KUALA LUMPUR, April 3 — Malaysia is emerging as a major hub for data centres as global tech companies, particularly from China, invest heavily in computing infrastructure to support artificial intelligence (AI).
The country offers a mix of stable China-Malaysia relations, lower electricity costs, and access to advanced semiconductors unavailable in China due to US export restrictions, making it an attractive destination for Chinese firms, analysts say.
“Chinese companies are the primary clients of data centres in Malaysia and other South-east Asian areas,” Joe Gao, a board member of IBuffett Investment Management, which focuses on Chinese AI businesses in the region, told South China Morning Post (SCMP).
Malaysia has seen rapid growth in data centre capacity, nearly doubling from 2021 to 2024, with 54 centres now providing a total capacity of 504.9 megawatts, according to Malaysian tech trade association Pikom.
This capacity is set to expand significantly with local conglomerate YTL Corporation’s upcoming data centre park, which will eventually generate 605 megawatts.
“We knew by the time this AI revolution came around, data centres would really take off,” Yeoh Keong Hann, a senior YTL executive, told SCMP.
“Malaysia was in that lucky position where it had the energy, water, land, and human talent to spark this new area of growth.”
Malaysia has overtaken Singapore as the region’s preferred data centre location after the latter imposed restrictions in 2019 due to concerns over land, water, and energy use.
This shift has attracted Chinese firms like Alibaba Cloud and ByteDance, which have established data centres in Malaysia to support their overseas operations.
Tens of thousands of Chinese companies now use Malaysian data centres, particularly for storing data generated by social media, e-commerce, and AI systems.
The rise of generative AI has further driven demand, with many firms seeking computing power for AI model training, Pikom chairman Alex Liew shared with SCMP.
“AI is very big in China. It attracts a lot of Chinese companies,” he said, adding that operating data centres in Malaysia is about 30 per cent cheaper than in Singapore.
Another key factor is Malaysia’s access to US-designed microchips, which remains legal despite some quantity restrictions. This allows Chinese firms to continue developing AI, smart manufacturing, and the Internet of Things.
However, this reliance on Chinese investment carries geopolitical risks. Stricter US regulations could require data centre clients to disclose ownership details or restrict Malaysia from providing computing power to Chinese AI models, potentially affecting profitability.
Environmental concerns are also growing, with Johor already rejecting some data centre applications due to resource constraints.
As reported by SCMP, Farlina Said, a senior analyst at the Institute of Strategic & International Studies in Malaysia, warned that data storage could become problematic unless data centres rely on renewable energy. She noted that while Malaysia aims to reduce greenhouse gas emissions by 2030, some are concerned about whether the country’s resources can sustainably support these facilities.
While Malaysia has ample water for cooling high-density data centres, its warm climate poses a challenge. “Unlike some countries that use wind cooling, water is our only option,” Liew said.
