The Philippines logged one of the highest growth rates as an emerging data center market alongside Malaysia and Thailand. As the home of the second-largest subscriber base in the region, ‘hyperscalers’ are motivated to build their technology and communication infrastructure throughout the archipelago.
In a published report by Arizton, factors such as the growth of online gaming industry, outsourcing, BPO, and the adoption of cloud, big data, and IoT contributed to the expansion of the data center industry in the Philippines.
In 2021, KMC Research reported a significant jump in investor interest in this asset type. Despite the pandemic, data centers are becoming one of the most in demand properties under industrial real estate, almost overtaking warehouses.
“Investors are currently interested in data centers and telecommunication projects,” KMC Executive Director for Investor Services Melo Porciuncula said. “More data center facilities will be developed as they anticipate increased activity in this side of the business.”
Mordor Intelligence reported in 2022 that the hyperscale data center market is expected to grow at approximately 3.38% between 2021 to 2026. Triggered by the pandemic and government-imposed lockdowns, many companies across the globe have been investing heavily in its digital and technological capabilities. This was observed by the boom of e-commerce, the shift to a remote or hybrid work setup, and the standardization of cashless and contactless transactions. These have pushed businesses to demand more storage, faster internet, and a seamless connectivity to streamline business processes.
PH as Data Center Hub in Southeast Asia
Pegged to be the data center hub in the Southeast Asian region, increased digitalization, availability of fiber connectivity, and innovation and adoption of technology makes the Philippines an attractive market for data center investment. Arizton also noted that the country continues to receive majority of the sector’s demand from ICT companies, followed by FMCG companies and BFSI companies.
Improved Connectivity Across the Archipelago
The Philippines, as an archipelago, is one of the reasons why it is an ideal data center hub in the ASEAN region. Most telecommunications companies and hyperscale data center locators invest in improved connectivity for network provision between other Asian countries and the Philippines.
Analysts cited increased connectivity via submarine cable developments will further boost the growth of the industry in the country. As of 2021, 19 submarine cables are either already established or soon to finish development. Last year, a submarine cable called JUPITER has connected the country with Japan and the US. It measures more than 14,500 kilometers and has the capability to carry 60 Terrabytes per second (TBps) worth of data.
Before the end of the year, the Philippines looks forward to the completion of Asia Direct Cable (ADC), a new submarine cable with a length of more than 9,000 km and CAP-1 cable system.
Competitive Infrastructure Supply
KMC data reported in 2020 that the Philippines is more than ready to welcome data center colocators and investors in the country. With a booming industrial real estate portfolio, it has adequate land availability for data center development that it can leverage.
Given initiatives and development to support connectivity, an increased activity from cloud service providers who will collocate their workloads in data centers is expected to significantly boost the industry across the Philippine islands.
Lower Utility Cost & Renewable Energy
The Philippines is abundant in natural resources. Over the previous years, the government started measures to tap its solar, wind, biomass, hydro, and geothermal energy sources to provide renewable energy. The Department of Energy has launched the National Renewable Energy Act, which focuses on tripling renewable energy supply in the country by 2030. Under this development plan, the country targets to achieve more than 15,000 MW renewable capacity by 2030. For this, the country needs around 760 MW of renewable energy projects each year.
Such steps taken towards renewable energy production and consumption are expected to reduce electricity costs by around 30%.
Government Support
With the Data Privacy Act (DPA) for the localization of data, the Philippines becomes more attractive as an ideal location for data centers in Southeast Asia. This ensures the protection of the state for privacy and communication while ensuring the free flow of information to promote innovation and growth.
Under this law, the country recognizes the crucial role of communications technology and implements laws to secure and protect the government and the private sector.
Moreover, the Integrated Government Philippines (iGovPhil) program also contributes to the digital transformation of services across government agencies. This program oversees the provision of the necessary infrastructure and software needed for e-governance, under the Department of Information and Communications Technology (DICT).
Power and Connectivity Capability
In terms of power capacity, data centers added 4.5 MW of power through open and under- construction facilities in 2020. By 2026, data centers expect to add 9 MW of power. Metro Manila registered the highest power capacity in the country with 32.03 MW.
In January of 2021, Ariston reported that the internet penetration across the Philippines reached around 70%, which is likely to increase with increased deployment and adoption of 5G.
Interested to know more about the Data Center industry in the Philippines? Reach out to Karen Golez at (+63) 2-8504-1044. For inquiries and more information about Industrial and Logistics Services, call us at (+63) 2-8403-5519 or email [email protected] today!
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