Chinese data centre operator GDS sees Singapore as hub for its Southeast Asia expansion plans

Data centre management company GDS is following in the footsteps of its Chinese tech customers by expanding operations to Southeast Asia, while betting on Singapore as a regional data hub, according to its chairman and CEO.

Founded in 2001, the Nasdaq and Hong Kong-listed GDS is a third-party data centre operator serving clients such as Alibaba Group Holding, Tencent Holdings, Industrial and Commercial Bank of China, as well as US cloud giant Amazon Web Services.

Although GDS’s major facilities are in China, the company has started to develop data centres overseas, particularly in Southeast Asia, to serve the increasing number of Chinese technology companies operating there, founder, chairman and CEO William Huang said in an interview with the South China Morning Post this week.

“Singapore has been a [major] hub due to its unique location, and that naturally determines the city’s important role in the future data centre industry,” Huang said. “It will be the base to expand our services and cover the Southeast Asian region.”

“Now is the right time to map out a plan in Southeast Asia,” Huang said, adding that the impetus for the move was to follow customers who expand in the region and need “digital warehouses” to store data.

Data centres, climate-controlled buildings that house routers and servers, provide the critical digital infrastructure for cloud computing, video streaming, and e-commerce.

Southeast Asia, with its booming internet industry and heavy presence of Chinese tech giants, has become an investment hotbed for China’s digital infrastructure providers.

Last year, GDS launched several large-scale data centre projects in the region. Last November, the company said it acquired 10,000 square metres of land in Batam, an Indonesian city about 25km from Singapore, where it plans to construct two new data centre buildings with a total power capacity of 28MW.

In April this year, the company announced another partnership with Malaysian power producer YTL Power International Berhad, with plans to co-develop 168MW of data centre capacity for eight facilities in Johor Bahru, a city near the causeway linking the Malay Peninsula with Singapore.

The proximity of these data centres to Singapore and the data initiatives being undertaken in Asean countries means GDS is “well-placed” to serve these markets and facilitate data networking in the region, Huang said.

GDS’ strategy aligns with China’s desire to play a role in developing Southeast Asia’s digital infrastructure. In July 2021, the Ministry of Industry and Information Technology announced a three-year plan for the industry which called for more data centres to “go global”.

Meanwhile, a tough regulatory environment at home and escalating geopolitical tensions have prompted China’s tech giants to further expand their reach in the region.

Southeast Asia’s internet economy is projected to be valued at US$1 trillion (S$1.4 trillion) in 2030, according to a report by Google, Singapore state investor Temasek Holdings and global business consultancy Bain & Company.

The continued expansion of China’s internet companies in Southeast Asian countries, especially for cloud computing services, will boost the need for data centre facilities, Huang said.

In June 2021, Chinese e-commerce giant Alibaba, which owns the Post, launched a US$1 billion project to expand its cloud computing arm in Southeast Asia after it was subject to antitrust probes at home. Last August, Huawei Technologies Co earmarked US$100 million to encourage start-ups in the region to use its cloud services in a bid to diversify its revenue sources after US trade sanctions crippled its smartphone business.

Huang said GDS will expand its presence in other Asian regions such as Hong Kong and Japan, and that it plans to serve more multinationals and local companies.

“China’s internet industry has developed at a speed that no one has ever seen, and that means we must move fast and provide stable, innovative services to meet their demands,” Huang said.