How Can AI Innovators Capitalize on Singtel’s Recent Investments in Regional Data Center Infrastructure?

In a strategic move toward Artificial Intelligence (AI) development in the Southeast Asian region, Singtel has established pivotal partnerships, bolstering its AI-ready infrastructure. In June 2024, Singtel’s Nxera joined forces with TM, a leading Malaysian integrated telco and technology company, to create sustainable and hyper-connected AI-ready data centers in Malaysia. Leveraging TM’s status as the largest domestic network infrastructure, extensive international subsea cable systems, and Malaysia's largest interconnected data center, the partnership with Singtel is poised to transform the Association of Southeast Asian Nations (ASEAN) into a top digital hub destination, with potential for significant economic growth and technological advancement.

Concurrently, Singtel made a groundbreaking declaration in collaboration with data center colocation service provider ST Telemedia Global Data Centers (STT GDC) and global investment firm KKR. The three entities have committed to infusing a staggering US$1.3 billion into STT GDC, marking Southeast Asia's most substantial digital infrastructure investment in 2024. This momentous investment and the series of previous investments and partnerships underscore Singtel's commitment to strengthening the region's AI-ready capacity and supporting digital transformation initiatives in the region.

These commitments to expanding the region’s data center’s capacity and connectivity come from the attempt to meet the growing demand for cloud, digitalization, and AI in Southeast Asia. It plans to target next-generation AI application providers, enterprises seeking digital transformation, and hyperscalers looking to enter new market opportunities in Southeast Asia through colocation facilities. Its expansion comes at an opportune time amid a period when global “Big Tech” companies like Google, Microsoft, Amazon, and Huawei are increasingly turning to the region to leverage their position as a developing hub for AI innovation.

According to a study by A.T. Kearney and Singapore’s Economic Development Board Investments (EDBI), a subsidiary of the country’s Economic Development Board, Singapore’s AI-related investment per capita is around US$68, compared to the regional Southeast Asian average of about US$2. The likely reason for Singapore’s key differentiated spending on AI-related investments could potentially be its existing built AI-ready infrastructure. By providing critical energy provision to enterprises looking to capitalize on AI solutions, the barriers to entry in implementing AI are reduced drastically, opening a key opportunity for investments and implementation in an enterprise’s immediate roadmap. With a clear goal to further stimulate AI investments in the region, Singtel Nxera plans to increase its data centers’ existing 62 Megawatt (MW) capacity to 200 MW with three new AI-ready data centers in Singapore, Thailand, and Indonesia. Its partnership with TM intends to develop the data center to cater to 64 MW with a scalable output of 200 MW in response to market demands.

Consequently, ABI Research expects AI software revenue in Asia-Pacific (excluding China) to grow to US$44.2 billion in 2030 from US$5.8 billion in 2023 (at a Compound Annual Growth Rate (CAGR) of 29%). By creating a comprehensive network of AI-ready data centers capable of powering and supporting AI adoption in the region, the hope remains that the robust infrastructure built will form the base for Southeast Asia to capitalize on the broader region’s expected growth and become a significant player in AI investments, innovation, and adoption.

ABI Research expects the adoption rate and investment per capita in Southeast Asia to exponentially improve as the demand for AI software increases and the capacity of AI-ready digital infrastructure improves throughout the region. With major players like Microsoft’s over US$3.9 billion investment in new data center cloud and AI infrastructure in Indonesia, Malaysia, and Thailand, the maturity and capacity of digital infrastructure are expected to grow significantly. These planned investments are laying the groundwork for other global technology firms and local technology vendors to drive AI-based investments in the region.

In a region where digital infrastructure is rapidly being deployed to support AI applications, technology vendors and innovators should strongly consider the following to position themselves at the forefront of enterprise adoption and digital transformation:

1. Develop Differing Strategies Based on the Country and Industry’s Readiness to Adopt New AI Technology: For AI adoption to succeed in the long term, enterprises need extensive organized data, trained AI expertise, and a culture of experimentation and data-driven decision-making. Technology vendors should recognize that each enterprise is at different stages in its AI-readiness, from infrastructural availability to adoption mentality. By recognizing that AI is not a plug-and-play implementation, but a consistent form of implementation, strategic roadmaps can be designed to prioritize foundational change, such as change management and a comprehensive data governance strategy, rather than directly implementing AI solutions without its supporting architecture.
2. Understand Varying Regulatory Standards in ASEAN by Focusing on Crucial Public-Private Partnerships in the Works: As AI continues to develop, the region and its governments will continue to work closely with critical private partnerships from technology giants like Microsoft, Google, Amazon, Huawei, OpenAI, and others. AI innovators should monitor these partnerships closely as public-private partnerships like Microsoft’s heavy investment in Indonesia and Malaysia could spark more open AI-related regulatory policies in Southeast Asia. Technology vendors can strategize opportune entries into growing markets with relaxed regulatory standards that encourage further investments by understanding how bigger developments influence policies in a new and developing field of AI.
3. Focus on Strategies That Reduce Capital Expenditure (CAPEX) Due to the Regional Enterprises’ Nature: A significant portion of Southeast Asia’s enterprises are Small and Medium Enterprises (SMEs). As they typically operate based on a profit-maximizing business model, concerns about investing significant amounts of CAPEX in digital solutions could be a major challenge. Technology vendors could explore other revenue generation options, such as operating as a Subscription-as-a-Service (SaaS) model, where they could potentially lower CAPEX acquisition costs and generate a long-term Operational Expenditure (OPEX) cost structure.