Equinix, The Data Centre Giants Betting on Malaysia

This is a podcast from BFM89.9, the business station. You're tuning in to the BFM Breakfast Grill, powered by you mobile, introducing you mobile's Ultra 5G. I'm Wong Xiaoning and this is the Breakfast Grill. Malaysia has become in a short space of time, a major player in data centers for Southeast Asia, attracting global hyper-scalers, cloud providers and even enterprise operators with names like Microsoft, Amazon, and alphabet-making investments in this country. What is the attraction of Malaysia and our data centers truly beneficial for the economy, despite the billions flowing in? Questions we pose to Chiang Tuan Yin-hee is the managing director of Equinix Malaysia, which claims to be part of the world's largest digital infrastructure company. Thanks for coming on our show. Now, for many Malaysians, no disrespect to Equinix, it's not a household name, but globally, the company does operate more than 270 data centers across six continents. So what prompted Equinix to start their first data center in Johor back in November 2022? So there are a couple of reasons behind the Equinix entry into the Malaysian market. First of all, was the government policies, which were very favorable to data centers in Westpins. So initiatives like my digital, and the streamlining of approval processes that subsequently came in place, on top of that, a very robust digital ecosystem. And Malaysia has a pretty good talent pool of people. And I think specifically for Johor, because of the close proximity to Singapore, that allows for what we call low latency interconnection between Johor and Singapore, which is an attraction if you are in data center because you want to move data traffic as fast as possible. Speed counts, right? Speed counts, right? And on top of that, Singapore is a highly developed digital ecosystem. So that makes sense to look at Johor and Singapore. And that is what we look at as a complementary metrostrategy, where, you know, because of the proximity, we take on the expansionary workload, or what we call the overflow workload into Johor. And at the same time, you get access to high speed connectivity between the two locations. Yeah, much cheaper costs also. I'm trying to want to ask you, was it easy at all to get all the approvals required, coordinate with the many agencies involved to actually break ground and complete this project on time? So like I said earlier, I think first in terms of the policies and the incentives that the government had, they were very pro data center investments. But the actual execution was painful? So the different, different government agencies that were involved, they were very, again, I think I must get credit to these agencies because they were truly working with the data centers, companies, to speed up the approvals. And most recently, I think we now got a single point of focus, where you just go to one single center, you present your plan, it gets approved, and then things just move smoothly in that sense. So I must say it was a very smooth process. Now, since open a second data center site in CyberGyre KL1, what drove that decision? When we looked at entering into Malaysia, we see two different markets. The first one, Johor, like I said, is a compliment Singapore to take on the expansionary workload from Singapore. KL1, it looks like it's an ideal location for foreign companies who want to establish a regional digital hub in Malaysia to KL. And at the same time, it allows Malaysian enterprises to our interconnected data centers to establish their digital presence around the world, any part of the world. So that made KL kind of like, I would say a different market segment from what Johor looks like. And all these facilities are what they call carrier neutral facilities, right? So does this mean that there's always a variety of clients? Can you tell us who these clients are? Are they existing equinix clients from other jurisdictions? So equinix prides ourselves in our digital ecosystem and interconnection. Now, why I say digital ecosystem? Because overall digital ecosystem across the world, there are more than 10,000 enterprises, networks, service providers, cloud service providers, content providers that are all connecting with each other in terms of transferring data between them and the customer, them and their business partners. So that makes us attractive in terms of companies who want to be part of the ecosystem because you have a choice who are the cloud players you want to connect to, who are the network service providers you want to work with, and where are the content providers that you're going to work with. So is GH1 and KL1, which is the reference that you all give for these two data centers? I mean fully occupied, I mean, is it capacity 100%. It's a very strong demand for both, both GH1 and KL1, right? And that's the reason why GH2 is now being constructed. So there is a GH2 coming. Okay, I'll come to that in a moment. But I also want to understand the Malaysia, the centers that you operate are what you say co-location and interconnection data centers. Is that the requirement of customers? Why isn't equinix rolling out a AI-ready data centers? Okay, so let me take that into two parts. Number one, how are the other centers? The equinix business model is what we believe in building a digital ecosystem or multiple cloud, multiple network service providers and all. So it's basically a collection, if I can use a simple term of different industries, different customers, or interacting with each other, connecting with each other within this large global digital ecosystem that is made out of exactly like what you said, more than 270 data centers in 36 countries. So we pride ourselves in the digital ecosystem. Now, there are hyperscalers who are maybe just for one particular customer, a cloud player or most of the time large cloud player or a large AI deployment company. Now, the second question I mentioned about AI is this. So we are actually enabled for AI deployment or across the world. Okay, let me explain. Now, until recently, if you look at AI, we hear a lot about large language models, right? A lot of computing power, high power density, and so on. Now, what we're seeing now is the trend towards deploying these trained models closer to where the data is and we call it for inferencing. So, in other words, faster decision making, faster answers to the questions that you ask and so on. So as a result of this shift, what is happening is you're now beginning to see a lot of distributed data centers being built. They are all interconnected with each other to give you the fast response time for inferencing. And that fits exactly into the equating business model of having 270 data centers, all network across the. Rather than one large data center. Okay, so in my research, right, I found this very interesting because I didn't know this when we talk about the Equinix data center model. So the company, you own the core, the shell, the power and the cooling and also the exchanges and cross connects. On the other hand, the client, they own the service storage and network equipment. So I assume this is a global model. Doesn't it just make Equinix like a fancy landlord? I mean, what is so unique about an Equinix data center then? Like I said, the fundamental business model is creating a digital ecosystem. Like for example, there will be financial companies banking industry who requires very high security requirements and so on. So in our data center, if you imagine with me, they would have a cage environment where they deploy all their equipment inside. So they have control, they have access, it's theirs. So they are assured of the physical security within the building. Now, there are those that will just maybe just deploy a simple point of presence because they just want to be in our data center to connect with the different cloud players. We call them the open racks. So you offer that as well. So we give our customers the freedom of deciding whether they want to deploy high power density racks for AI, a cage environment like a banking industry where security is important. So it gives them the flexibility, but you still have fancy landlord that can meet the different needs of different clients. Well, we provide the the extra event at the value probably like the Skype will be right that digital ecosystem where you get connection to more than 10,000 customers around the world. I think that is the difference in the connection right now. Why is the connection important here is because number one. It is a private and secure interconnection number one number two low latency interconnection. That's very important if you're deploying in a global environment. But are you concerned that there's a lot more competition in Malaysia because since you arrived. For example, there is your, I would say your biggest global competitor knocking on the door digital reality. They officially entered the Malaysia market this January. They acquired a I think a telco hub data center in cyberjaya. How do you fend off the competition? You might have the local guys, but maybe you're not, you know, that's not really the space you compete in because they don't have 270 data centers. But what about the name like digital reality. The first thing being like I said the the strength of our digital ecosystem and interconnection number one right. So we have customers around the world enough America and Europe in other parts of Asia. They they deploy all over the world. They want to be closer to their customer to certain better. So if someone in North America or Europe now says look, I want to enter Asia Pacific. They look to equinix because we have this global intercom. Do you compete on price? Are you the cheapest or most expensive? Let's say compared to digital reality. Well, we are premium brand. We have a very strong digital ecosystem and it's a highly interconnected data center which is the pride and the core strength of the equinix brand. But do you think that Malaysia is close to an oversupply of data centers because if I just look at the cumulative life capacity from it went from 85 megawatts in 2019 to 784 by third quarter last year. So are we hitting for a bubble? You know, whatever you want to call it maybe not today, but in three to five years time when the supply actually is fully built. What we're seeing now is that the global demand actually exceeds what is completely built up in in Johor right now. So that's why even we are you know building investing in the second data center in Johor. Clearly, if you look at from a global perspective, the demand for AI and cloud workloads are clearly growing at an exponential rate. On the breakfast grill this morning is jumped in. He is the managing director of equinix Malaysia after the break our data centers actually good for this country BFM 89.9. You're listening to the BFM breakfast grill with you mobile introducing you mobiles ultra 5G. BFM 89.9 welcome back to the breakfast grill when the hot seat is jumped out in. He's the managing director of equinix Malaysia. Now, early on, you reference a third site. Let's call it what J.H. to I suppose that will be the new name. Why did you want to add the site? Who is the client? Is it going to be green fill or is it an acquisition? Can we have some details? So Johor to is a green field investment. It's a it's much bigger than than what we currently have in KL one or J.H.1. Clearly, like I said, because the demand for cloud and AI workloads increasing. And it's a it's a 200 about 200 US million dollar investment. That is quite significant because I think the first time around you spend 40 40 million. Yeah. And you'll be ready in quarter three twenty twenty. And this one you will all not lose. We own this. So who will be filling up this space? Cloud players, the AI deployments. These are the major customers. And of course for J.H.2, we already have interest from local companies to consider J.H.2 as a so other than companies coming in from outside of Malaysia, investing into Malaysia to make Malaysia the regional digital hub. So we also have now local companies looking at deploying into our data center when we start contributing to earnings. Okay. And is this also because your parent equinix, which is a nest that nest at listed right company. They have stated that they intend to double their data center capacity over the next five years. So is Malaysia very much part of those plans all be it is Asia Pacific's quite small contributor. I think it's only twenty study above 20% for overall turnover. Yeah. So Malaysia is one of the among we got a couple other data centers across Asia pack, which are part of this global build program. I think almost more than 60 right in terms of countries. Our countries. We countries like Singapore, Australia, Japan, Hong Kong. The name of you right so and of course we are investing in emerging markets like Indonesia, Philippines and Thailand. I mean, I mean, I know you only represent Malaysia and of like say it's present in Asia pack. But how important is Malaysia? Right now if you look at the industry trend Malaysia is obviously the hottest spot for investment. Yeah. And especially in in your whole. So and that's the reason why like I said we have your whole to now. Can you tell me how soon I am going to assume GH1 KL one. How soon can you recruit your cost back? Are these properties yield and long term the data center in the streets right. You know years years. We look at. So all these assets are yield and all multi just we look at things from multi years point of view. And are they yield and hunting above 2% which is what connects. What is your day they are globally as as published in our global. You know any report. They are along the line of what is published in the you know what we disclose all street or all you know I can say you know any. Any company report now critics of data centers say that you know they consume I'm sure you heard all this significant amounts of electricity. And I think in Malaysia we have read recent reports that existing the existing grid seems to be under pressure. And the this has resulted in tighter reserve margins. Aren't you contributing to this problem that we have. All right. Let's let's look at this from this perspective right why why we're seeing power and and water. And what's being constrained is because of the sudden search of demand in certain locations right. So what what what can the data center industry look number one. You can say okay let's deploy outside of this congested area areas where there is enough water and power available and which is what's happening right now. And this moving away from that hotspots in your whole especially right into into the other regions where there's power and this water. I think it's a question of working with the utility companies and the regulators. Like in our case we work we're again like I said we we we plan years ahead. And the way we expand is based on demand let in a way that demand let we don't just build we we work based on the demand you know build and they will come kind of a data center player and then we work very closely with the utility companies. So that our growth is in line with the national energy planning or water for them. So in other words the priority road that the data centers to especially equinix is to work with the with the authorities to plan out our phases of growth to be aligned with how the national energy plan is or the national water availability will look like. I think that way you would you would ease the constraint on on the on the those particular location. I'll tell you you're still using the power and using the water sufficient power and the sufficient water okay national point of view I think it's a question of how do you manage the constraint that's currently there in those occasion in a short time. Where are you say outside of that those constraint area their company is really deploying with power and water. So equinix also has this global goal of 100% clean and renewable energy coverage by 2030 exactly well these two and eventual three sites in Malaysia achieve this by that date. Oh we're definitely looking at renewable energy coverage we are currently talking to a few local companies that are supplying solar solar power and we are evaluating their capabilities. So you haven't put up the panels yet not not not yet well the things is this okay the building alone will have the panels but there is not sufficient drive the data center so we need to work with people who specialize in providing solar power through a very large fund. Yeah yeah yeah the LSS players that you saw that yes. Press this yes S program and so now we're currently working with a number of these companies evaluating their game capabilities because like I said this industry is a long term industry so we look for assurance for long term supplier and that's where we are right now but it is part of our our and you will get that by 2030. That's something we're working on in Malaysia. Everyone's enamored by these billion of dollars that you know every time the government makes an announcement we see in the papers 30 40 billion yeah everyone gets excited but I do want to know in equinix case specifically for you all how much of your investment actually does go to Malaysia and Malaysian companies otherwise is a ginormous warehouse with equipment that comes all the way from US or maybe another Asian country and doesn't really benefit. Doesn't have a strong multiplier effect and you may be higher five people for this entire warehouse. That's a very good question so if you go back to what was announced by me T. Between 2000 and 21 and first half of 2025 the country attracted about 144 billion regate investments. Yes. Today you are beginning to see the result of those investments you've seen construction and engineering company announcing multi year pipeline growth. Yeah they benefit you see in the share price. You've seen local supply and companies saying they are busy supplying to data centers and continuously you're seeing announcements by companies announcing that they want a deal to supply power equipment cooling system to some data center companies of course because of confidentiality they cannot disclose the name. On top of that you've seen jobs in engineering civil engineering mechanical engineering electrical engineering project management architecture. So you've seen jobs we created all across this construction power. Do you monitor then your local shall I call it localization content. Okay let me look at the localization point of view right so specifically to us right now right. So we again some of local companies are enjoying the construction contract that we we we we we give them the local companies that are taking on some of the supply or equipment the cages that we spoke about just now in our data center some local supply and so on. So it is our plan to increase the localization right to to allow more Malaysian companies to participate in the supply and the data center industry and how many Malaysians do you actually hire a clinic and when we're talking about well paying. So high productivity right now with with two data centers we have about 50 employees currently right but I think the important thing is which I always say is that is the leverage jobs creation as more important. Because like I say right we give contracts to construction company which they didn't in turn higher the engineers project managers and so on so the impact is really in the local supplier creating more jobs the construction company creating more jobs and all the industry that support the supply to the data center industry like ours getting more contracts and hiring more people now on the other hand this is interesting because it's part of our digital economy expansion right. So like I said we attract foreign companies to invest in Malaysia in our data center to do AI cloud workloads now we need to scale people to support this or they need this customers always need skill people to support the cloud and AI and we're seeing Malaysians being employed into these roles of supplying AI skills cloud skills and so on. So in fact we are creating jobs in the software industry or in the data center industry so basically it is a process where you you kind of strengthen the digital economy in that in as you as you build more more heck and there's more skilled people in industry to support the different role else that are not just Malaysian companies but overseas companies. On that note thank you for your time on the breakfast grill this morning was jumped in he is the managing director of Equinix Malaysia and Wang Xiaoning BFM 89.9. Thank you. That was the BFM breakfast grill powered by you mobile introducing you mobile ultra 5G the next generation network for Malaysia. You have been listening to a podcast from BFM 89.9 the business station for more stories of the same kind download the BFM app. [Music]