KUALA LUMPUR, April 3 — Malaysia is rapidly becoming a key center for data centers as international technology firms, especially those originating from China, pour significant investments into computational facilities to back the growth of artificial intelligence (AI).
Analysts suggest that the nation presents a blend of robust Sino-Malaysian ties, reduced power expenses, and availability of sophisticated semiconductors not accessible in China because of US export limitations, rendering it an appealing location for businesses from China.
"Malaysia and other Southeast Asian regions primarily cater to Chinese corporations as their main clientele for data centers," Joe Gao, a board member at IBuffett Investment Management—which specializes in Chinese artificial intelligence enterprises in the area—told us. South China Morning Post ( SCMP ).
Malaysian technology trade body Pikom reports that the country’s data center capacity has surged dramatically, almost doubling between 2021 and 2024. Currently, there are 54 centers offering an overall capacity of 504.9 megawatts.
This capability is poised to grow considerably with the anticipated data center park by the local group YTL Corporation, which will ultimately produce 605 megawatts.
"We understood that when this AI revolution arrived, data centers were poised for significant growth," said Yeoh Keong Hann, a senior YTL executive. SCMP .
Malaysia found itself in a fortunate situation with enough energy, water, land, and skilled manpower to ignite this emerging sector of development.
Malaysia has surpassed Singapore as the top choice for data centers in the region followingSingapore's imposition of limitations in 2019 because of worries about land, water, and energy consumption.
This change has drawn Chinese companies such as Alibaba Cloud and ByteDance, prompting them to set up data centers in Malaysia to aid their international expansion efforts.
Many tens of thousands of Chinese firms currently utilize Malaysian data centers, especially for keeping data produced by their social media platforms, online commerce operations, and artificial intelligence systems.
The growth of generative AI has intensified the demand, as numerous companies look for computing power for AI model training, according to Pikom chairman Alex Liew’s insights. SCMP .
"AI has significant presence in China and draws many local enterprises," he mentioned, noting that running data centers here costs approximately 30 percent less compared to doing so in Singapore.
A significant aspect is Malaysia’s lawful access to US-designed microchips, even with certain limitations on quantities. This enables Chinese companies to keep advancing in areas such as artificial intelligence, intelligent manufacturing, and the Internet of Things.
Nevertheless, depending heavily on Chinese investments comes with significant geopolitical dangers. Tighter US rules might compel data center customers to reveal their ownership structures or prevent Malaysia from supplying computational resources for Chinese artificial intelligence systems, which could impact earnings negatively.
Concerns about the environment are escalating as well, with Johor having already turned down certain data center applications owing to limitations in resources.
As reported by SCMP Farlina Said, a senior analyst at the Institute of Strategic & International Studies in Malaysia, cautioned that issues may arise with data storage unless data centers utilize renewable energy sources. She pointed out that although Malaysia intends to decrease greenhouse gas emissions by 2030, concerns have emerged regarding whether the nation’s resources will be able to maintain such facilities sustainably.
Although Malaysia boasts sufficient water resources for cooling high-density data centers, its tropical warmth presents a difficulty. "In contrast to some nations that utilize air cooling with winds, we have no choice but to rely solely on water," Liew explained.
