Challenges and opportunities of the data centre industry
26 Oct 2024
DATA centres are not exactly a new industry. However, we entered a new phase in 2024 with the advent of generative artificial intelligence (AI). The demand for data centres increased exponentially to accommodate its intense computational demands.
The market size of AI is expected to grow by four times within the next six years, and it will drive an annual growth of 15% in global data centre energy demand over the same period of time.
I have been told that a CHATGPT search consumes about 10 times more energy than a conventional Google search. The energy consumption of AI data centres is immense and will have a significant impact on the net zero carbon emissions aspirations of many organisations and even countries.
The generative AI boom is presenting the same set of challenges to data centres everywhere in the world.
Prime Minister Datuk Seri Anwar Ibrahim, in his Budget 2025 speech on Oct 18, mentioned this:
“The country … must embark on a new paradigm shift to attract more meaningful investments. We can no longer sustain the outdated approach of offering incentives and support to investors without considering the broader economic benefits.
“For instance, investment in data centres should not be pursued unless they bring tangible added value to the rakyat, such as high-paying job opportunities and knowledge transfer.
“A fresh shift in focus is now essential, ensuring that the support provided has a multiplying effect that directly benefits the rakyat and the nation, rather than merely serving the profit motive of the investor companies.”
Now, this is a challenge for everyone, that when we grow the data centre business, we must think not just about the infrastructure but also about the multiple challenges that we have to deal with. There are five such challenges that we must work on together.
First, how to create jobs, and more importantly high value jobs, in this industry. I understand that data centres on site don’t create a sufficient number of jobs. We must think of how to generate the multiplying effect of creating jobs in operations, maintenance, and along the entire supply chain.
The job opportunities may not be on site, but the industry will have to articulate that it is growing jobs at all levels.
While developing the data centres in Johor’s Sedenak, Kulai, and Iskandar Puteri, which have now become the focal point of data centres, how do we create higher-skilled maintenance, engineering, and services jobs in Kuala Lumpur or Johor Baru? It has to come as a package.
Johor Mentri Besar Datuk Onn Hafiz Ghazi has said he asked data centre operators about pay rates, and they pay S$4,000 (RM13,150) in Singapore and RM4,000 in Malaysia. This is why he advocated for industry players to pay Malaysians at least 50% of what they pay Singaporeans, especially after benefiting from the low cost of utilities, land, and labour in Malaysia, which are 70% cheaper than in neighbouring countries.
How do we create jobs that pay well? How do we benchmark pay? My advice to the Malaysian industry, whether you are in a data centre or other sector, do not benchmark Malaysian pay against pay in countries with a lower skill capacity. Benchmarking has to be done differently. Malaysia should be thought of as a “Singapore at a discount”. When we think about jobs, we need to think about pay. There is no talent problem in Malaysia – the only problem is that Malaysian talents are working in Singapore. When you offer two-thirds of Singapore pay, they will come back to work in Malaysia.
The second question is water consumption. The data centre industry will have to invest in creating alternative water sources instead of competing with the people for water. For instance, southern Johor has many rivers but most of them are very dirty. Should investment be put into cleaning them up and reclaiming that water, apart from other solutions?
The third challenge is energy consumption. Two years ago, the Malaysian government made a commitment to reach net zero carbon emissions as early as 2050. This year, the Prime Minister reaffirmed that target. Energy intensive industries, including data centres, will have to look into technologies – existing and new – to help achieve this national target.
Investments in renewable energy is imperative to allow for the data centre industry to grow while minimising impact on sustainability.
The fourth challenge is localisation. This is, again, mandated by the Prime Minister to Miti (Inter-national Trade and Industry Ministry). The Prime Minister requested that Miti and Mida (Malaysian Investment Develop-ment Authority) look into mechanisms for the data centre industry to localise.
One good example is server racks. Over the past few months, the import of server racks has been quite significant. How can the government work with industry players to instead create Malaysian equipment for domestic consumption of data centres as well as potentially for export? We must remember that Malaysia has very strong metal fabrication and equipment industries that have been serving the semiconductor industry for a while.
The fifth and final challenge – the nation will also have to work with the data centre industry to prevent speculative build. AI is going to power a lot more demand for data centres, but at the same time, we need to ensure there is no speculative build which could result in a glut.
Finally, I highly encourage data centre industry players to form an association, to build a collective voice, and a common policy platform, as well as to advocate for good and solid policies for the common good of the industry and the nation.
The data centre industry is in a new phase globally. Everyone is facing the same challenges, and this is the best time to come together and work together – the government, the industry players, the users, and the wider stakeholders – to look at how to build this industry and how to deal with the challenges outlined above. I hope we can work together so that this industry can flourish, and at the same time, Malaysians benefit from the industry.
LIEW CHIN TONG Deputy Minister International Trade and Industry Ministry
Excerpt from a speech delivered at the Malaysia Cloud and Data Centre Convention 2024 on Oct 24.
Source: The Star
