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Indonesia Data Center Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Indonesia Data Center Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

  • April 2022
  • 194 pages
  • ID: 6067814
  • Format: PDF
  • Mordor Intelligence LLP

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The Indonesia data center market was worth USD 1.67 billion in 2021, and it is predicted to grow to USD 3.43 billion by 2027, with a CAGR of 13.15% from 2022 to 2027. One of the critical sources of growth in the region is the region’s increasing internet economy. The SEA region’s internet economy is valued at over USD 100 billion, according to SpaceDC’s upper management, and is predicted to expand to USD 300 billion by 2025. As a result, the demand for data services and infrastructure is expected to grow rapidly throughout the forecasted time.

Key Highlights
Indonesia ranks lower in the competitive index than other Southeast Asian countries; however, the potential commercial upside for data center players is significant. Indonesia is witnessing a growing digital economy, coupled with the rapid growth of startup companies and an ever-growing population, leading to a boost in hyperscale data centers.
The COVID-19 pandemic has posed additional stress on the overall economy across sectors and highlighted the contribution and potential of the online workplace being facilitated by the data centers. Further, due to the digital economy’s growth, the data center boom in the market has led several global vendors to expand in Indonesia and tap on the emerging opportunities in the studied market. For instance, in November 2021, Smartfren announced partnering with UAE technology firm G42 to build a 1,000 MW data center in Indonesia. The investment is expected to strengthen the development of the digital industry in Indonesia and maintain national data sovereignty, which the government of Indonesia is carrying out. It also steers multiple international vendors to focus on the digital economy.
According to the report "Digital 2021"by content management service, HootSuite, and social media marketing agency, We Are Social, the number of users of the internet in Indonesia increased by 27 million (+16%) between 2020 and 2021. Internet penetration in Indonesia stood at 73.7% in January 2021.
Indonesia’s current e-commerce market is like China’s online marketplace beginnings, with a large pool of entrepreneurial sellers providing goods purchased based mainly on social media recommendations. Moreover, the country is Asia’s foremost mobile-first nation, with one of the highest mobile-Facebook usage rates, which aggressively promotes data centers’ growth.

Key Market Trends

Colocation Data Service is Expected to Dominate the Market

The e-commerce market in Indonesia has been growing for the past few years. This increasing market size is mainly driven by increased Internet access and usage. According to the Indonesian Internet Service Providers Association’s 2020 report, Internet users increased to 196 million, or around 73.7% of the total population.
Indonesia’s data center services income is growing due to increased demand for colocation from worldwide cloud service providers. The Indonesian data center market is regarded as one of the world’s most primitive data center markets. Because of the increased migration of OTT participants in Indonesia, increased IT spending, and the deployment of 5G, the data center industry is predicted to rise exponentially.
The e-commerce growth has helped the merchants operating in the country during the COVID-19 pandemic, indicating its importance to the Indonesian economy. The e-Conomy SEA 2021 report outlined that 28% of merchants believed they would not have survived COVID-19 without selling on digital platforms. The increasing dependency on e-commerce is increasing the need for data centers, driving the colocation sectors of the data center ecosystem.
The colocation provider will offer the server the appropriate bandwidth, IP, and power. Colocation hosting allows a small firm to benefit from the advantages of a large IT department without the expensive cost of setup. According to the Jakarta Post, all companies are not ready to shift to the public cloud in the region. They wish to have complete control of their data without someone else’s possession, due to which colocation is still big despite strong interest businesses to adopt cloud services.
In Indonesia, Jakarta has the maximum number of data center activities. For instance, in April 2021, Tencent Cloud launched its first data center in Indonesia, emphasizing its commitment to addressing growing business needs in Indonesia. Located in Jakarta’s central business district, the data center boasts two utility power lines, 2 N redundant transformers, and N+1 redundant diesel generator with a capacity to support up to 72 hours at full load.

IT and Telecommunications is Expected to Hold a Major Market Share

The fast development of the information technology sector, combined with driving elements such as mass consumerism, urbanization, increased mobile usage, and a tech-hungry youthful population, has a favorable impact on Indonesia’s economic growth. It will massively increase the number of data center facilities in the country, allowing the government to meet the growing demand during the projection period.
In November 2021, Smartfren, an Indonesian telco, and G42, a UAE technology corporation, announced their plans to build a 1,000MW data center in Indonesia. The two corporations signed a document memorandum of understanding (MoU) for the project. Smartfren revealed that the collaboration would result in the creation of data centers in the country and the preservation of the national data sovereignty, which the Indonesian government is carrying out. Interests of such telecom giants and their up-and-coming projects in Telecom and IT are contributing significantly to impacting the industry.
The country’s telecommunications sector is one of the world’s fastest-growing, thanks to increased fixed and mobile broadband connections. The key drivers of growth in the telecoms sector include increased affordability, extended coverage, service improvements, higher data usage, and smartphone adoption. Indonesia continues to invest heavily in capital expenditure to expand its fiber-optic network and 4G coverage. The country has the third highest number of internet users in Asia.
Further, the trend of the IT industry’s agile and DevOps operational frameworks is increasing the need for more efficient data storage solutions. Hence, it stresses the need for the data center construction market around the globe. The hyperscale and edge data centers in the IT domain are expected to witness a boom due to increased demand for advanced facilities to manage the data traffic worldwide. For instance, in February 2022, PT Aesler Group International Tbk (RONY) signed a cooperation agreement with Huawei Digital Power to construct a data center. Aesler Data Center will be built in a series of Eco Green-interconnected data center chains throughout Indonesia, known as AESLER-GREENIX, with a total capacity of 88 megawatts (MW), across several locations.

Competitive Landscape

Both prominent global vendors and regional companies compete in the Indonesia Data Center market. Cisco, Dell, HP, and Pure Storage are just a few of the leading solution providers in the market. Vendors are scaling up their capabilities to maintain and gain new clients due to the prospects presented by 5G adoption and the predicted rise in data traffic. Overall, the competitive competition between the players is expected to stay high over the forecast period.

November 2021- Smartfren signed a memorandum of understanding (MoU) with Group 42 (G42), an Abu Dhabi-based artificial intelligence and cloud computing business. PT Amara Padma Sehati (APS) will be one of the local partners with capabilities in the business and technological ecosystems to host a 1,000-Megawatt (MW) data center in Indonesia.
August 2021 - Princeton Digital Group (PDG) unveiled its plans for greenfield development in Indonesia with a total investment value of USD 150 million. The new 22MW data center, Jakarta Cibitung 2 (JC2), is expected to be constructed within the same 19,550 sq m campus that houses PDG’s existing data center JC1. When completed, the expanded campus aims to offer 35MW of capacity for serving domestic Internet companies, global cloud companies, and enterprises. JC2 is scheduled to be ready for service by Q4 2022.

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