Vietnam’s data centre (DC) market is currently flourishing with both domestic and international companies seeking to establish more data centres in the Southeast Asian nation, driven by a growing demand for data storage. This growth can be attributed in part to the introduction of a new data localisation regulation in Vietnam last year, which has led to a surge in investments in the data centre industry.
The decree, which came into effect in October of last year and provides instructions on the enforcement of Vietnam’s 2018 Cybersecurity Law, requires all domestic companies and select foreign businesses that offer services in fields such as telecommunications, e-commerce, and online payments to store particular types of data in Vietnam for a minimum of 24 months.
At present, foreign enterprises occupy approximately 80 percent of Vietnam’s cloud computing industry. Among these, Amazon Web Services represents 33 percent, while Google and Microsoft each hold 21 percent. Additionally, six out of the seven most widely used social media applications in Vietnam are owned by overseas technology giants such as Meta and ByteDance.
This implies that domestically generated data is largely stored, transferred, and processed at certain data center hubs located outside of Vietnam, while a duplicate copy of regulated data must still be maintained at local facilities.
According to a report by Google, Temasek, and Bain & Company, Vietnam’s digital economy expanded by 28 percent year on year and reached a value of US$23 billion in 2022. The report further predicts that Vietnam is positioned to be the most rapidly growing digital economy in Southeast Asia, with an estimated annual growth rate of 31 percent from 2022 to 2025.
Industry experts anticipate that this favorable market condition, along with the stricter regulations regarding data residency, will result in increased investments and advancements in Vietnam’s data center and cloud computing industry.
In an interview with Nikkei Asia in March 2022, Amazon Web Services, an Amazon subsidiary, announced plans to construct 10 data centers in Vietnam and five other Asia-Pacific nations, such as Thailand and the Philippines.
According to reports, major technology corporations like Google, Facebook, and Apple have already established servers at several data centers in Vietnam. Currently, there are 27 data centers in Vietnam, and this number is projected to increase significantly in the coming years. Research and consulting firm Arizton estimates that the size of Vietnam’s data center market will nearly double to US$1.04 billion by 2028, from US$561 million in 2021, representing a compound annual growth rate of approximately 10.8 percent during that period.
Gary McKinnon, a senior director at VNG Corporation – Vietnam’s inaugural technology unicorn, has observed that foreign firms are exploring the possibility of constructing their own data centers in Vietnam or partnering with a local data center for co-location purposes.
“The question within the market here is (whether) we have the sustainability requirements and the infrastructure requirements to accommodate,” he said.
In December of last year, VNG Corporation declared the unveiling of its new data center in Ho Chi Minh City. Covering an area of 12,400 square meters, the facility is one of only three data centers in Vietnam that has received a Tier III certification for its design and equipment related to data center installation.
“Our facility opened in January (2023) and we’ve seen unprecedented demand from international players,” said McKinnon. “We expect that international business will make up a major component of our business within two or three years.”
Several other Vietnamese companies are also seeking to attract the attention of international corporations in the data center industry. Among them are several major telecommunications companies that have developed strategies and investments to utilize their data storage and connectivity capabilities in order to better serve clients operating in Vietnam.
In April 2022, Viettel Group, which is run by the military, unveiled a plan to build the largest data center in Vietnam, with a total investment of six trillion dong. Four months later, in August 2022, CMC Corporation inaugurated a 13,000 square meter, 1,200-rack data center in Ho Chi Minh City, with an investment of 1.5 trillion dong.
FPT Telecom has also announced plans to invest US$87 million in the Asia Link Cable project, which aims to connect Vietnam to mainland China, Hong Kong, Singapore, the Philippines, and Brunei through a 6,000 km undersea fiber optic cable.
In addition to the Asia Link Cable project, two more international subsea cables, with a combined length of 20,000 km, are also under development this year, with capital contributions from Viettel Group and Vietnam Posts and Telecommunications Group. These cable networks are expected to provide high-speed internet connections and support large-scale data transmission from Vietnam to other countries in the Asia-Pacific region.
At a conference held in Vietnam, Glen Duncan, who heads data centre research for the Asia-Pacific region at JLL, commented that the focus of the data centre industry is shifting. Rather than being solely focused on real estate, it is now more centered around connectivity.
“As more subsea cables come in, Vietnam needs to think about how they can be utilised, (in order for Vietnam) to shift from being a spoke of Singapore’s or some other countries’ (DC) hubs, to becoming a hub for other parts of the region,” he said.
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