China tech firms drive AI data centre boom in Southeast Asia

(By Caixin journalists Wen Simin in Hong Kong and Zhao Xuan in Beijing)

Inside the Hong Kong Convention and Exhibition Centre on a hot and humid day in July, the Data Center Asia event was packed.

The crowd included Chinese data centre operators, colocation providers and suppliers of energy and liquid cooling systems. But Southeast Asian companies were just as visible. Exhibitors from Thailand, Malaysia and Indonesia occupied much of the floor.

As global demand for computing capacity spills across borders and digital infrastructure becomes a strategic priority, businesses from across Southeast Asia are coming to China in search of opportunity.

AI has become one of the main engines of global economic growth. Market research firm IDC recently raised its forecast for worldwide AI infrastructure spending in 2026 to US$497 billion, nearly 56% higher than a year earlier. Southeast Asia is widely viewed as one of the most promising beneficiaries.

A report by Boston Consulting Group, Temasek Holdings Pte. Ltd. and the Infocomm Media Development Authority of Singapore forecast that AI will add roughly US$120 billion to GDP across six Southeast Asian economies — Indonesia, Malaysia, Singapore, Thailand, Vietnam and the Philippines — by 2027.

Chinese cloud companies are also turning their attention to Southeast Asia, driving a sharp increase in demand for leased data center and AI computing capacity. Of the roughly 1.5 gigawatts of approved data centre projects in Thailand, projects with Chinese investment ties or that primarily serve Chinese technology customers account for 60% to 70%, according to a data centre industry executive.

In Johor, Malaysia — Southeast Asia’s largest computing hub — Chinese cloud giants and third-party data centre operators have become dominant forces. ByteDance Ltd., Alibaba Group Holding Ltd. and Tencent Holdings Ltd. all lease data centre capacity in the region.

Why Southeast Asia

Southeast Asia, Australia and the Middle East have emerged as hotspots for the global data centre construction boom. Southeast Asia stands out because of geopolitical stability, land and power availability, and the ability to deliver projects quickly and predictably.

A May 2026 report by the China Academy of Information and Communications Technology estimated that total computing infrastructure capacity in key Southeast Asian markets exceeded 4.4 gigawatts in 2025. The region had more than 2,000 major computing centres, and total capacity is expected to surpass 10 gigawatts by 2030.

Singapore led the region with more than 1.4 gigawatts of capacity. Malaysia followed with 1,063 megawatts, Indonesia with 900 megawatts and Thailand with 620 megawatts.

Jonathan Jia Zhu, chairman and partner of Bain Capital Greater China, said three requirements are non-negotiable for data centre development: ample land with power access, robust fibre and international submarine cable connections, and a complete industrial supply chain. Southeast Asia meets all three.

The corridor running from the South China Sea to the Strait of Malacca is one of the world’s densest routes for submarine cables. Numerous trans-Pacific and trans-Indian Ocean cable systems converge there, giving Southeast Asia an advantage as a key landing point and data transfer hub for the Asia-Pacific region.

Australia has fewer power constraints, but its regulations are more restrictive. Access to renewable energy can be limited, and delivery timelines for computing projects are long. “In North America or Australia, power constraints can mean a data centre takes two or even three years to deliver,” Zhu said. “In Southeast Asia, Chinese infrastructure teams can deliver one by the following year.”

Steady demand has also made Southeast Asian data centres attractive to investors. As capital-intensive infrastructure assets, data centres have a relatively straightforward valuation framework, Zhu said. At a 7.5% capitalisation rate, for example, an asset could support a valuation multiple of roughly 13 times. That valuation can rise further when market conditions improve. “Demand for computing capacity in Southeast Asia is strong, and project cash flows are continuing to grow,” Zhu said. “Asset values rise in tandem.”

Bain Capital was among the early international private equity investors in Southeast Asian data centres. It founded Bridge Data Centres Pte. Ltd. in 2017 and merged it with Chindata Group Holdings Ltd. in 2019, creating a pan-Asian platform spanning China, India and Southeast Asia.

Thailand: waiting in line for power

Thailand has emerged as one of Southeast Asia’s newest data centre frontiers. Its stable political and economic ties with China, relatively mature industrial parks and location at the centre of mainland Southeast Asia have made it a sought-after destination for computing giants.

According to Cushman & Wakefield Inc., operating data centre capacity in Bangkok and nearby areas had reached 134 megawatts by the first half of 2026. Capacity under construction and in the planning pipeline had surpassed 2 gigawatts.

Demand has made regulatory approvals increasingly time consuming. At least 10 gigawatts of data centre projects are now waiting for power allocations, according to market participants.

The queue does not consist of completed server facilities awaiting connection. Rather, it includes investors with billions of dollars in capital waiting for approval of the crucial power quotas. The approval process now takes nearly two years, according to people familiar with the matter.

In May 2026, Thailand’s Board of Investment approved three large data centre projects at the same time. TikTok System (Thailand) Co. Ltd., a ByteDance unit, received approval to invest 842.3 billion baht (US$25.7 billion) to add servers and expand data storage and processing facilities in Bangkok and the provinces of Samut Prakan and Chachoengsao.

Also approved were a 46.9 billion baht project by Skyline Data Center and Cloud Services, an affiliate of the United Arab Emirates’ Damac Group Ltd., and a 24.6 billion baht project by Bridge Data Centres IIO in Chonburi province.

Microsoft Corp., Google LLC and Amazon.com Inc. have also announced multibillion-dollar investments in Thai data centres. Total investment in these projects under review or already approved in Thailand exceeds 1.3 trillion baht, according to industry estimates.

Malaysia: a mature supply chain

Thailand has recently attracted a surge of large investments, but it is not Southeast Asia’s central data center hub in terms of market maturity or scale. “Malaysia clearly got an earlier start than Thailand in data center development,” said an industry executive who has closely tracked digital infrastructure in Southeast Asia.

A 40-minute drive from Singapore brings travellers to Iskandar Puteri in Malaysia’s Johor state. Together with Kulai and Pasir Gudang, the city forms the core triangle of Johor’s data centre cluster. Johor has become one of Southeast Asia’s largest computing hubs.

Johor had about 850 megawatts of operating data centre capacity as of the second quarter of 2026, with 1.8 gigawatts under construction and 2.7 gigawatts in development, according to JLL Malaysia.

Across Iskandar Puteri’s more than 300 square kilometres, silvery-grey steel-framed buildings line the landscape. Cooling towers hum around the clock. Beneath dense rows of cranes and construction barriers, more hyperscale facilities are rising. Many newly topped-out buildings are moving into the electrical and mechanical installation phase.

A walk down one street in Johor might reveal a server factory; the next, an electrical equipment plant; and the one after that, companies focused on liquid cooling and energy systems. The data centre parks are so large that workers shuttle between them by bus.

Johor’s Chinese players

Chinese-linked companies have become among Johor’s most important suppliers of computing capacity and some of its largest customers.

DayOne Data Centers Ltd., the Singapore-headquartered global data centre operator, has already established two campuses in Johor: one in the Nusajaya Tech Park and another in the Kempas Tech Park. As of January 2026, the two sites provided a combined 390 megawatts of capacity.

DayOne’s former major shareholder was GDS Holdings Ltd., a Chinese data centre developer. In 2022, GDS established GDS International Ltd. in Singapore for its overseas business. The unit was renamed DayOne in early 2025 and began operating independently.

Bridge Data Centres has also built a presence in Singapore and Johor. At Sedenak Tech Park, its MY06 campus has a combined capacity of 110 megawatts, with ByteDance as its anchor tenant. The first phase was delivered in October 2022, only 314 days after construction began.

ByteDance is also investing directly in its own data centre infrastructure in Johor. Alibaba Cloud opened two new Johor data centres in June 2026, bringing its total number of Malaysian facilities to five.

The industry’s rapid growth, however, is running into increasingly stringent regulation.

Malaysia began restricting approvals for new non-AI data centre projects in February 2026. The Thailand Board of Investment has also formed a dedicated working group to conduct upfront reviews of data centre projects’ energy, water and environmental effects.

“Approval timelines have clearly slowed,” said a Thailand-based data centre operator.

Indonesia joins the race

As Malaysia and Thailand become more restrictive toward new projects because of power and other constraints on resources, Indonesia is seeking to seize the opportunity.

On 7 July, Indonesian President Prabowo Subianto designated Batam Island as a priority development zone for the digital economy and data centres, while using digitalised approval systems to shorten permitting timelines. Later that month, at the Indonesia-China Partnership Forum in Jakarta, Indonesia’s Ministry of Investment and Downstream Industry promoted local data centre opportunities to Chinese companies.

To attract foreign capital, Indonesia offers corporate income tax holidays of up to 20 years in 25 special economic zones. It has also classified data centres as a pioneering industry eligible for a 100% income tax holiday of five to 20 years, along with streamlined direct investment approvals and import duty exemptions for machinery and raw materials.

The policy push has had quick results. In May 2026, the Batam Indonesia Free Zone Authority finalised a US$5 billion high density AI data centre project covering 30 hectares. The project is being led by Indonesia’s PT Equator Gate System Batam, with support from Range Technology Development Co. Ltd., a Chinese data centre operator, based in Langfang, Hebei province.

Soon afterward, Australia’s Firmus Technologies Pty. Ltd. reached an eight-year partnership with Nvidia Corp. to build an AI factory campus in Batam with DayOne. The project is expected to provide 360 megawatts of capacity and deploy as many as 170,000 Nvidia AI accelerators.

Going local

Localisation has become an important next step for many Chinese-linked data centre operators expanding overseas.

After its formation in 2022, GDS International completed two rounds of financing. GDS Holdings’ ownership was diluted from 100% to 52.7% and then 35.6%. In January 2025, GDS International formally became DayOne, an independently operated entity.

DayOne Chief Executive Jamie Khoo said in July 2025 that the company had long planned to separate from its Chinese parent to accommodate differing regulatory systems.

In April 2026, GDS founder Huang Wei stepped down as DayOne’s executive chairman. In June, DayOne announced a US$4.5 billion funding round. GDS was no longer the company’s major shareholder. The Singapore-based digital-infrastructure platform had become an independent company led by international capital and focused on Asia-Pacific and European markets.

Chindata’s separation followed a more complicated path. Bain Capital took Chindata private in 2023 in a deal valuing the company at US$3.16 billion, then split its China business from overseas Bridge Data Centres operations.

In September 2025, Bain Capital sold Chindata’s China business for US$4 billion to a consortium led by Shenzhen HEC Industrial Development Co. Ltd. Bloomberg reported the following July that Bain Capital planned to sell roughly a 50% stake in Bridge Data Centres at a valuation above US$4 billion, with South Korea’s SK Telecom Co. Ltd. and Singapore’s GIC Pte. Ltd. among potential bidders.

The result is a class of data centre operators with Chinese roots but international ownership structures. They retain advantages in China’s lower construction costs and relationships with Chinese customers, while gaining the benefits of localisation and internationalisation.

“Regulatory controls are one reason,” said a Chinese data centre executive with overseas operations. “Another important consideration is customer diversification. That allows us to become an international provider of computing capacity serving international demand.”

Qu Yunxu contributed to this article.

This article was first published by Caixin Global as “Cover Story: China Tech Firms Drive AI Data Center Boom in Southeast Asia”. Caixin Global is one of the most respected sources for macroeconomic, financial and business news and information about China.

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