Asia emerges as data center hub with renewable edge, report finds

Australia-based data center operator AirTrunk continues to expand its investment in Malaysia. (Photo: AirTrunk)

Asia’s data center market is set for continued expansion, with Fitch Solutions’ BMI projecting an annual growth rate of 9.7% through 2028. The report adds that the U.S. policy focus on natural gas could further boost Asia’s competitiveness, with Malaysia, Indonesia, and India leading regional development.

Rising U.S. power costs drive data center shift toward Asia

According to BMI, surging digitalization and cloud service demand are accelerating Asia’s data center growth. Meanwhile, U.S. electricity prices have risen sharply—doubling in some major data center hubs—making Asia a more cost-efficient alternative.

The report noted that under the Trump administration, the U.S. prioritizes natural gas generation to meet data center demand while cutting clean energy supply. This approach could drive up both the cost and lead time for new power capacity. “Solar power, which offers the shortest lead time for deployment, faces policy headwinds, while the gas sector confronts long order backlogs for equipment and infrastructure,” BMI said.

In contrast, Asia’s renewable energy buildout offers faster power delivery and more competitive costs. Singapore’s tight supply and soaring land prices are further pushing data center expansion into neighbouring Johor, Malaysia, and Indonesia’s Batam Island.

The boom has attracted major Malaysian developers and infrastructure firms. Amran Hafiz Affifudin, managing director of UEM Group—a subsidiary of Malaysia’s sovereign wealth fund Khazanah Nasional—recently said the company will release a significant landbank to expand its data center footprint and develop clean energy to ensure reliable supply.

The BMI report notes that Asia’s data centers are rapidly expanding due to surging digitalization and cloud service demand. (Photo: iStock)

Major developers fuel Malaysia’s data center boom

Other domestic players such as Malaysian Resources Corp., Mah Sing Group, Sime Darby Property, and Gamuda, along with global firms like the U.S.-based DigitalBridge and Australia’s AirTrunk, are intensifying competition in Malaysia’s fast-growing market.

India, meanwhile, is viewed as best positioned to capitalize on clean power demand from data centers, supported by policies favourable to renewable energy and power procurement. BMI estimates that over the next five years, less than 10% of India’s renewable output growth will be needed to meet additional data center power demand—leaving ample headroom for other sectors.

However, BMI cautioned that each of Asia’s key data center markets faces distinct challenges. Malaysia’s rapid buildout is straining land and grid resources, while both Malaysia and Indonesia currently generate only about a third of the renewable power needed to meet data center demand—posing potential bottlenecks.

As of July data, BMI projected Malaysia’s new data center capacity to exceed 3.2 GW, followed by Indonesia with 1.8 GW and the Philippines with 180 MW, underscoring Malaysia’s dominant lead in the regional race.

Source: Bloomberg, Bernama, NST(1), (2)

Read more: Race to green data centers: Three low-carbon trends as AI reaches GW scale