There are currently over 370 data centers in Southeast Asia, with national markets estimated to be 55-70% underpenetrated in supply compared to more evolved markets like the U.S. and China. Data center demand in Southeast Asia is expected to increase at a 20% compound annual growth rate (CAGR) by 2028, resulting in a US$11 billion total addressable market. In addition to robust digital economy growth within ASEAN, AI and supply chain diversification strategies are expected to bolster growth as Singapore (99 data centers) continues to be a regional leader in terms of capacity and Indonesia (84 data centers), Malaysia (62 data centers), Thailand (42 data centers), and Vietnam (33 data centers) make significant strides to position themselves as top hubs in the Asia Pacific.
During the first quarter, several announcements had been made, including a 126 billion baht (US$3.76 billion) data center network and 100 megawatt (MW) in Thailand, 220MW campus and 270MW data center in Malaysia, and recent launch a new cloud region in Thailand. Johor has been identified as the fastest-growing market in Southeast Asia, with the Malaysia Digital Economy Corporation announcing that RM147 billion (US$33 million) in data center investments are currently the pipeline.
The U.S. Framework for AI Diffusion set up by the Biden Administration could potentially present a complicating factor; however, the proposed restrictions placed on most Southeast Asian countries, classified as Tier-2 markets, are expected to have limited impact on their data center investment outlook for now. While the Trump Administration may change U.S. policy, under the current Framework, companies cannot transfer or install more than 7% of their total AI computing power in a Tier-2 market. Most large investment announcements in the region have made up 2-3% of companies’ expected global investments on average. The release of DeepSeek’s R1 model has led to increased scrutiny about the efficacy and outlook of this Framework and other AI-related export controls as the Commerce Department investigates whether the company acquired restricted U.S. chips through select countries, including Singapore and Malaysia.
