The Rise of Data Centers: A New Boom Industry in Johor, Malaysia
A New Chapter for Johor’s Economy
On the southern tip of Malaysia lies the state of Johor, renowned for its beaches and mountainous jungle. But Johor has a new boom industry: data centers to power generative AI, with Microsoft committing more than $2 billion on just such a data center. For the tech giants, electricity has become the new oil.
The Growing Demand for Data Centers
A state-of-the-art AI data center might need 90 MW, enough to power tens of thousands of American homes. With AI applications proliferating, from chatbots to AI agents, needs are growing. One industry consortium is planning for data centers requiring 10 GW (more than a hundred times the demand of today’s largest).
The Quest for Cheap and Reliable Power
Securing cheap, reliable power is now as crucial to tech firms as silicon chips. In 2025, the big tech firms will scour the globe for kilowatts, megawatts, and gigawatts. In board meetings, discussions about server capacity are increasingly overshadowed by discussions on grid capacity and energy futures. Nations blessed with abundant low-cost energy are leveraging this newfound advantage and crafting policies to attract AI investments with the zeal once reserved for manufacturing.
The Rise of Unlikely Competitors
Regions that have historically won the data center ark, such as Ireland and Singapore, have found their capacity strained to bursting before the GenAI boom. This has created opportunities for unlikely competitors, not just Malaysia but Indonesia, Thailand, Vietnam, and Chile. Latency is less important than keeping the electrons flowing.
Cooler Climates and Coastal Areas
Location ultimately does matter. Half of the energy costs in a data center typically comes from running cooling systems and air conditioning to keep the servers from overheating. Cooler climates or coastal areas will start to become more in demand as potential sites.
The Draw to Deliver AI
This draw to deliver AI is so powerful that big tech firms are buying dirty power to meet it, putting their own and local economies’ decarbonization targets at risk.
Countries Compete for Data Centers
Countries hotly compete for the business of data centers. Tax breaks are popular: more than half of US states—including Arizona, New York, and Texas—offer operators some form of tax break, and even preferential rates for buying land and committing to access to power. In Malaysia, Green Lane Pathway initiatives expedite construction approvals, cutting through red tape to fast-track construction—and power lines—for data centers. Concessions of data regulations to allow information to flow freely.
A Shift in Global Influence
This interplay between watts and algorithms is redrawing the map of global influence. It’s a shift as profound as the oil boom of the 20th century, but far less visible. No pipelines are being built, no tankers are changing course. Instead, nondescript warehouses humming with servers are becoming the new geopolitical hotspots.
Conclusion
The extent to which this shifts global influence is unclear. The real research on AI—where the breakthroughs happen—will remain in the research hubs of San Francisco, London, Beijing, and Paris. The data centers that take these algorithms to market, however, will be a low-margin, pile-it-high and sell-it-cheap business.
FAQs
Q: What is the impact of data centers on the environment?
A: Data centers are a significant contributor to greenhouse gas emissions, with some estimates suggesting that they will account for up to 3.8% of global emissions by 2030. To mitigate this, data centers will need to transition to renewable energy sources.
Q: How do countries attract data centers?
A: Countries offer tax breaks, preferential rates for buying land and access to power, and concessions on data regulations to attract data centers.
Q: What is the future of data centers?
A: The future of data centers lies in building sustainable, low-carbon infrastructure that can accommodate the growing demand for data processing and storage while minimizing environmental impact.
