As AI reshapes societies around the world, Malaysia is embracing this next-generation technology to drive inclusive economic growth, boost productivity, and enhance public services. AI is no longer a concept of the future – it is already transforming the way businesses operate, the way government delivers services, and the way Malaysians work.
Central to Malaysia’s journey towards harnessing the power of AI is the development of world-class datacenters—essential infrastructure that forms the backbone of our digital world. Malaysia’s data center market holds immense potential, valued at USD4.04 billion in 2024 and is projected to reach USD13.57 billion by 2030, rising at a staggering compound annual growth rate (CAGR) of 22.38%.
This indicates the critical role that datacenters will play in accelerating Malaysia’s AI-driven economy. But what exactly are datacenters, and why are they so important?
The role of datacenters in an AI-driven economy
Datacenters are the physical infrastructure behind cloud computing. Think of a datacenter as a “digital brain” that powers essential services on the cloud, from the life-saving work of doctors and first responders to everyday necessities like food deliveries, remote work, and online banking. Inside, it houses servers, storage devices, and networking infrastructure to ensure data is always available, secure, and accessible.
Datacenters have now become a strategic imperative in the AI era, as they provide the immense computational power required to train, test, and deploy AI solutions at scale. Modern, hyperscale datacenters are specifically equipped with a vast amount of computing resources specifically designed to handle massive AI workloads, thus ensuring people and organizations have the reliable cloud services they need to harness AI effectively.
Why are datacenters crucial for AI’s future in Malaysia?
Malaysia is positioning itself as an early mover in AI – a mandate that comes directly from Prime Minister Anwar Ibrahim, who stated that the government is committed to propelling the nation as a leading AI hub in Southeast Asia. This ambition is already taking shape through various strategic initiatives including the establishment of the National AI Office (NAIO) under the Ministry of Digital to help achieve the Government’s key outcomes related to AI. Among others, NAIO will drive the completion of Malaysia’s AI Technology Action Plan 2026 – 2030, as a continuation of the National AI Roadmap 2021 – 2025; underscoring the nation’s efforts in fostering a robust AI ecosystem.
Moreover, industries across Malaysia are rapidly putting AI into action, as seen in companies like PETRONAS, Qi Group, and RHB Bank. This rapid AI adoption is projected to have a significant economic impact – according to research by Microsoft and Access Partnership, generative AI can potentially unlock USD 113.4 billion of productive capacity, equivalent to approximately 25% of Malaysia’s 2022 GDP.
But to unlock this immense potential, AI technology has specific requirements. It relies on the ability to process data quickly and efficiently. AI requires significant computing power to run machine learning algorithms, perform complex data analyses, and make real-time, data-driven decisions. Datacenters, especially those with larger capacities, are the core infrastructure needed to meet these demands and fully unlock AI’s potential.
Powering Malaysia’s AI-economy on the cloud
Microsoft brings decades of global expertise in building and operating secure, scalable, and sustainable datacenter infrastructure to power the cloud. Around the world, Microsoft operates over 300 datacenters that are trusted by leading enterprises and governments to manage sensitive data, deliver high-performance computing, and ensure business continuity with enterprise-grade security and compliance.
In Malaysia, this commitment is exemplified by the upcoming launch of the Malaysia West Cloud Region, Microsoft’s first datacenter region in the country. More than just a datacenter, the region will include three availability zones, which are distinct physical locations that are close enough to have low-latency connections to other availability zones, but far enough apart to reduce the likelihood that more than one will be affected by local outages or weather. Availability zones have independent power, cooling, and networking infrastructure – so if one zone experiences an outage, then regional services, capacity, and high availability are supported by the remaining zones.
The Malaysia West Cloud Region will also be connected to Microsoft’s global wide area network (WAN), providing high-bandwidth, low-latency connectivity to other Microsoft cloud regions internationally. This will enable Malaysian companies to expand internationally in a more seamless way while offering global businesses a gateway into Malaysia with integrated technological readiness.
Strategic Benefits of Microsoft’s Malaysia West Cloud Region
Once operational in the second quarter of 2025, customers will get access to the full Microsoft Cloud services including Microsoft Azure, Microsoft 365, and Dynamics365/ Power Platform. By using the Malaysia West cloud region, businesses and organizations will gain several benefits:
- Data residency and compliance: businesses will be able to honor their data residency commitments by storing and processing data within Malaysia’s borders, ensuring greater compliance with local regulations and industry standards.
- Enhanced performance and reduced latency: Malaysia West’s three availability zones will increase business efficiency with faster network connectivity and lower latency between local data centers and global Microsoft Cloud services.
- Sustainability and energy efficiency: By using the Malaysia West cloud region, businesses can take advantage of Microsoft’s next-generation innovations on sustainability and carbon emissions reduction methods, thereby saving on energy costs and reducing their environmental impact.
Democratizing the cloud dividend for Malaysia and Malaysians
Ultimately, building datacenters, is not just about technology – it’s about creating a digital ecosystem that is inclusive, secure, and sustainable for everyone.
Beyond the strategic benefits for cloud customers, research by the IDC projects broader economic and social benefits from the Malaysia West cloud region*. Over the next four years, Microsoft, its partners, and cloud-using customers are expected to generate about USD$10.9 billion in new revenues. The new datacenter region will help eliminate some of the barriers to cloud adoption within the region and account for approximately 16.9% of this new revenue total through 2028.
In the same time frame, Microsoft and its partners and customers will add 37,575 jobs to the economy, including jobs directly in their own organizations and jobs generated indirectly in other organizations. Out of these, 5,700 are skilled IT jobs. The creation of new jobs will be spread across key strategic sectors including retail, manufacturing, financial services, energy, as well as the public sector.
Microsoft’s investment in the Malaysia West cloud region underscores our long-term commitment to supporting the nation’s digital ambitions—empowering businesses, government agencies, and communities to leverage AI responsibly, securely, and sustainably. By democratizing access to cutting-edge cloud technologies and AI capabilities, Microsoft is helping Malaysia unlock new economic opportunities, foster innovation, and create a more inclusive future for all Malaysians.
To learn more about Microsoft’s Malaysia West Cloud Region, please visit aka.ms/malaysiacloudregionplaybook.
*Source: IDC Info Snapshot, sponsored by Microsoft, The Microsoft Cloud Dividend Snapshot: Malaysia, Doc. #US52629924, October 2024