As one of the fastest-growing data centre markets in Southeast Asia in the third quarter of 2024 (3Q2024), Malaysia is poised to become Asia’s third-biggest data centre market after Japan and India. Malaysia has come out on top as the most attractive destination for data centre investment in the Knight Frank SEA-5 Data Centre Opportunity Index 2023. 

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9.41% CAGR (2022-2028) of the Malaysia data centre market, due to the acceleration in digitalisation and the increase in the adoption of cloud technology, big data, IoT and smart cities.

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Malaysia (113 MW) was the top destination for data centre investment in 2022, followed by Thailand (25MW), Indonesia (22MW), Vietnam (2MW), and the Philippines (2MW).

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Malaysia's semiconductor industry is experiencing a boom, centered in the northern state of Penang. Major European and US companies are establishing new facilities or expanding existing ones, aiming to build resilient global supply chains for these essential components. Malaysia now accounts for 13 percent of global semiconductor testing and packaging, and is already the world's sixth largest exporter of semiconductors.

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Semiconductors (microchips) are essential for modern tech, with over 100 billion used daily. But the supply chain is risky because one Taiwanese company, TSMC, makes most advanced chips. Experts worry this concentration could be disrupted by political issues or natural disasters. 

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Seeking diversification, companies are turning to Malaysia. Penang attracted a record-breaking $12.8 billion in foreign direct investment in 2023, surpassing the total amount from the previous seven years combined.

Leading companies like Intel are investing heavily, with a $7 billion commitment to a new Penang plant. The Malaysian government considers this industry development a "critical goal."

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The Malaysian Government has launched the National Energy Transition Roadmap (NETR) as a comprehensive strategic plan to steer the energy systems away from conventional, fossil-fuel-based sources and towards cleaner, more sustainable alternatives. Designed to address the challenges posed by climate change, enhance energy security, and ensure long-term sustainability, this roadmap spans multiple sectors, encompassing electricity generation, transportation, industrial processes, and residential energy consumption.

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The NETR sets ambitious targets for Malaysia, aiming to achieve net-zero emissions by 2050. The plan is comprehensive and outlines a gradual increase in renewable energy shares, targeting 31% by 2025, 40% by 2035, and an impressive 70% by 2050. To efficiently transition towards cleaner and more sustainable energy sources, six (6) energy transition levers, namely Energy Efficiency (EE), Renewable Energy (RE), Hydrogen, Bioenergy, Green Mobility and Carbon Capture, Utilisation and Storage (CCUS), have been strategically structured into 10 flagship projects.

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These flagship projects are expected to attract substantial investment exceeding RM25 billion, fostering the creation of 23,000 employment opportunities. Simultaneously, these initiatives are projected to reducing the greenhouse gas (GHG) emissions by over 10,000 Gg CO2eq (gigagrams carbon dioxide equivalent) per year.

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Further, Malaysia witnessed a 326 per cent year-on-year surge in green investments to US$1.03 billion in 2023. According to the "Southeast Asia's Green Economy 2024 Report: Moving the Needle" jointly published by Bain & Company, green investment group GenZero, Standard Chartered Bank and Temasek, this accounted for 16 per cent of the total green investments in Southeast Asia.

 

The report highlighted that although power, especially renewables, continued to be the leading green investment focus last year, there was a notable rise in investments in green data centres, primarily driven by energy efficiency regulations in Malaysia and Singapore. For example, GDS Holdings Bhd is investing US$280 million on a data centre at the Nusajaya Tech Park while YTL Power International Bhd is building a US$250 million data centre in Kulai.

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