INVESTMENTS by technology giants in Malaysia’s data centre industry are expected to boost the national economy by empowering the domestic small and medium enterprises (SMEs) and catalysing technological advancement in the sector.
The recent plans unveiled separately by Amazon Web Services Inc (AWS) and Microsoft Corp in setting up large data centres in the country are welcomed by the SMEs as it will offer them supply chain opportunities. It will in turn empower local tech talents and enhance domestic digital infrastructure, thus accelerating the digital transformation of SMEs and creating a vibrant ecosystem for start - ups to flourish.
AWS, the cloud computing division of Amazon.com Inc, disclosed in August last year its plans to invest US$6 billion (RM28.32 billion) by 2037 to establish the new AWS Region in Malaysia.
On May 2, Microsoft also revealed plans to invest US$2.2 billion (RM10.38 billion) to advance new cloud and artificial intelligence (AI) infrastructure in the country.
Previously, Investment, Trade and Industry (MITI) Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said data centres made up the bulk at RM114.7 billion, out of RM144.7 billion approved digital investments between 2021 and 2023.
He also said the approved investments were RM3.4 billion in 2021, RM80.8 billion (2022) and RM60.5 billion (2023) coming from various organisations such as Amazon, GDS Holdings Ltd, YTL Corp Bhd and ByteDance Ltd.
According to Statista, the global data centre market this year is projected to reach US$340.2 billion in revenue.
In addition, according to the online platform, revenue is expected to show a compound annual growth rate (CAGR 2024 - 2028) of 6.56%, resulting in a market volume of US$438.7 billion by 2028.
Direct Advantages for Local SMEs
SME Association of Malaysia national secretary general Chin Chee Seong said the investments from AWS and Microsoft into Malaysia is expected to bring numerous benefits for SMEs, both in the short and long term, integrating them into a broader supply chain ecosystem.
“SMEs will become key providers in various sectors such as consulting services, logistics and supply chain management, value - added services, human resources services, ICT services, construction, renovation and F&B services.
“This integration will not only expand their business opportunities but also enhance their competitiveness and growth potential within the digital economy,” he told TMR.
On economic growth, he said the arrival of these tech giants is anticipated to draw more foreign investments, fostering a vibrant environment for start - ups and SMEs.
At the same time, such investments will accelerate the digital transformation of Malaysian SMEs, cultivating a more innovative and resilient business ecosystem.
He said equipped with the latest digital solutions, SMEs will be empowered to revamp their business models, enhance their competitiveness and successfully compete in the global market.
As a result, SMEs will be able to streamline their operations, boost efficiency and ultimately, achieve greater success.
By having AWS and Microsoft data centres readily available, he noted that SMEs are able to instantly tap into cutting - edge cloud infrastructure, eliminating the need for substantial upfront investments in hardware.
Moreover, Chin opined that the proximity of these data centres will lead to cost savings for SMEs, as it will be able to gain from reduced latency and lower data transfer expenses, ultimately benefitting their bottom line.
Both AWS and Microsoft are expected to commit to training programmes aimed at enhancing the Malaysian workforce’s skills in cloud computing and other digital areas. These initiatives will help ensure a steady supply of talent to support the country’s expanding digital economy, he added.
“By expanding the pool of skilled workers, these programmes will directly address the current shortage of ICT talent in Malaysia, providing SMEs with access to a larger, more capable workforce to drive their digital transformation efforts.
“In summary, the strategic investment of AWS and Microsoft will drive significant economic growth, foster a more resilient and innovative SME sector, and contribute to the overall advancement of Malaysia’s digital economy,” Chin said.
Local Supplier Opportunity
Malaysia Semiconductor Industry Association (MSIA) president Datuk Seri Wong Siew Hai pointed out that the investments by AWS and Microsoft in setting up data centres in Malaysia are primarily focused on enhancing cloud computing infrastructure and services within the region.
He said while it has no direct impact towards Malaysia’s semiconductor industry, however, these investments may have indirect effects on the local semiconductor industry in several ways.
“As these tech giants expand their presence, there may be opportunities for local businesses and manufacturers, including semiconductor companies, to become part of their supply chain, either through direct partnerships or by providing ancillary services as well as products.
“Some semiconductor products could even be produced in Malaysia to manufacture servers for their worldwide customers,” he told TMR.
Wong added that it is imperative for the government to encourage these companies to explore local custom Application - Specific Integrated Circuits (ASiC) solutions from integrated circuit design companies like SkyeChip for compute acceleration.
Touching on infrastructure, he highlighted that there is a need for reliable power and telecommunications infrastructure to support these data centres.
Enhancements to infrastructure will lead to overall improvements in these areas, indirectly benefiting industries that are sensitive to disruptions in these utilities, like semiconductor manufacturing.
Upgrading the Local Workforce
Sunway University economics professor Dr Yeah Kim Leng said foreign direct investments (FDI) by global tech companies such as AWS and Microsoft are a good signal that the recipient country has favourable growth prospects in both the overall economy and specifically, the ICT industry.
“It also amplifies investor confidence in the country’s economic policies and macroeconomic management in addition to political stability.
“Given the preeminent roles of these two global firms in driving computer industry growth and transformation, their investments, although small relative to Malaysia’s total FDI inflows, have significant impact through network effects and crowding in both domestic and foreign companies,” he told TMR.
Furthermore, he said the global firms also play a key role in providing solutions to enterprise IT needs, thereby driving up firm - level productivity and efficiency.
Another important benefit for Malaysia, he added, is the provision of employment opportunities for skilled manpower and income - generating openings for local suppliers and service providers.
Yeah said these global tech firms are expected to deploy leading - edge solutions and services to both foreign and local firms, thereby further strengthening the competitiveness of the country’s industrial clusters and global value chains.
“By leveraging AWS and Microsoft’s services, local businesses will not only improve efficiency and lower transaction costs but also be able to plug into global value chains more seamlessly and efficiently,” he said.
On initiatives to support skills development and training programmes, he said the digital skills training and upgrading constitute an important component of the country’s human capital development plan to leverage on FDI to elevate the technological capabilities of the Malaysian workforce.
This learning and training opportunity has far greater and more durable effects on the transformation of the economy in moving up the income and technology ladder, Yeah added.
To increase the country’s ability to “absorb” FDI and develop its own indigenous technological capabilities, he said Malaysian universities and research institutions should find ways and means to engage with the global tech firms in collaborative research, development and innovation.
“There are already existing industry – university - research institutions and the entry of the US tech giants will present more opportunities to enliven the landscape,” he said.
Source: https://themalaysianreserve.com/2024/05/27/global-tech-giant-investments-to-boost-economy-tech-advancement/