Tech Stories

Issue #72

Hello Reader,

Today, I want to talk about Johor and how the surge of data centres in Malaysia could offer a once-in-a-generation opportunity to build something truly special.

A big thank you

I had a hectic but fruitful two days in Kuala Lumpur last week - the Malaysia Cloud & Datacenter Convention 2025 itself on Thursday, and the networking session the evening before. Thank you to all who stepped forward to say hi. I'm especially encouraged to hear how my posts resonate with data centre analysts and insiders alike.

I'm also tickled that some have been sharing my posts in private conversations but refrained from commenting publicly due to company policies or customer sensitivities. Please keep sharing your insights with me, and I'll keep writing content without the fluff.

Johor for the win

I've occasionally expressed skepticism about the surge of data centres in Johor. Yet month after month, growth there continues to belie expectations. As of the first half of 2025, Knight Frank says Johor has a vacancy rate of just 1.1 per cent. That's lower than Singapore's.

As I shared on Thursday's opening panel, data from JLL indicates Malaysia is set to overtake Singapore and South Korea in data centre capacity by 2027, and every other major APAC market by 2029. China has more data centres, but it also has 1.4 billion people.

Reflecting on what I heard over the two days, three things stood out:

Growing cost pressures: The cost environment that catalysed today's growth no longer exists. Costs have increased substantially, with higher electricity and water tariffs, while many earlier tax exemptions are being rolled back.
More data centres coming up: Remember when I mentioned everyone I spoke to was mulling a Johor data centre? From several off-the-record conversations, I learned many of these developments have advanced. So yes, more data centres are coming. Many more.
To Thailand... and back: It is true that several data centre operators have looked to places like Thailand, put off by sharp cost increases in Malaysia. But at least some have since decided to return to Malaysia.

The ecosystem play

Perhaps what struck me most was Malaysia's efforts to leverage this opportunity to build a robust ecosystem beyond digital infrastructure. MDEC's Wan Murdani alluded to this during my opening panel discussion.

Here's what surprised me: looking back at my notes from his July 2024 presentation in Singapore, he was already talking about growing both renewables and supply chain ecosystems in Malaysia - including semiconductors and data centre equipment manufacturing. I heard the words then but didn't grasp their significance at that time.

Now, a year later, I'm seeing it materialise. I met at least two born-in-Malaysia data centre equipment suppliers that have successfully ridden this growth wave. One was recently acquired by a Fortune 500 European firm, while the other is expanding beyond Malaysia.

Many countries have tried to leverage a boom to build lasting industrial capability. Few succeed. The difference always comes down to execution - the unglamorous work of skills training, supply chain development, and creating genuine competitive advantages beyond cost.

Can Malaysia transform this data centre boom into lasting industrial capability before the window closes? The vision is there. The momentum is there. But between vision and reality lies the hardest part: execution at scale.

What do you think?

As always, you can reach me by hitting reply.

Regards,
Paul Mah.

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