PETALING JAYA: Industry leaders are optimistic about the opportunities and challenges in sustaining Malaysia’s ambition to become a regional hub for artificial intelligence-driven solutions and data centres.
While the ambition is fuelled by rising demand for digital transformation, government incentives and strategic foreign investments, they caution that addressing infrastructure, energy sustainability and competition will be critical to long-term success.
As businesses increasingly turn to AI for efficiency, data centres become the backbone of Malaysia’s growing digital economy.
Exabytes CEO Chan Kee Siak said demand for AI-driven solutions and cloud services has surged, largely due to businesses seeking greater efficiency in an increasingly competitive environment.
“As hiring costs rise, companies are leveraging AI to streamline operations and reduce reliance on large workforces. Businesses are finding ways to do more with fewer employees by increasing efficiency.
“With AI, we see improvements in various areas, from automation to data analytics, making operations more effective and scalable,” he told SunBiz.
Further, Chan said Malaysia’s strategic location in Southeast Asia, coupled with its strong internet infrastructure, positions it as an attractive destination for data centre investments.
“With global tech giants such as Microsoft, Google and AWS expanding their footprint, the country is set to become a key player in the region’s digital economy. Malaysia is geographically well-positioned, free from major natural disasters, and has an established data centre ecosystem. This makes it an ideal hub for AI and cloud services.”
Beyond cost savings, AI is also fostering innovation.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said AI tools such as ChatGPT have transformed work processes by enhancing creativity, improving idea generation and accelerating research.
“The AI revolution is changing how businesses, governments and individuals operate.
“We are witnessing a fundamental shift, where technology allows us to achieve more with fewer resources. This progress underscores the necessity of expanding Malaysia’s data centre infrastructure to meet growing digital demands,” he added.
Malaysia University of Science and Technology Prof Emeritus Dr Barjoyai Bardai said government initiatives such as the Malaysia Digital Economy Blueprint and the National Fourth Industrial Revolution Policy are further accelerating growth by offering tax incentives, grants and foreign investment opportunities.
However, he emphasised that Malaysia must remain agile in adapting to rapid technological changes.
“The pace of AI development is astonishing. Just like how mainframe computers in the 1960s evolved into laptops today, we must anticipate how AI and data infrastructure will transform in the next decade. To stay ahead, Malaysia needs continuous investment in AI talent, research, and sustainable infrastructure,” Barjoyai said.
Despite the country’s growth potential, Malaysia faces several hurdles in sustaining its data centre expansion.
Chan said one of the biggest concerns is energy consumption. “If all AI-powered data centres in Malaysia were to come online simultaneously, states like Johor might struggle with power shortages. Energy demand for cooling these facilities is also a significant challenge.”
Afzanizam said the push for sustainable energy solutions is becoming critical as more investors and corporate clients prioritise green and renewable energy sources.
“Data centres are highly energy-intensive, and Malaysia’s reliance on fossil fuels raises concerns about long-term sustainability. We must consider the environmental impact. Energy and water security will become key issues as data centres require vast amounts of both.
“It is about striking the right balance between technological progress and sustainability,” he said.
Beyond infrastructure, Afzanizam highlighted that cost sustainability and competition remain pressing challenges.
“The data centre business currently operates on low margins due to high competition and price-sensitive customers. Complex regulatory requirements and competition from neighbouring countries such as Singapore, Indonesia and Thailand add further pressure,” he said.
Despite these challenges, Chan said Malaysia’s data centre market is on a rapid growth trajectory.
Analysts project that the market will expand from US$4.04 billion (RM18 billion)( in 2024 to US$13.57 billion by 2030, representing a compound annual growth rate of 22.38%.
“New players, including STACK Infrastructure, Epoch Digital, EdgeConneX, and Edgenex Data Centres (by Damac), are entering the Malaysian market, further intensifying competition.
“Microsoft is also acquiring additional land in Johor to expand its data centre operations,” Chan said.
Barjoyai echoed the optimism, highlighting the shift towards localised, smaller-scale data centres with the rise of edge computing. “By 2025, Malaysia is well-positioned to solidify its status as a regional data hub, serving not just domestic needs but also neighbouring countries like Indonesia, Thailand and Vietnam,” he said.
