Making sense of Microsoft's local outlays
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Making sense of Microsoft's local outlays

Thailand is becoming a hotbed for data centre investment as foreign players establish a foothold

Mr Nadella speaks during the
Mr Nadella speaks during the "Microsoft Build: AI Day" event in Bangkok on May 1. (Photo: Reuters)

Microsoft's announcement last week of its first investment in a data centre region in Thailand is expected to enhance the country's digital ecosystem and could fuel competition in the data centre sector.

Microsoft chairman and chief executive Satya Nadella was on a three-nation tour of Indonesia, Thailand and Malaysia to announce a range of investments in data centres, artificial intelligence (AI) and cloud services.

Q: What are Microsoft's commitments to Thailand?

Mr Nadella said the company plans to set up a new data centre region in Thailand. He made the statement during "Microsoft Build: AI Day" on May 1 in Bangkok.

The company also committed to provide AI training opportunities to more than 100,000 Thais, aiming to support the nation's growing developer community.

The commitments build on Microsoft's memorandum of understanding with the Thai government last year to envision the nation's digital-first, AI-powered future.

However, Mr Nadella did not specify the company's investment value for Thailand's data centre region.

Digital Economy and Society Minister Prasert Jantararuangtong said Microsoft and Thailand only started talks on these issues late last year, so it may be too early for the company to specify investment figures.

Microsoft announced investment of US$1.7 billion over the next four years in new cloud and AI infrastructure in Indonesia, and pledged to invest $2.2 billion over the same period to support Malaysia's digital transformation.

The company wants to continue to foster the growth of the Thai developer community through new initiatives such as AI Odyssey, which is expected to help 6,000 Thai developers become AI subject matter experts by learning new skills and earning Microsoft credentials.

K-Research expects Thailand's data centre service business to expand 31.2% per year.

Q: How does Microsoft view Thailand?

According to Microsoft, Thailand is a rapidly growing market on GitHub, the Microsoft-owned software development, collaboration and innovation platform. More than 900,000 Thailand-based developers used GitHub in 2023, representing 24% year-on-year growth.

Many Thai organisations are improving their productivity and accelerating innovation using Microsoft's generative AI-powered solutions, said Dhanawat Suthumpun, managing director of Microsoft Thailand.

He said Microsoft has seen continued growth in demand for services such as cloud and AI from organisations of all sizes and scales in Thailand. This demand exists in both the private and public sectors, including government initiatives, said Mr Dhanawat.

"There is no doubt the global shift towards AI transformation presents huge opportunities for Thailand to accelerate economic growth, including the predicted $117 billion increase to Thai GDP by 2030 from the impact of AI, as well as productivity and capacity to innovate," he said.

"We are establishing a new data centre region in Thailand to help organisations and individuals capture these new opportunities and accelerate growth across the region, with world-class cloud and AI."

Mr Dhanawat said the company recognises Thailand's ambition to become a regional digital economy hub and enhance the country's R&D capabilities while reskilling the workforce.

"Through the work of our customers and partners in Thailand, we have already seen clear willingness and intent to innovate with AI," he said.

"Our Work Trend Index study from 2023 showed Thailand was a frontrunner among 31 countries surveyed in terms of AI mindset. Some 91% of Thai professionals said they were comfortable using AI for administrative tasks, while 92% were open to involving AI in analytical and creative parts of their job, all figures higher than any market in the western world."

Q: What does the planned data centre region mean for Thailand?

According to Microsoft, the data centre region in Thailand will expand the availability of Microsoft's hyperscale cloud services, facilitating enterprise-grade reliability, performance and compliance with data residency and privacy standards.

Research by Kearney found AI could contribute nearly $1 trillion to Southeast Asia's GDP by 2030, with Thailand poised to capture $117 billion of this amount.

Data centre players said competition in Thailand's data centre and cloud service sectors is expected to intensify as several foreign providers enter the market, becoming an investment battleground for global cloud data centre operators from the US, Japan, China, Singapore, Malaysia, Australia and India.

In 2022, Amazon Web Services announced plans to open a data centre region in Thailand, investing more than $5 billion over 15 years.

Recently NextDC, an Australian data centre operator, received Board of Investment approval for a 13.7-billion-baht investment in a new hyperscale data centre located in Bangkok.

Thai trade representative Nalinee Taveesin earlier disclosed that CtrlS Datacenters, Asia's leading data centre operator, leased a land plot in the Eastern Economic Corridor of Digital in Chon Buri for a period of 50 years to establish its hyperscale data centre.

Thailand is estimated to attract data centre investment worth $7.8 billion during 2024-27, equivalent to 1.1% of GDP, but the value is expected to be three times lower than that of Malaysia, according to Kasikorn Research Center (K-Research).

K-Research expects Thailand's data centre service business to expand 31.2% per year, while that of Malaysia is projected to grow by 36.8% annually over the next four years.

The think tank puts Thailand's data centre capacity at third in Southeast Asia, behind Singapore and Malaysia.

The entry of major foreign cloud providers with local data centres should to lead to positive impacts for the Thai digital ecosystem, said Adam Simmons, an analyst at Dgtl Infra, a global online publication and research provider on data centres.

Their entry will enable Thai startups and enterprises to access cutting-edge cloud services and tools, he said, contributing to digital upskilling by expanding access to training resources and certifications in cloud skills.

Q: What is the data centre outlook for the region?

Mr Simmons said Asia-Pacific, including Thailand, has become a hotspot for hyperscale data centre investments in recent years because of several key factors, including rapid digital transformation and growing demand for cloud services in the region, driven by e-commerce, digital device and mobile internet usage, and increasing adoption of generative AI technologies.

Thailand also holds a strategic geographical position, at the intersection of a north-south corridor connecting China to Singapore and an east-west passage extending from India to Vietnam, he said.

Deploying data centre capacity in Thailand creates geographic diversity and redundancy benefits, as well as lower network latency for China and thus an improved user experience for Chinese businesses and consumers, said Mr Simmons.

In addition, international network connectivity is rapidly improving from new submarine cables expanding in Thailand, with several new systems landing in the country this year, he said.

The Bangkok-Singapore route is one of the largest international internet routes in Asia, and its usage is growing rapidly, said Mr Simmons.

Supportive government policies and infrastructure investments are also factors, as the Thai government has taken steps to attract data centre investments.

The total value of data centre investments in Thailand is estimated to reach roughly 110 billion baht ($3.0 billion) by the end of 2024, he said, growing to 225 billion by 2027, marking a 27% compound annual growth rate.

Regarding Microsoft's refusal to specify an investment amount in Thailand, Mr Simmons said often this means negotiations are ongoing.

"Establishing a new data centre region involves significant planning and coordination with local authorities," he said.

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