What’s Driving the Digital Infrastructure Boom? Demand Drivers in APAC

Asia-Pacific's digital transformation is fueling an unprecedented data centre boom, with demand for capacity skyrocketing across the region. APAC has the highest number of internet users globally, and its digital economy is expanding faster than any other, propelling the need for robust digital infrastructure. From bustling urban hubs to emerging markets, a convergence of powerful demand-side forces is shaping the trajectory of data center growth through 2030. These forces range from surging online populations and cloud adoption to the transformative impact of AI, the rollout of 5G and IoT, and even the regulatory mandates of data sovereignty.

In this in-depth article, I unpack five strategic pillars of demand that explain why APAC's data centre industry is booming and how it will evolve. Supported by the latest research and market data, I present a comprehensive view on the region's digital infrastructure trends. Each section highlights not only the commercial viability behind the demand (why businesses and investors should care) but also offers a strategic outlook on how these drivers will shape decisions around capacity planning, investment, and policy. I conclude with insights on how stakeholders can navigate these trends, and a call for your feedback—because understanding these dynamics is a collective journey.

Asia-Pacific’s digital infrastructure demand is surging, driven by a $1 trillion internet economy, 1.4 billion projected 5G connections, and AI workloads now consuming 11% of global data centre capacity.

Five strategic demand drivers are reshaping APAC’s data centre landscape: digital economy growth, cloud transformation, AI acceleration, 5G and IoT expansion, and regulatory localisation.

With these pillars in mind, let's delve into each one in detail, backed by data and examples, to understand precisely what's driving the boom in APAC data centers—and what it means for leaders and investors navigating this dynamic landscape.

1. Digital Economy Surge: APAC's Online Population & Commerce

The foundation of APAC's data center boom is the explosive growth of its digital economy—more people online, consuming more digital services than ever before. The Asia-Pacific region is home to over half the world's population and likewise boasts the highest number of internet users globally. This primacy in the online population makes APAC a major driver of global digital growth. But it's not just the sheer number of users; it's the rapid increase in users and their online spending that is straining existing infrastructure and necessitating new data centre capacity.

Key facets of this digital surge include:

• Millions of New Users Every Year: Across developing Asia, internet penetration is climbing steadily. The COVID-19 pandemic accelerated this trend, bringing tens of millions online in a short span. Southeast Asia alone added 60 million new internet users from 2020 to 2021, taking the region's total to 440 million users. India has seen a massive wave of new connectivity over the past few years, now with an estimated 750+ million internet users, up from about 400 million in 2017 (growth primarily via affordable mobile data and smartphones). Even China, which already had a huge base, continues to add users at the margins – the number of mobile internet users in China is projected to grow from 1.17 billion in 2023 to about 1.22 billion by 2030. Each new internet user represents additional demand on servers, networks, and storage – from the first YouTube video they watch to the first e-commerce purchase they make, data centres somewhere are doing that work. Notably, there's still vast headroom: roughly 48% of APAC's population remains offline as of 2024, illustrating the scope for future expansion as connectivity initiatives and falling smartphone costs bridge the digital divide.

• E-commerce and Digital Services Boom: APAC's internet users are not just browsing—they're transacting, in ever greater numbers. The region's online marketplaces, payment apps, streaming platforms, and delivery services have seen surging usage. Southeast Asia's internet economy is a standout example: it's forecast to grow from about $174 billion in 2021 to $1 trillion by 2030 in gross merchandise value. E-commerce, online travel, media, and food delivery adoption across countries like Indonesia, Vietnam, and Thailand drives this staggering growth (nearly 6x in a decade). China's e-commerce GMV, already the world's largest, continues to expand, and India's digital payments and e-commerce sectors are on a steep upward trajectory under initiatives like Digital India. All these digital transactions — every e-wallet swipe, food delivery order, or Netflix stream — generate data that must be processed and stored. For instance, the volume of e-commerce in Southeast Asia (SEA) was around $120 billion in 2021 and is expected to reach $234 billion by 2025, implying a massive uptick in transaction records, user data, and product data hosted in data centers.

• Social Media and Content Consumption: APAC is a social media powerhouse. Countries like the Philippines, Malaysia, and Indonesia rank among the highest globally in average daily time spent on social platforms (often 3–4 hours per day). Video content is king — YouTube, TikTok, local platforms like China's iQiyi or India's Hotstar drive enormous traffic. Cisco's earlier projections (from their Visual Networking Index) anticipated that by the mid-2020s, Asia would account for the majority of global internet traffic growth, much of it video. This content boom demands not just central data centers but also content delivery networks (CDNs) and edge caching closer to users, to reduce latency and bandwidth costs, spurring more distributed infrastructure.

• Digital Services Adoption by Governments: The public sector's digitalization adds to demand. Many APAC governments are digitizing citizen services — from India's Aadhaar and UPI platforms (which handle billions of authentications and transactions) to Indonesia's push for innovative city services, to Singapore's fully digital government services. The data generated and stored by these projects (think national ID databases, tax filings, health records, etc.) must reside in secure data centres, often domestically. For example, India's DigiLocker (a cloud service for storing citizens' official documents) has over 100 million users; this kind of initiative directly translates to new government cloud infrastructure and private data centre tie-ups to host the data reliably.

The commercial viability stemming from this digital economy surge is straightforward: more users and more online services mean enterprises and service providers are willing to pay for robust infrastructure to serve them. And indeed, we see that willingness in the market. Consider the utilisation rates and expansion plans in key hubs (covered in Week 2's article on Tier-1 cities): Singapore's near-zero vacancy, or Jakarta's 22% compound annual growth in data centre capacity expected as Indonesia's online market explodes. These are direct responses to user demand.

Importantly, the digital economy surge is not just an urban phenomenon; it's also reaching deeper into rural areas as mobile connectivity improves. This is prompting telcos and cloud providers to think about edge data centers and regional nodes to support users outside capitals (we'll touch more on this under 5G & IoT).

In summary, APAC's booming digital economy forms the bedrock demand driver for data centres. The region's demographic heft (young, mobile-savvy populations), combined with increasing internet access and a cultural embrace of digital life (from shopping to entertainment), has created an environment where the need for computation and storage is compounding year after year. For stakeholders, this underscores an essential point: investing in APAC's digital infrastructure is not speculative—it's riding a very real wave of user-driven demand that shows no sign of cresting. As more of daily life moves online in APAC, data centres have become as critical to the economy as factories and offices were in the industrial age.

2. Cloud & Enterprise Transformation

The Shift to ‘'Everything-as-a-Service " The second pillar of APAC's data centre demand boom is the region's rapid adoption of cloud computing and the broader digital transformation of enterprises. Companies of all sizes, as well as governments, are increasingly moving their IT systems to the cloud or modernising them with digital technologies. This has two significant implications: firstly, hyperscale cloud providers (like Amazon Web Services, Microsoft Azure, Google Cloud, Alibaba Cloud, etc.) are racing to expand their physical infrastructure to meet customer demand in APAC; and secondly, enterprises adopting cloud and digital services are creating new loads on data centres, whether through public cloud usage, hybrid cloud deployments, or colocation of critical equipment near cloud on-ramps.

Let's break down this trend:

• Cloud Revenue and Expansion Soaring: Asia-Pacific is the fastest-growing market for cloud services globally. As evidence, the public cloud services market in Asia-Pacific (excluding Japan) grew to about $41.5 billion in 2023, up ~24% year-on-year. And this is just the beginning: that same market is forecast to reach $153.6 billion by 2026, nearly triple the 2021 value of $53.4B. This phenomenal growth (23.5% CAGR from 2021–2026) reflects how quickly APAC organizations are embracing cloud-based software (SaaS), platforms (PaaS), and infrastructure (IaaS). Global tech giants have responded by launching new cloud regions across APAC. In the last few years, we've seen AWS open regions in Indonesia and Hyderabad (India), Azure in Malaysia and Taiwan, Google Cloud in Seoul and Melbourne, Alibaba Cloud expanding in Indonesia and the Philippines, and so on. Each new “region" generally means at least 2-3 massive data centre availability zones. For example, when AWS announced a $5 billion investment for an Indonesian region launch, it committed to building multiple data centres to ensure redundancy. These hyperscale builds are primary drivers of data centre demand, often consuming tens of megawatts each.

• Enterprise Digital Transformation: Beyond the tech sector, traditional industries in APAC are digitizing rapidly. Banks are moving core banking to private clouds, manufacturers are deploying IoT and analytics, retailers are embracing e-commerce platforms, and so forth. A telling statistic: enterprises in APAC are expected to allocate around 10% of their revenues to digital transformation between 2024 and 2030 (covering technology upgrades, new digital products, etc.). This substantial budget share indicates that going digital is a top priority across sectors. As enterprises transform, they rely more on data centres – either indirectly via cloud providers or directly via colocation and private clouds. For instance, an Asian bank launching AI-driven mobile services might migrate its data to a combination of an on-premises private cloud (hosted in a third-party data centre for security and uptime) and public cloud for burst capacity. Both imply more racks and power in data centre facilities. Hybrid IT architectures, where companies use a mix of on-premises and cloud, often lead to deployments in carrier-neutral data centres to conveniently connect with multiple clouds (the “Multi-cloud" strategy).

• Software-as-a-Service (SaaS) Adoption: APAC businesses are also turning to SaaS solutions (like Salesforce for CRM, Workday for HR, SAP/Hana on cloud, Zoom, and Teams for collaboration). The usage of SaaS in APAC is set to more than double from $22.9B in 2021 to $58.1B in 2026. Every SaaS application shifts IT workload from a company's server room to a cloud data center. So as SaaS penetration increases, the aggregate IT load concentrates in larger facilities run by the SaaS providers. Moreover, many SaaS companies are expanding their data centre presence in Asia to reduce latency for local customers. (Think of how Office 365 or Google Workspace performance improves if the data is served from within Asia rather than from the US.)

• Emergence of Local Cloud Players and Startups: It's not just the international players. APAC has a growing array of local cloud and IT service providers – from Tencent and Baidu Cloud in China, to Naver Cloud in Korea, to startups offering specialized cloud (like VNG Cloud in Vietnam for gaming services). These local clouds cater to country-specific requirements or niche segments and often partner with data centre operators to build out capacity. For example, in India and Southeast Asia, domestic telecom companies (like Reliance Jio, Telstra, Telkom Indonesia) have launched cloud or edge computing services, leveraging their data centre assets. This diversification of cloud supply further boosts demand for data centre space since each new entrant will lease or build infrastructure.

• Colocation & Interconnection Demand: The more enterprises go digital and multi-cloud, the more they seek high-quality colocation facilities to house critical equipment and to interconnect with cloud providers and telecom networks. APAC's colocation market is thus thriving alongside pure hyperscale growth. Data center operators report strong bookings from financial services, healthcare, government agencies, and other sectors that require secure and compliant environments. For instance, a multinational might colocate regional servers in Singapore to serve as a hub connecting to various public clouds and to on-prem setups in nearby countries. Equinix, a global colocation company, has been expanding its International Business Exchange (IBX) centres in APAC cities mainly due to this interconnection demand. The carrier-neutral facilities in places like Hong Kong and Singapore are effectively the meeting points of this cloud-enabled ecosystem.

From a strategic outlook, this trend means APAC's data centre growth is underpinned by enterprise IT spend shifting from traditional CAPEX (owning servers) to OPEX (renting cloud/colocation). This Shift is fairly recession-resistant because digital transformation is seen as essential for competitiveness, which was evident during COVID-19 when digital channels became lifelines for many businesses. In fact, cloud adoption often accelerates in uncertain times as companies seek flexibility.

The commercial viability here is demonstrated by the robust revenue growth of data center operators serving cloud and enterprise clients. Many APAC data center REITs and providers boast double-digit annual revenue growth primarily on the back of cloud and IT outsourcing deals. When an operator signs a long-term lease with a top cloud provider for, say, 10 MW of capacity, it secures a stable income stream. APAC has seen a slew of such deals: in 2022, Singapore's Space DC signed major contracts to host cloud nodes; in 2023, PDG (Princeton Digital Group) filled significant capacity with cloud tenants in its Mumbai and Jakarta sites; and so on. The trust that cloud giants place in APAC markets also reassures investors—notice how capital investment follows cloud footprints. If Google announces a new region in a country, you can expect a rush of data center investment in that country, either by Google itself or third parties anticipating spillover demand.

One thing to watch is cloud repatriation – a minor countertrend where some companies pull specific workloads back from public cloud to private infrastructure for cost or control reasons. However, in APAC, this is not yet significant compared to new cloud adoption. The general trajectory remains strongly oriented toward outsourcing more to specialist infrastructure. We will see similar movements in South East Asia, us non-Singapore based companies look to move their data back into their home countries as local Hysperscaler facilities launch.

In summary, APAC's cloud and enterprise digital transformation wave is a key demand driver for data centers. 90% of organisations globally are predicted to adopt hybrid/multi-cloud by 2025, and APAC is at the forefront of this shift. For data center strategy, this means designing facilities that cater to hyperscale cloud requirements (massive power and cooling, often in cluster deployments) and enterprise needs (rich connectivity, compliance, tier certifications). Markets that support both—like Tokyo, Singapore, Sydney—are reaping the benefits as true hubs. For less mature markets, attracting a big cloud region can be a game-changer that validates the location for further builds. Thus, countries are even competing to woo cloud data centers, knowing it leads to tech ecosystem benefits. The takeaway: the cloud revolution in APAC translates directly into data centre demand, making this pillar indispensable to understanding the region's digital infrastructure growth.

3. AI & Big Data Wave: The New Compute-Hungry Workloads

If cloud adoption was a gale force driving data center demand in the 2010s, the rise of Artificial Intelligence (AI) and big data analytics in the 2020s is a hurricane accelerating that demand to new levels. AI, particularly the subset of training large machine learning models (like transformer-based AI for language, vision, etc.), demands orders of magnitude more computing power and specialised hardware than traditional enterprise IT. As organisations in APAC (and globally) race to infuse AI into everything from customer service chatbots to medical research to autonomous vehicles, the requirement for data center infrastructure able to handle these intense workloads has spiked.

Several aspects illustrate how the AI & big data wave is turbocharging data center growth:

• High-Density Compute Requirements: Traditional data center servers might draw a few kilowatts (kW) per rack. In contrast, AI training clusters filled with GPU accelerators or TPUs can draw 30kW, 50kW, or even 100kW+ per rack. This is a game-changer in facility design – power and cooling infrastructure must be far more robust. APAC data center operators have noted this shift: new builds are increasingly including dedicated high-density zones or liquid cooling to accommodate AI tenants. For example, in Japan, some facilities now support up to 20 kW per rack specifically for HPC/GPU servers. In Singapore, where efficiency is paramount, companies like Singtel are launching new data centre projects (Singtel's “xtera" brand) optimised for AI workloads, with aggressive PUE targets (~1.23) and readiness for liquid cooling, explicitly to attract the next generation of compute-heavy customers. The push for AI-readiness is thus driving upgrades and new builds, and those that can't support high density risk falling behind in the market.

• Surge in Capacity Demand (Driven by AI Projects): The capacity planning paradigm is shifting. According to DC Byte's Global Data Centre Index 2025, AI-focused deployments already account for about 11% of global leased data centre capacity in 2024, nearly doubling from the year before. This is an astounding figure when you consider how new large-scale AI adoption is – essentially, one out of every ten racks leased is now for AI or similarly intensive uses. DC Byte's analysis emphasizes that operators must prepare for this new generation of tenants that expect denser infrastructure and faster delivery. Indeed, project timelines are shrinking under AI demand. DC Byte notes that committed future supply has increased more than sixfold since 2019, with many projects being pre-leased far in advance, much of it tied to AI expansions. The takeaway: data center service providers are under pressure to deliver capacity quickly and in huge blocks. The old model of building a bit, then waiting for tenants, is giving way to significant forward commitments. This is especially visible in APAC's most AI-active markets, such as Japan, South Korea, and Singapore, where competition to host AI cloud clusters is intense.

• APAC Government and Corporate AI Initiatives: Many APAC countries have made AI a strategic priority, which is directly stimulating demand for infrastructure. Japan and South Korea have national programmes for AI and supercomputing. South Korea, for instance, launched a plan to secure 10,000 high-performance GPUs by 2025 for national AI competitiveness, and a mega-project (Stock Farm Road AI data centre in Jeolla) aiming for 3 GW capacity was announced – That's a data center that could rival the largest in the world, purely for AI. China's Eastern Data, Western Computing" initiative is building gigantic data center clusters in inland provinces to process data from eastern cities, explicitly to support AI and significant data needs while using cheaper land and renewable energy in the west. In 2023 alone, Chinese operators deployed over 25,000 hyperscale racks dedicated to AI computing. In India, major conglomerates and startups alike are investing in AI; for example, the Adani Group and others are setting up AI data parks, and the government's push for digital services is implicitly driving AI adoption in governance. All these initiatives essentially mean large, centralised compute farms must be built to deliver on AI ambitions.

• Analytics and Big Data Across Industries: It's not just headline-grabbing AI models; even conventional businesses are storing and crunching more data than ever. The rise of big data analytics in sectors like finance (e.g., real-time fraud detection), retail (customer analytics, supply chain optimisation), and telecom (network data analysis) is creating an incremental load. Many companies choose to handle big data on cloud platforms like AWS EMR or Google BigQuery, again feeding into cloud data centre demand. Others set up private analytics clusters in colocation for sensitive data. APAC's large population means more data points – for instance, a telecom in India with 300 million subscribers generates petabytes of logs and call records that need analysis and retention. Regulatory compliance (such as financial trade data retention or healthcare data analysis for public health) also drives big data usage. The net effect is that storing and processing these troves requires more rack space. In particular, demand for storage capacity (in terms of pure petabytes) is rising: data centre providers note strong uptake of storage-as-a-service or wholesale storage deployments, which occupy a lot of physical space and power (even if not as dramatic as AI compute in power draw).

• AI Hubs" within APAC: We are seeing the emergence of specialised hubs known for AI infrastructure. Within APAC, cities like Tokyo, Singapore, Seoul, and to some extent Sydney and Beijing are positioning themselves as AI infrastructure hubs. They combine the presence of AI research institutions, supportive power/network conditions, and government incentives. In Singapore, despite its tight moratorium-driven market, the government selectively allowed some new capacity primarily for “strategic use cases" like AI and finance, signalling that AI workloads are highly valued. In Seoul, the presence of tech giants like Naver, Samsung, and the government's AI Computing Center initiative is turning it into a new hotspot. These hubs tend to attract further demand: companies wanting to do AI work might colocate in the same city to be near peers or specialized service providers. A clustering effect that amplifies growth in specific markets.

From a commercial viability perspective, AI can be a goldmine for data center operators if managed correctly. AI clients (like a global cloud provider rolling out an AI cloud service, or a consortium building an AI supercomputing facility) often lease large contiguous spaces and have high power usage, which results in higher billings. They also usually require bespoke arrangements (high-density cooling, specialized floor layout), allowing operators to charge a premium for custom solutions. However, there are challenges: these deployments are capital-intensive to support, and the technology is evolving quickly (what if facilities built today can't handle next-gen chips in 5 years?). But overall, operators that become known as “AI-ready" are attracting significant investor interest. We saw earlier with investments: e.g., equity investors targeting data centre firms with an AI focus or forming JVs for that purpose (like the Equinix xScale JV with GIC noted in Week 2).

Strategically, the AI wave reinforces the need for agility in data center development. Speed to market is crucial: DC Byte's article emphasised that markets that can align land, power, and advanced infrastructure fastest will win AI deals. This is a call to action for APAC governments and operators – to streamline approvals, invest in power grid upgrades, and consider pre-designing facilities for rapid build-out. We see some of this: regions in Australia tout fast-tracked construction and renewable energy to attract new hyperscale builds for AI; Indonesia is marketing its new capital city, Nusantara, as an opportunity to create modern smart infrastructure (including DCs) from scratch. Additionally, supplier ecosystems are adjusting – e.g., electrical and cooling equipment suppliers in APAC are ramping up production of high-capacity components to meet shorter project timelines dictated by AI demand.

In conclusion, the rise of AI and big data is not just another incremental demand driver; it's a step-change that is reshaping the very design and pace of data center expansion in APAC. It introduces new technical requirements and urgency, but also promises higher-value opportunities. For leaders in this space, embracing the AI trend means ensuring your infrastructure strategy includes plans for high-density compute, exploring partnerships or locations with abundant power (preferably green power to keep sustainability in check), and staying agile to adapt to rapid shifts in technology requirements. This wave is a clear illustration that as digital workloads evolve (from basic web hosting to cloud to AI), the supporting infrastructure must evolve in tandem – and APAC is at the cutting edge of this evolution, as both a producer and consumer of advanced digital services.

4. 5G Rollout & IoT Explosion: The Hyperconnected Future Arrives

Asia-Pacific is in the midst of a historic upgrade of its telecommunications foundation with the rollout of 5G networks, which in turn is catalyzing an explosion in the Internet of Things (IoT). This next-generation mobile network doesn't just mean faster phone internet; it enables a whole new class of applications that can generate and consume massive amounts of data with low latency – from smart cities filled with sensors to real-time augmented reality to connected cars. As 5G spreads across APAC, it's both directly and indirectly boosting demand for data centre infrastructure.

Here's how 5G and IoT are driving the data centre boom:

• Mass Adoption of 5G in APAC: The scale of 5G rollout in APAC is unmatched. By 2030, the region is expected to have around 1.4 billion 5G connections, accounting for roughly 41% of all mobile connections. To put that in perspective, that's nearly half of all cell phones and IoT modules running on 5G within just a decade of the technology's introduction. Leading the charge are developed markets like South Korea (one of the first with nationwide 5G) and China (which has built hundreds of thousands of 5G towers). But even emerging economies are catching up: India only launched 5G in late 2022, yet is set to add tens of millions of 5G users annually. This rapid uptake means more people access rich, data-heavy services on mobile – UHD video streaming, cloud gaming, etc., which shifts more traffic onto data centres hosting content and applications. Moreover, 5G's lower latency (in the single-digit milliseconds) allows mobile applications that interact with servers in near real-time (think of an AR app that constantly queries an edge server for scene analysis, or a remote surgery that needs instant feedback). To meet those latency promises, data centres need to be proximal – either within the country or even at the edge of networks.

• Internet of Things (IoT) Proliferation: APAC's enterprises and cities are deploying connected devices at a breathtaking pace. By one estimate, the number of connected IoT devices globally will reach 18.8 billion by 2025, and APAC will contribute significantly to that growth. China alone wants to have billions of IoT connections as part of its “Digital China” Initiative, embedding connectivity in manufacturing, agriculture (smart farming), and urban management. Southeast Asian innovative city projects (like Malaysia's Smart Selangor or Thailand's Phuket Smart City) deploy networks of CCTV cameras, traffic sensors, and environmental monitors – all of which feed data to central systems (often cloud-hosted analytics platforms) in real time. Industrial IoT is massive in manufacturing powerhouses like Vietnam and Thailand, where factories are equipping machines with sensors for predictive maintenance and automation. Each IoT device might send small amounts of data, but in aggregate, the data is colossal – and often needs to be ingested 24/7. For example, consider a smart utility meter pinging usage data every 15 minutes, multiplied by tens of millions of meters. That stream has to be collected (likely by edge gateways) and then stored and processed in data centers for billing and analysis.

• Edge Computing and Distributed Infrastructure: 5G's promise is partly to enable computing at the edge – closer to the user or device – to reduce backhaul and latency. In practice, this means telecom operators and cloud providers are placing mini data centers or edge nodes in cell towers, central offices, or regional hubs. Across APAC, there's movement in this direction. Japan's NTT and KDDI have spoken of edge data centres to support autonomous vehicles and VR. In India and Indonesia, some providers are trialling edge clouds in secondary cities to serve local video content or IoT data processing, rather than backhauling everything to Singapore or Mumbai. While these edge facilities are smaller (maybe a few racks to a few hundred racks), they multiply the number of sites needed, which is a business opportunity for infrastructure companies. Also, these edge nodes often connect back to larger core data centers, increasing interconnection needs. So, the architecture becomes more distributed: instead of one giant central data center serving a whole country, you might have one primary DC and ten regional micro-DCs. This entire network still counts as “Data centre demand"– just not all in one building. We can see this in action: Telstra in Australia is investing in regional exchanges as edge sites to complement its main Sydney/Melbourne data centres for 5G use-cases. Singtel in Singapore is working on edge computing in partnership with the nationwide 5G rollout (e.g., network slicing trials for enterprises.

• Use Cases Driving Low-Latency Demand: The true power of 5G IoT synergy lies in new services that were previously impractical. For instance, autonomous vehicles and smart transportation generate massive sensor datasets (LIDAR, cameras) and require real-time processing – they will likely rely on roadside edge computing or ultra-fast networks to a nearby data centre. Telemedicine and remote robotics: a surgeon in one city could operate equipment in another via 5G, but a local data centre must handle the control and feedback loops to guarantee sub-millisecond timing for safety. Augmented Reality (AR) and the metaverse: delivering rich AR experiences on AR glasses or phones might mean offloading rendering to an edge cloud to keep devices light and extend battery life – again, pushing for micro-data centres closer to users (perhaps one in each major city). Gaming is another area where Asia excels: it has a massive online gaming community, and cloud gaming (rendering games on servers and streaming to devices) is bandwidth and latency-intensive. Nvidia and others have launched edge GPU servers in Asia to support this. All these use cases mean more specialised infrastructure – not necessarily giant hyperscale builds, but numerous edge deployments and network-centric data centres, which cumulatively add to significant capacity. For data center providers, this diversifies the demand beyond the big cloud guys, also to include telcos and CDN providers who need space in strategic locations.

• Backhaul and Core Network Upgrades: Indirectly, 5G forces telecom operators to upgrade their core networks to handle traffic, which includes expanding their data centre facilities (often called central offices, data centres for network functions, etc.). Many telcos in APAC are virtualising their core networks (moving from proprietary hardware to software that runs on servers – in other words, turning parts of their network into something that runs in data center environments). This network function virtualisation (NFV) and the upcoming 5G-Advanced and 6G planning mean telcos themselves are becoming big data center consumers. They may build their own (like some do in their exchanges) or lease wholesale space. This is another often-overlooked source of demand: the lines between “network infrastructure" and “data centre" are blurring due to 5G. As an example, Rakuten Mobile in Japan built a cloud-native mobile network and enlisted data centres across the country to host its network nodes instead of traditional tower equipment. Similarly, Dish in the US (not APAC, but trend-leading) built a 5G core entirely on AWS cloud. If APAC telcos follow that model, it pushes even more telecom workload into either public clouds or dedicated data center footprints.

From the perspective of commercial opportunity, the 5G/IoT wave is creating new client segments for data center services. Telecom operators themselves might become key tenants (if outsourcing), governments rolling out smart infrastructure might contract data centre space to store all the sensor data, and content providers (like Netflix, gaming companies) will pay for edge colocations to deliver quality service in the 5G era. Markets like Vietnam, Philippines, and Thailand – which may not yet rival Singapore in traditional data center size – have young populations enthusiastic about mobile tech, so 5G could sharply boost local demand and justify more regional DC investments. We are already seeing signs: e.g., Thailand granted AWS and Alibaba incentives to set up local cloud zones, anticipating data sovereignty and low-latency needs.

However, one should also note challenges: the gap in APAC (people covered by 4G/5G but not using the internet entirely) is still significant, often due to affordability or digital skills. If those gaps close with cheaper data plans and better digital literacy, the user base could expand even more, or usage per user could climb (for instance, older demographics coming online more). If they don't close, some 5G capacity might remain underutilised in certain areas for a while, which could temper localised demand. But overall trajectories suggest continuous improvement.

In terms of strategy, data center and telecom planning are becoming intertwined: Data center site selection now considers fiber routes and 5G cell density; conversely, telcos consider where data centers are when planning edge computing. For investors and tech leaders, a key insight is that the value is not only in core hubs but increasingly in the network of smaller facilities that will support the billions of devices and connections. Edge strategies might become a competitive differentiator (e.g., a cloud provider that has many edge nodes in APAC could offer lower latency than one that centralises everything in a couple of big cities).

To conclude, the rollout of 5G networks and the explosion of IoT devices represent a tectonic shift in how and where data is generated and processed. APAC, with its massive mobile user base and innovative use-case adoption (from China's IoT factories to Korea's smart cities), is leading this shift. Data centers are the indispensable behind-the-scenes engine making it all possible – whether a huge regional cloud centre processing millions of IoT sensor readings, or a tiny edge server ensuring your 5G video call doesn't lag. The next decade will likely see an increasingly rich tapestry of infrastructure, from mega facilities to micro-edge boxes, all working in concert. For those steering digital strategy, aligning with the 5G/IoT wave means ensuring your infrastructure deployments are nimble and distributed enough to capture the value at the edge, not just the core.

5. Regulatory & Sovereignty Shifts: Government Mandates as Demand Catalysts

In the Asia-Pacific region, government policies and regulations are not just background factors; they are actively shaping where and how data center demand materialises. This final pillar addresses how data sovereignty laws, privacy regulations, and government digital strategies are driving the need for local data centers and influencing investment decisions. Unlike organic demand drivers (users, businesses, tech trends), these are rule-based or strategic drivers – but they can be just as powerful in unlocking data center growth (or conversely, pausing it, as we saw with Singapore's moratorium on sustainability grounds covered in Week 2).

Key regulatory and sovereignty-related drivers include:

• Data Localisation Laws: Many APAC countries have introduced data localisation requirements, which mandate that certain types of data be stored and processed within national borders. This is often for reasons of national security, privacy, or to ensure law enforcement access. For example, India, over the past few years (through RBI notifications and draft Personal Data Protection bills), has required that sensitive personal data and all payment data of Indians be stored on servers in India. This has compelled global payment companies, social media firms, and cloud providers to either build local data centres or partner with Indian facilities to comply. It's one reason global cloud players rushed to set up regions in India (AWS, Azure, Google all have multiple Indian regions now, whereas a decade ago many served India from Singapore). Indonesia's regulations (GR 71, 2019) require public sector data to stay onshore and specific private sector data (especially in finance/health sectors) as well. That sparked a significant uptick in data center investments in Jakarta – from Telkom's state-backed hyper-scale facility to new entrants like Microsoft building local cloud zones to serve Indonesian clients who cannot have data offshore. Vietnam enacted a cybersecurity law in 2019 requiring online service providers to store Vietnamese user data inside Vietnam. As a result, we've seen new data center builds in and around Hanoi and Ho Chi Minh City by both domestic telcos and foreign players, anticipating these needs. In sum, the patchwork of localisation laws across APAC (China, India, Indonesia, Vietnam, Russia in Asia, etc.) creates a situation where multinational companies might need to maintain infrastructure in each jurisdiction rather than centralising in one hub. This decentralisation by mandate increases overall regional demand.

• National Digital Agendas and Investments: Governments are also directly investing in and promoting digital infrastructure as a cornerstone of economic development. For instance, Japan's Society 5.0 initiative and accompanying policies include funding for next-gen data centres and 5G, recognizing that without the backbone, visions of smart cities and an AI-driven society can't be realised. China's government, through its “new Infrastructure" stimulus in 2020, explicitly listed data centers as a target for development (leading to large projects in various provinces). Indonesia has announced the construction of a “National Data Centre" to consolidate government IT, and also positioned it as a hub that the private sector can connect to. These projects often involve significant partnerships with the private sector, effectively guaranteeing demand (since the government will be the anchor tenant). In some cases, governments offer state-owned land or power subsidies for data centers that align with their strategic goals. Malaysia, for example, set up the Malaysia Digital initiative offering incentives for cloud and data centre investments, successfully attracting hyper-scale projects in Johor and other states. The commercial impact of such agendas is that data centre developers find supportive environments (faster permits, tax breaks) in those countries, making it more viable to build capacity, which then serves both government and commercial clients.

• Privacy Regulations (indirect effect): APAC is seeing a wave of data protection laws (akin to Europe's GDPR). While these don't always mandate localisation, they do require careful handling of data. Sometimes, companies choose to localise data storage anyway to ensure compliance and avoid cross-border legal complexity. For example, after Thailand passed its Personal Data Protection Act (PDPA) in 2019, some firms decided to keep Thai customer data within Thailand's borders, even without an explicit law forcing them, to simplify compliance. That creates demand for local DC or cloud zones. Similarly, Australia's stance on cybersecurity and critical infrastructure has led some vital data (like healthcare records, government data) to be hosted within Australia under sovereign cloud arrangements. Global cloud providers have responded with offerings like Azure Australia Central – basically dedicated regions for government data.

• Censorship and Internet Fragmentation: China deserves special mention – its regulatory environment (Great Firewall, etc.) effectively necessitated the creation of a gigantic domestic data centre industry isolated from global peers. Any international company operating in China must use local data centres (typically through joint ventures) because direct cross-border service is not feasible at scale due to both policy and performance. This is why AWS has partnered with local firms to operate AWS China in Beijing and Ningxia, and why many multinational companies maintain separate infrastructure inside China for Chinese users. While China is a unique case, we see some echoes elsewhere – e.g., Russia (though not APAC) had similar sovereign internet ideas; in APAC, one could imagine more controlled regimes possibly doing the same. This kind of fragmentation, if it grows, means duplication of infrastructure for each “internet zone, "increasing total demand albeit with inefficiencies.

• Regulatory Pause or Enablement: On the flip side, regulations can also restrict growth temporarily – as seen when Singapore paused new DC permits to recalibrate on sustainability. However, such pauses often come with conditions to resume growth in a better way, as Singapore did by introducing Green DC standards. Now, only highly efficient projects are approved, effectively raising the bar. In a way, this still drives demand because everyone wants to meet those standards to get in, leading to innovation in design (which could cost more and thus require strong business cases, usually underpinned by high demand). Another form of enablement is when governments open up new land for tech parks: e.g., Johor (Malaysia) setting aside an area for a “Data centre hub" to catch spillover from Singapore. This regulatory action (zoning, incentives) suddenly creates a new hotspot for data centre development, as evidenced by multiple firms now building in Johor and Batam for regional capacity. Hence, policy can redirect where demand is met, if not the absolute demand itself.

From an investment point of view, navigating APAC's regulatory landscape is crucial. Data center investors actively track policy changes. For instance, when Indonesia simplified some data centre investment rules under the Job Creation Act, it piqued interest in Jakarta's build-to-suit. Conversely, when a country is rumored to consider strict data laws, cloud providers preemptively plan local infrastructure. The interplay is dynamic: policy can stimulate demand (through localisation) or concentrate it (through incentives in certain places). Countries with stable, clear regulations will likely attract more investment – e.g., Japan and Australia have very transparent regimes, and they indeed rank among the top locations for data centre investment in APAC.

It's also worth noting the regional cooperation or conflict aspects. If cross-border data sharing becomes easier (say, within ASEAN if they establish some data transfer principles), it might allow more consolidation of data centers serving multiple countries, similar to the SIJORI region vision. But if every nation insists on its own infrastructure for critical data, that decentralises things more. Current trajectories suggest more localisation, not less, given geopolitical trends around tech sovereignty.

One emerging area is green regulations – e.g., requiring data centwes to use renewable energy or meet efficiency benchmarks (as Singapore does now, and parts of Australia via NABERS ratings). This doesn't reduce demand, but it does influence which operators can supply that demand (only those who meet the criteria). Thus, it shapes the competitive landscape and might concentrate demand in facilities that tick the compliance boxes, potentially leaving older, less efficient ones underutilised unless upgraded.

In summary, government actions in APAC act as both a carrot and a stick for data center demand. Sovereignty and privacy push the need for local presence (stick, because you have to do it), whereas digital economy initiatives and incentives invite more builds (carrot). For leaders and investors, staying ahead means engaging with policymakers, understanding legal trajectories, and perhaps contributing to shaping regulations that balance national interests with industry growth. Companies that are proactive in compliance (offering “sovereign cloud" solutions, for instance) can turn regulation into a competitive advantage. Likewise, countries that find the sweet spot of supportive policy (like offering renewable energy at reasonable rates plus data security assurances) could become havens for future data centre growth, even diverting demand from more saturated markets.

To wrap up this section, the key insight is that policy is a demand driver in its own right in APAC. It can create demand (where none existed) by fiat of law, and it can channel demand to preferred locations by structuring the rules of the game. Thus, any strategic outlook on APAC data centers must include a policy lens alongside market and technology lenses.

Asia-Pacific's data center boom is not the result of any single factor, but the confluence of all the above demand drivers, each reinforcing the others. Hundreds of millions of new internet users create new markets for digital services; enterprises and governments going cloud-first amplify the need for scalable infrastructure; breakthrough technologies like AI stress the system (and budgets) in novel ways, prompting rapid scaling; 5G networks spread connectivity everywhere, generating data at the extremes; and government policies ensure much of this activity needs local computing homes.

For leaders of global tech companies, a clear message: digital infrastructure needs are immense and growing, so one must plan to invest and localise appropriately. You cannot serve these markets well from afar or with outdated setups. Whether it's deploying more CDN nodes in Southeast Asia to serve a burgeoning user base, or setting up an R&D data centre in Japan for AI development, tapping local talent and subsidies, aligning infrastructure strategy with these demand trends is key to staying competitive in the region.

For investors and the data center ecosystem, the diversity of demand drivers is a boon – it means a diversified customer base (not relying only on one sector). But it also means due diligence must cover everything from tech trends to legislative changes. The strong demand outlook suggests that well-placed bets (especially those combined with sustainable practices, given energy constraints) are likely to pay off in APAC, as utilisation rates remain high and customers sign longer-term deals to secure capacity in tight markets.

Finally, an essential overarching strategic pillar tying everything together is sustainability and innovation (covered in earlier weeks). The only way to satisfy this astronomical demand is to innovate out of constraints (power, cooling, skills) and ensure growth is sustainable – otherwise one of these drivers might stall (e.g., if users get concerned about carbon footprint, or governments halt projects due to energy concerns). The good news is APAC is already pioneering some solutions, as seen in new cooling tech, renewable energy deals for data centres in Australia, and novel land use ideas in Singapore.

As we look toward 2030, the demand drivers we've discussed position Asia-Pacific not just as a participant but as a leader in the next era of digital evolution. The region will likely set standards in how to serve massive digital populations efficiently, integrate cloud and edge seamlessly, harness AI at scale, and govern data responsibly. Each challenge is an opportunity for innovation and leadership.

Call to Action

We've explored the powerful forces driving Asia-Pacific's center expansion – now I'd love to hear your perspective. How are these trends manifesting in your industry or region? Are there demand drivers you find particularly pressing or novel in your experience?

I encourage readers, especially fellow leaders and investors in this space, to share their thoughts or questions. Perhaps you have a story about navigating data sovereignty in a new market, or insights on how 5G has changed your company's infrastructure strategy. By sharing and discussing, we can deepen our collective understanding and identify new opportunities (or pitfalls) on the road ahead. Please leave a comment, or get in touch with your feedback and queries – let's engage in a dialogue about Asia's digital infrastructure future. Together, our insights can help shape more innovative strategies and maybe even inform how the next wave of growth is managed for sustainable success.

Sources Bibliography

DC Byte. (2025, September). AI Build Boom: Data Centre Suppliers Face Pressure to Deliver Faster. https://www.dcbyte.com/news-blogs/ai-build-boom-data-centre-suppliers

Google, Temasek, Bain & Company. (2022). e-Conomy SEA 2022: Through the waves, towards a sea of opportunity.

CBRE. (2024). Asia Pacific Data Centre Trends H1 2024.

Singapore Infocomm Media Development Authority (IMDA). (2022). Green Data Centre Roadmap.

GSMA Intelligence. (2024). The Mobile Economy Asia Pacific 2024.

Cushman & Wakefield. (2024). APAC Data Centre Market Update.

Structure Research. (2024). APAC Hyperscale and AI Infrastructure Report.

IDC. (2023). Asia/Pacific Public Cloud Services Forecast, 2021–2026.

Microsoft Asia. (2023). Digital Transformation in Asia: Unlocking the Next Wave of Growth.

DC Byte. (2024). Global Data Centre Index.

Knight Frank. (2024). Data Centre Report: Asia-Pacific.

Arizton Advisory & Intelligence. (2023). Hong Kong Data Centre Market – Industry Outlook & Forecast 2023–2028.

Equinix. (2023). Global Interconnection Index.

Ministry of Electronics and Information Technology, Government of India. (2022). Draft Digital Personal Data Protection Bill.

ASEAN. (2023). ASEAN Digital Masterplan 2025.

GSMA. (2023). 5G and the Internet of Things in Asia Pacific.

Naver Cloud. (2024). AI Infrastructure Expansion Strategy.

Indonesia Ministry of Communication and Information Technology. (2023). National Data Centre Development Plan.

Internet World Stats. (2024). Asia Internet Usage and Population Statistics.