When Granill Ding Simon moved to the Malaysian state of Johor six years ago, the mechanical engineer traded city life for what he thought would be a slower pace among palm-oil plantations and beaches. Since then, Johor’s rapid transition into a data center hub has drawn him into one of the world’s hottest tech sectors.
Big tech firms including Google, Amazon, Nvidia, and Alibaba have committed investments in Malaysia’s data centers in recent years, tapping into the growing demand for artificial intelligence and cloud computing in Southeast Asia. Malaysia is adding data center capacity at the fastest pace in the Asia-Pacific region, with some 850 MW in potential electricity demand announced in the first half of 2024 alone.
Johor, the southern state which borders Singapore, has drawn about 50 data center projects in the last three years, including from ByteDance and Microsoft. The total capacity of data centers in Johor, including those that are under construction or in the planning stage, has grown 100 times in the last five years, according to research firm DC Byte.
The data center boom has created some 40,000 jobs in Malaysia, including for Simon.
“My new data center role pays double what I was earning,” the 31-year-old, who previously worked on a railway project, told Rest of World. “Earlier, the oil and gas sector paid engineers the highest wages in the country, but now data centers are offering the same or more.”
Vivian Wong/DC Byte
An established electronics manufacturer and a significant player in the back end of the semiconductor industry, Malaysia has long aimed to be a global tech hub. Last year, the nation’s digital economy employed more than 1.2 million people, and contributed about a fourth of its GDP.
The country stands to benefit from the AI boom, cornering more than a tenth of the nearly $1 trillion that could accrue to Southeast Asia’s GDP by 2030, according to consulting firm Kearney. Malaysia’s ambitions in the data center sector received an unexpected boost when Singapore imposed a temporary moratorium on its data center expansion in 2019, due to resource and land constraints.
This benefited Johor, in particular, with its proximity to Singapore, and cheaper land, labor, and electricity, Raymond Siva, former senior vice president of digital investment at Malaysia Digital Economy Corporation, a government agency, told Rest of World.
“With Singapore’s moratorium, Johor was a natural recipient of these investments,” he said. “There’s access to power infrastructure, water availability, submarine cable landings, and abundant land. Because Malaysia was already prepared with the infrastructure, data centers found it easier to land in Johor.”
While Singapore ended the moratorium in 2022, its insistence on energy efficiency and sustainability have meant continued investment in Malaysia, according to research firm BMI. Johor alone is set to draw some $3.8 billion in investment in data centers this year, according to separate estimates by Malaysian bank Maybank. In June, the Johor government said nine data centers were complete, with at least 30 more projects in the pipeline.
This has boosted real estate prices in the state, Samuel Tan, chief operating officer at Olive Tree Property Consultants, told Rest of World.
“Residential properties, and amenities like transport, recreation, and education will emerge,” he said. “This augurs well for landowners.”
But not so much for other residents: Amir Alif is already feeling the pinch. He lives in the capital Johor Bahru, just a few kilometers from the Nusajaya Tech Park which houses the Iskandar Puteri Data Center. There have been more frequent power outages and water disruptions recently, he told Rest of World.
There are also concerns about electricity and water availability. Worldwide, there is growing pushback against the large quantities of water needed to cool data centers, and their broader environmental impact.
Malaysia’s main water regulator, the National Water Services Commission, has said that the country could face widespread water shortages in the next five years due to climate change and aging infrastructure, even without factoring in increased consumption by data centers. Electricity demand from data centers could exceed 5,000 MW by 2035, or nearly a fifth of the installed capacity of Peninsular Malaysia where Johor is located, the national electricity company Tenaga Nasional Berhad estimates.
Even authorities are concerned. At a recent investors’ conference, Johor Bahru’s mayor, Mohd Noorazam Osman, conceded that he is worried about water and power shortages.
Vivian Wong/DC Byte
“People are too hyped up about data centers nowadays, but the issue in Johor is we do not have enough water and power,” he said. “I believe that while promoting investments is important, it should not come at the expense of the local and domestic needs of the people.”
The Johor state government has said it will implement sustainability guidelines, and that new data center developments will be assessed on metrics including power and water efficiency. The 500-MW YTL Green Data Center Park in Johor, for example, is powered by solar energy, the first such facility in the country.
Malaysian Prime Minister Anwar Ibrahim has said that data centers reliant on cheap energy and water are no longer viable, and that authorities are being more selective about project commissions. In October, the cabinet approved new data center planning guidelines to “ensure the distribution of resources for domestic needs is not affected.”
Other areas in the country are also being promoted as desirable locations: Amazon Web Services is building its data center in Cyberjaya near Kuala Lumpur, while Google’s data center will be located in the western state of Selangor.
For now, Johor is still the draw for companies and aspiring workers alike. Isaac Matthews, an engineering graduate from Kuala Lumpur, told Rest of World he is considering a move to Johor.
“It is a good time to join the data center industry,” Matthews said. “And Johor, in particular, is a gold mine of career opportunities now.”
