The Philippines is experiencing a significant increase in the demand for data center facilities, driven by economic growth and digital adoption.
The country’s digital economy is set for exponential growth, with the data center market projected to grow by 6.51% between 2023 and 2028, reaching a market volume of US$669.70 million in 2028.
The IT load capacity of the tier 2 segment is expected to increase from 125.6 MW in 2021 to 172.6 MW by 2029 at a CAGR of 4.33%.
The Philippines’ digital economy is expected to unlock a vast economic potential of up to US$101.3 billion by 2030 through the full utilization of digital technologies.
The World Bank is supporting reforms to increase digital technology adoption in the Philippines, aiming to expand financial inclusion through digital finance and stimulate the growth of digital services.
The Philippines data center market size is projected to witness investments of USD 1,016 million by 2028, growing at a CAGR of 11.01% from 2022-2028.
These developments reflect the country’s efforts to embrace digital transformation and build a robust digital infrastructure to support its growing economy.
Key Data Center Locations in the Philippines
In the Philippines, there are crucial spots where data centers play a big role. Let’s explore these locations:
1. Metro Manila
Metro Manila is one of the main data centers in the Philippines. It’s packed with lots of facilities and connections, making it the number one place to expand. Believe it or not, about half of all the data centers in the country call Metro Manila their home.
2. Bonifacio Global City
Bonifacio Global City is like a magnet for colocation expansions, showing how much growth is happening in that part of the country.
3. Cebu and Davao:
It’s not just Metro Manila and Bonifacio Global City that are booming. Places like Cebu and Davao are stepping up their game in the data center world. They’re adding to the overall growth of the Philippines’ data center market, making the whole country a hotspot for digital action.
Data centers are like the brain of our digital world. They store and process information, making sure everything we do online runs smoothly.
Colocation Data Centers
In the world of technology, colocation data centers play a crucial role. These are big facilities that rent out space for servers and equipment belonging to different companies. Let’s explore what makes colocation data centers so important.
What is a Colocation Data Center?
A colocation data center is like a giant technology hub that offers space for other companies to keep their servers and equipment. Instead of each company having its own space, they share the resources provided by the colocation facility. This sharing not only makes it cost-effective but also ensures that everyone gets the essential services they need.
What Services Do Colocation Facilities Provide?
Colocation facilities go beyond just providing space. They offer power, cooling, and physical security for the servers, storage, and networking equipment of different companies. Imagine it as a high-tech apartment building for servers, where each tenant (company) enjoys the shared amenities.
Connecting the Dots
One of the perks of using a colocation data center is the access to various telecommunications and networking services. This means that companies can easily connect with each other and the outside world, fostering better communication and collaboration. It’s like having a direct line to the internet and other essential networks.
Leading Colocation Providers in the Philippines
In the Philippines, several top-notch colocation providers stand out. These companies specialize in offering carrier-neutral services, meaning they provide a level playing field for all users.
Here are a few key players:
1. Space DC: Operating a robust 6MW data center in Cebu, Space DC is a significant player in the colocation scene. Companies relying on Space DC benefit from its spacious and well-equipped data center.
2. Converge ICT: With a 6MW data center located in Pasig City, Converge ICT is another major player. The company ensures that businesses have the necessary resources to keep their operations running smoothly.
3. IP Converge Data Services: Nestled in Makati City, IP Converge Data Services boasts a 1.5MW data center. Despite being slightly smaller, it still offers a reliable and secure space for companies’ data and equipment.
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Cloud Operator Data Centers
The data center colocation market in the Philippines, mainly centered around Manila, is still in its early stages but is poised for significant growth.
The demand for data center colocation has been fueled by the entry of cloud platforms.
Rapid time to market is essential, and the relatively unfamiliar market conditions create opportunities for colocation providers to establish their presence and win business.
Market Growth and Projections
Over the past 12-18 months, there has been a notable buzz in the industry, with data center operators, real estate developers, and investors circling the market in anticipation of increasing demand.
The sector is expected to experience steady growth, with a five-year Compound Annual Growth Rate (CAGR) of 25% through 2027. The Philippines is on track to becoming a hyperscale market sooner than later.
On a Megawatt (MW) basis, the total inventory is set to grow at a five-year CAGR of 26%, with the hyperscale inventory portion growing even more significantly at a CAGR of 48%.
Leading the charge in the Philippines’ carrier-neutral colocation sector are prominent players such as Epldt Inc, GTI Corporation, NTT Ltd, STT GDC Pte Ltd, and Zenlayer Inc.
STT GDC Philippines, a key colocation provider, is planning a significant expansion, aiming to increase the footprint of three of its data centers to a total of 27.2MW, with a focus on utilizing renewable energy sources for the majority of its power needs.
The investment landscape in the Philippines data center market is robust, with projections indicating a staggering USD 1,016 million in investments by 2028.
This growth is expected to occur at a CAGR of 11.01% from 2022-2028, showcasing the potential for substantial returns. The market is also set for a robust five-year CAGR of 25%, highlighting its attractiveness to investors and industry stakeholders.
Cloud Operators and Market Presence
Major cloud operators, including Microsoft, Google, Oracle, and local player IPC, play a pivotal role in the Philippines’ data center market.
These global and local players have substantial investments in building local regions, significantly contributing to the overall growth of the data center market in the country.
Cybersecurity and Reliability
The cybersecurity standards and resilience capabilities of these data centers are critical factors in ensuring the security and reliability of the services they provide.
As the market continues to develop, businesses and organizations looking to utilize colocation and cloud services in the Philippines will consider these factors as key components in their decision-making process.
Key Demand Drivers
The Philippines is becoming a hotspot for data centers because of a few big reasons:
1. BPO Boom
The BPO (Business Process Outsourcing) industry is growing like crazy, and guess what? They need data centers to keep everything running smoothly.
2. Digital Explosion
People and businesses in the Philippines are gobbling up digital services. It’s like everyone suddenly realized, “Hey, we can do a lot of cool stuff online!” So, the demand for data centers is shooting up.
3. Local Cloud Heroes
Imagine having your own superheroes but for the internet. That’s what local cloud service providers are becoming in the Philippines. They’re like the champions of making sure everything online works smoothly and perfectly.
Perfect Spot for Data Center Action!
The Philippines is right in the middle of a bunch of big markets like China, Japan, South Korea, and more. It’s like being at the center of a tech party! That’s why building data centers here makes a ton of sense.
Riding the Cloud Wave
Businesses are using cloud services to do their thing better, spend less on tech stuff, and give us cool new services. The country’s internet economy was $17 billion in 2021. Hold on tight, because it’s predicted to zoom up to $40 billion by 2025! Thanks to the government pushing for more tech and people just loving everything digital, it’s like the internet economy is on steroids.
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Challenges Faced by Data Centers in the Philippines
Power Reliability and Electricity Costs
The data centers in the Philippines encounter various challenges that impact their smooth operation. One significant hurdle is the reliability of power and the associated high electricity costs.
To run efficiently, data centers rely heavily on a consistent power supply, but the ongoing issues with power reliability pose a continuous challenge.
Additionally, the high costs of electricity further compound the difficulties faced by the data center industry in the Philippines.
Lack of Experienced Talent
Another notable challenge is the scarcity of experienced professionals for critical roles in facility operations.
The data center industry requires skilled individuals who understand the intricacies of managing and maintaining these complex facilities.
However, the need for more experienced talent in such roles poses a significant obstacle to the optimal functioning of data centers in the Philippines.
Subsea Connectivity Infrastructure
The need for enhanced subsea connectivity infrastructure is also a pressing challenge.
For the data center industry to flourish and establish stronger links with other markets, the Philippines must invest in developing a more robust subsea connectivity infrastructure.
This improvement is crucial for ensuring seamless data transfer and communication, fostering growth in the data center sector.
Land Supply and Costs
Limited land supply, coupled with high land costs, poses a challenge for establishing and expanding data centers.
Due to these constraints, finding suitable properties for large-scale data center operations becomes a complex task.
The scarcity of appropriate locations hinders the industry’s ability to grow and meet the increasing demand for data-related services.
Despite Challenges, Opportunities Abound
Despite these obstacles, the Philippines remains a promising environment for data center operators and developers.
Government initiatives play a pivotal role in supporting the industry, and offering solutions to existing challenges.
Additionally, the growing renewable energy sector contributes to the sustainability of data centers, aligning with global environmental concerns.
Key Factors Supporting Success
1. Government Initiatives
The government is actively involved in creating a conducive environment for data center development, offering incentives and streamlined processes.
2. Renewable Energy
The rise of the renewable energy sector provides data centers with a sustainable and eco-friendly power source, mitigating some of the challenges related to electricity costs and reliability.
3. Digitally Savvy Consumer Market
The Philippines boasts a large digitally savvy consumer market. This burgeoning market presents ample opportunities for data center operators to cater to the increasing demand for digital services.
Future Expansion Plans
The Philippines is witnessing remarkable growth and investment in its data center industry, with numerous expansion plans and projects in progress.
The country’s commitment to advancing its IT infrastructure is evident through various initiatives.
Let’s delve into the key developments and future expansion plans shaping the landscape of the Philippines’ data center market.
New Government Data Center in North Luzon
One pivotal step towards bolstering the country’s IT capacity is the upcoming establishment of a government data center in North Luzon.
By 2025, the Philippines aims to achieve an impressive 300MW IT capacity, reflecting the nation’s dedication to technological advancement.
Nationwide Expansion Initiatives
Several prominent companies, such as PLDT, STT GDC, and Converge ICT, are spearheading the expansion of data centers across strategic locations in the country.
These expansion projects span Metro Manila, Santa Rosa, Pampanga, Quezon City, Cebu, Cavite, and Davao. This widespread approach ensures that various regions benefit from the growing digital infrastructure.
Global Data Center Operators Join the Fray
International players are recognizing the potential of the Philippines as a hub for data center operations.
Notable global data center operators like ST Telemedia Global Data Centres, Amazon Web Services, Microsoft, Google, Alibaba, Oracle, and IBM are making substantial investments and unveiling ambitious expansion plans in the country.
Rapid Growth and Market Potential
The digital economy in the Philippines is experiencing robust growth, fueled by a surge in cloud adoption. Projections indicate that the digital economy will soar to $40 billion by 2025.
This upswing in digital activities is driving an increased demand for data centers to support the growing technological landscape.
Hyperscalers’ Interest and Investments
The Philippines has become an attractive destination for hyperscalers, with plans for significant capacity expansion and the construction of new facilities.
The interest from global giants underscores the country’s strategic importance in the global data center arena.
Driving Forces Behind Expansion
The expansion and investment surge in the Philippines’ data center market are propelled by several factors:
1. Growing Digital Economy: The flourishing digital economy in the country is a catalyst for increased investment in data infrastructure.
2. Favorable Market Conditions: The Philippines provides favorable conditions for data center operations, attracting both local and global investors.
3. Surging Demand for Cloud Services: As cloud adoption rises, so does the demand for robust data storage solutions, positioning the Philippines as a key player in meeting this demand.
The digital landscape in the Philippines is undergoing a remarkable transformation, with a substantial surge in digital infrastructure development.
Investors, both local and international, are drawn to the burgeoning data center market.
This growth is attributed to the country’s strategic location, expanding digital economy, and favorable market conditions, making it an attractive destination for data center operators and developers.
Key Data Center Hubs
PLDT Data Centers
PLDT, a major player, is gearing up to establish its 12th data center in the Philippines, a robust 100MW facility. Simultaneously, the company is actively working on its 11th facility, another 100MW project located in Santa Rosa.
STT GDC Data Centers
ST Telemedia Global Data Centers is set to enhance its presence in the Philippines by adding 5.2MW to its existing capacity this year. Moreover, ambitious plans include a 124MW campus in Manila and the establishment of three data centers in Pampanga, Quezon City, and Cebu.
Converge ICT Data Centers
Converge ICT is committed to a $60 million investment for the development of three data centers strategically located in Pampanga, Quezon City, and Cebu.
New Government Data Center in North Luzon
Anticipated to contribute significantly, the Philippines aims to reach an IT capacity of 300MW by 2025, with plans underway for a new government data center in North Luzon.
Enter YCO Cloud Centers, Space DC, and Digital Edge, the new entrants in the Philippines data center arena. Their combined investments are projected to soar to $635 million by 2027.
Projections and Growth
The data center market in the Philippines is poised for substantial growth, forecasted at a CAGR of 11.2%. By 2027, the market is expected to reach an impressive $635 million. This surge is closely tied to the country’s burgeoning digital economy, predicted to hit $40 billion by 2025. The increased adoption of cloud services is a driving force behind this growth, leading to a heightened demand for data centers.
In summary, the Philippines is not only witnessing a digital revolution but is emerging as a hotspot for data center development. The strategic initiatives and investments by key players, coupled with the country’s growing digital economy, position it as a frontrunner in the Southeast Asian digital landscape.