suitably strategic for DCs, and will continue to draw more investments in the coming years. He said being natural disaster-free has been one of the top reasons why, citing that other countries within the region had not been so fortunate.
'We've had some clients that have pulled out halfway of constructing DCs in these countries because the risks are there.
'Malaysia also has ample water and power supply, and is still relatively cheaper compared to the developed and even regional countries,' he said.
The workforce is another bonus, he said, whereby English is widely spoken. This is on top of the fact that most Malaysians speak many other languages, which is an added advantage.
With talk about the upcoming electricity tariffs and how this might impact DC operators, Seet said he doesn't expect it to be huge for these companies, as they will definitely be reeling in profits.
'So, about the electricity tariff, I think they are going to implement it in the coming months. I don't know how big the impact is, but I would like to believe that the impact won't really reduce such investments coming to Malaysia. It's more of a way to filter out the speculation,' he explained.
As for the next hotspots for DCs, Seet said areas outside of Greater KL could be the newer, more ideal locations.
'Negri Sembilan, I always say, is an up-and-coming location, mainly because the land it offers is more affordable. If we look at Cyberjaya and some locations in Johor, it is already three figures per sq ft. Then you look at Kuala Lumpur, and there is no land big enough to build a proper tech park,' he said.
Sarawak is another state that has been mentioned a number of times in terms of being a viable location for DCs.
Seet said he recently visited the state and spoke to some of the government agencies where he learnt that they were very positive about any such investments there.
'Going back to the fundamentals, DCs store data and they need connectivity. I think Sarawak has three or four cable landing stations compared to Peninsular Malaysia, where I think we have about nine.
'So, each cable landing station has several fibres connected to the rest of the world,' he explained.
In essence, to make Sarawak a successful DC destination, there needs to be more cable landing stations. 'The state will also need to figure out who its customers are – it could be the government, the private sector or even tech companies.
'Perhaps, if its government can offer some contracts to DC operators, it could be a catalyst for the rest,' he said.