Johor surges as top data center hub in Malaysia amid growing multinational interest

Joanna Gao, Taipei; Willis Ke, DIGITIMES Asia 0

Credit: AFP

Malaysia's Johor state has emerged as a main hub for data center construction in the country, attributed to its proximity to Singapore, relatively, inexpensive land, water, and electricity resources, and the ongoing China-US trade conflicts, all of which are attracting more multinational corporations to establish operations there.

According to data from Baxtel cited by Singaporean media outlet CNA, Johor currently hosts over 13 data centers, with another four under construction. This makes Johor the largest data center market in Malaysia and the ninth biggest in the Asia Pacific region.

Several major companies have already established data centers in Johor, including Nvidia, AirTrunk, GDS, YTL Power, and Princeton Digital Group (PDG). Nvidia's supercomputer project, in collaboration with YTL Power, is also situated in Johor. In addition, Microsoft is reportedly planning to construct a new data center in Kulai within the Johor state after having acquired land there.

The Malaysian government supports the development of data centers in Johor and designated two parks, Sedenak Tech Park (STeP) and Nusajaya Tech Park, as industry accelerators to further bolster the sector's growth.

While Johor is poised to attract investments from more multinational enterprises due to its cheaper land and electricity supply, as well as lower operating costs compared to neighboring Singapore, the Singaporean government is actively promoting the "SG+1" initiative. This initiative is designed to encourage companies to establish headquarters in Singapore to leverage its status as an international hub, numerous free trade agreements, and easy access to professional talent.

Furthermore, the Singaporean government is embracing the trend of diversifying supply chains to neighboring areas of Singapore, including Johor and Indonesia's Batam. In January 2024, the Malaysian and Singaporean governments signed a Memorandum of Understanding (MOU) to establish the Johor-Singapore Economic Zone and facilitate the cross-border movement of goods and talent between the two areas.

Amidst the US-China trade tensions, Malaysia has emerged as a preferred destination for many multinational corporations pursuing a "China+1" strategy. Numerous US semiconductor manufacturers have established operations in Penang, while Johor is attracting American tech giants and their clients from China.

According to former Malaysian Deputy Minister of International Trade and Industry, Ong Kian Ming, Chinese companies are also considering investing in data centers in Johor. However, some prefer to maintain a low profile to avoid unwanted attention from the US government.

Furthermore, Bridge Data Centres, backed by the Chinese tech giant ByteDance, launched its data center in Sedenak Tech Park in October 2022, further solidifying Johor's position as a regional data center hub.

Data centers demand substantial amounts of water and electricity, and Johor has encountered water shortages and power outages in the past. Johor State Assemblyman Lee Ting Han has affirmed that the federal and state governments are dedicated to addressing water and electricity concerns. The state government is constructing Malaysia's largest power substation in Johor.