Emerging data center market poses potential to be next big economic driver
Manila—The
global pandemic has been a catalyst for digital transformation as there was a
steep rise in the usage of consumer applications from social media to video
streaming, gaming, e-commerce, online learning, and telehealth, among
others. The pandemic has also pushed
the enterprise and public sector over the technology tipping point by
accelerating their cloud adoption by increasingly migrating workloads to the cloud and
massively using collaboration platforms supporting work from home
arrangements.
Speaking
earlier this year at Asia Pacific Regional Internet Conference on Operational
Technologies (APRICOT) 2021, Jeff Mendoza, Asia Pacific Regional Head of PLDT
Enterprise said, “The digital transformation dictated by the pandemic among the
enterprise and consumer sectors have pushed the hyperscalers in the cloud and content
provider space to step on the gas with their data center deployment plans
across relevant countries. The goal is to optimize subscriber experience through data server localization
while enhancing network resilience in growth markets, including the
Philippines.”
Digital
Philippines at a glance
The
digital profile of the Philippines has motivated these hyperscalers to build
their digital infrastructure within the archipelago. As these big techs strive
to reign in the intensified battle of eyeballs or subscribers, the
population and the digital economy of a country are critical considerations in
crafting their data center expansion road map.
According
to “We Are Social’s” Digital 2020, the Philippines is home to the
second-largest eyeballs within the Southeast Asia with a population of 109
million. It has one of the youngest median age of 25.8 years old versus the average
age within the region of 31.8, pointing to a sizable tech-savvy population
which has stronger digital appetite and adoption to technology.
The
nation also takes pride in having one of the highest mobile penetration rates in the region at 138%.
The Philippines has 74 million internet users with netizens spending 10.5 hours
online which is the longest across the globe.
The
Philippines has been dubbed as the social media capital of the world when it
comes to hours spent in social media while it ranks as sixth in the list
of countries with the most Facebook users. E-commerce sales grew by
USD3.6 billion in 2020 at a phenomenal growth rate of 43%, with projections
spiraling to USD12 billion in 2025.
From a cloud
service revenue perspective, Global Data has reported that the Philippines is
anticipating a steep rise in cloud service revenues up to USD2.4 billion by
2024. This is due to the increase in cloud spending in the enterprise segment
and the government’s “Cloud First Policy”, which encourages and pushes the
agencies to hasten their cloud adoption strategies.
The
5G curve fueling data center demand
The
country has also been cited by the GSMA, a global mobile industry organization
for mobile network operators worldwide, as an early adopter of 5G, alongside
China, Singapore, and Hong Kong.
Smart,
the wireless subsidiary of PLDT, has launched its 5G services in key locations
in the Philippines. 5G brings about denser and faster streams of data as it is
driving the need to bring more efficient compute and storage power closer
to the point of connectivity and the end-user. Hence, fueling a stronger demand
for edge data centers.
The
Philippines as an emerging data center market
The
challenges confronted by major data center hubs serving Southeast Asia, like
Singapore and Hong Kong, come at a time when the demand for such facilities in
the region is growing. In Hong Kong, geopolitical risks out of the imposition of China’s “National
Security Law” have caused hyperscalers in the West to rethink their strategy of
building or expanding their server farms in the country. In Singapore, the
government has issued a moratorium to freeze data center construction amid high
demand in response to sustainability concerns. Landmass shortage was also cited
as another point of consideration.
“Hyperscalers
are in need of options to serve the fast-growing demand within region.
This is the time when the emerging data center markets such as the Philippines,
is anticipated to take advantage of this window of opportunity,” Mendoza added.
According
to Structure Research, a research firm niched in the data center internet and
cloud space, the Philippines is one of the emerging DC markets, having a high
growth rate alongside Malaysia and Thailand.
Cushman
& Wakefield, a reputed global commercial real estate services firm
whose technology advisory group is also deeply connected into the data center
ecosystem, has cited the Philippines’ DC Market CAGR of 14.2 % versus the
Southeast Asia’s growth average of 12.9% until 2024. It has been noted
that SEA is the fastest growing region for co-location data centers in a span
of 5 years, underpinned by the rapid pace of digitalization and surge in demand
for cloud-based services.
UBS sees
the Philippines as an underserved market with tremendous opportunity, with
strong demand from domestic and international operators. This is attributed to
data localization and the demand for lower latency by the consumer and
enterprise sectors.
Robust
submarine cable infrastructure
At
present, there are nine existing submarine cables landing in the Philippines,
with seven more international cable systems upcoming. These resilient subsea
cables are complemented by six diverse cable landing stations strategically
located within the archipelago while more stations are already anticipated to
be built in the next three years.
Moreover,
the Philippines has over 600,000 kilometers of fiber optic cables spread across
the islands to date with PLDT owning 478,000 kilometers of the said fiber
network. PLDT also has the lion's share of submarine cable capacities
terminating in the Philippines.
Hyperscalers
are building new subsea cable systems landing in the Philippines, which
highlights the importance of the country in the digital infrastructure roadmap
of these tech giants.
Greening
the power grid
Touted
as one of the early renewables-leaders in the region, with a sustainable energy
mix of 24%, the Philippines strives to push for more green sources of
power thru the Department of Energy’s renewable power standards circular.
The
government’s sustainability campaign anticipates renewable power to generate
35% of the country’s electricity by 2030. This national program is aligned
with the sustainability initiatives of the hyperscalers via their
respective commitments to renewable energy utilization across their
operations.
PLDT has
been implementing sustainability initiatives for its data center facilities
that will make the most efficient approach to energy usage. For instance, its
data center in Clark, Pampanga built its own solar energy source with an EIFS
or Exterior Insulation Finishing System which reduces heat penetration into the
building.
New destination
for hyperscalers
Possessing a burgeoning digital economy, robust domestic and international
infrastructure in place, a progressive
renewable power mix, and data centers at par with the technologically developed
countries, the Philippines is an ideal destination to support the hyperscale
data center requirements of the cloud and content providers.
“The
Philippines is indeed a strong player in the emerging market space for globally
certified data centers while it thrives on value creation within the digital
economy. We expect in-country DC rollouts of global technology players to
accelerate,” Mendoza concluded.
The
country’s major data centers are primarily operated by PLDT through its ICT arm
ePLDT Inc. The group currently owns a network of 10 globally certified VITRO
data center facilities strategically located across the country, with a total
capacity of 72MW and over 9,000 racks, designed to support the transformation
and fortify the resiliency of enterprises. Since network is as essential as
data center reliability, all VITRO data center facilities are designed to be
carrier-neutral, allowing other telcos both foreign and local to provide
network connections based on customer preference.
VITRO data
center also hosts two of the country’s major internet exchanges and serves as
the global gateway of the enterprise across different sectors that require
colocation, cloud hosting, disaster recovery, managed servers, security and
network services—making it the preferred colocation site for hyperscalers.
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