Leveraging geographic security, low costs, and strong policy incentives, Malaysia has rapidly risen as a computing power hub in Southeast Asia. Johor has absorbed spillover demand from Singapore and moved decisively into the AI high-compute track, becoming a key transit hub for Chinese companies’ overseas computing expansion.
Author | Leci Zhang
Editor | Hanchen Meng
Key Takeaways:
The rapid rise of Malaysia’s computing-power landscape is not driven by a single policy or short-term investment cycle, but by the combined effects of geopolitical positioning, advantages in energy and land costs, institutional incentives, and positive global spillovers in computing demand.
Johor has leveraged spillover demand from Singapore’s data-center sector and proactively embraced AI high-performance computing use cases, achieving a transition from a regional backup location to a core node in Southeast Asia’s computing-power network.
For Chinese technology firms, Malaysia not only offers low-cost, large-scale computing infrastructure, but also objectively functions as a compliant “transshipment hub” for accessing advanced computing resources.
Against the backdrop of U.S.–China tech rivalry, Malaysia has preserved feasible institutional space for cross-border flows of computing power through cautious policy balancing and middle-ground diplomacy.
In the long run, Malaysia is transitioning from a traditional resource-based economy toward a key computing-power hub that connects East and West in the digital era, with strategic value that clearly extends beyond Southeast Asia itself.
Imagine this: in the Malaysian countryside, a campus covering roughly 275 acres is blanketed with gleaming solar panels, while rows of servers hum steadily. This scene epitomizes the computing power revolution unfolding across Southeast Asia—and Malaysia is increasingly becoming the engine driving it.
As of 2024, Malaysia has built and put into operation 54 data centers, with total computing capacity of about 504.9 megawatts (MW), nearly double that of 2021. Even more striking, a hyperscale data center campus under development by local company YTL in Johor is set to come online, with a total planned capacity of up to 600 MW and an initial phase of 72 MW.
Notably, this surge in computing capacity is no accident but the result of multiple forces working in tandem. It reflects not only Malaysia’s own favorable “timing, location, and policy alignment,” but also powerful external tailwinds. In particular, Johor has not only absorbed traditional business demand spilling over from Singapore due to tighter environmental regulations, but has also purpose-built multiple high-compute, high-energy data centers in response to the AI wave. In just a few years, Johor has transformed from oil palm plantations into a digital hotbed—fields once agricultural now filled with servers.
PDG Malaysia Data Centers: Johor Hyperscale & AI-Ready Campus Solutions
Image source: Princetondg
So what exactly has enabled Malaysia to emerge as a latecomer—but a fast riser—on the regional computing power map? In the following sections, EqualOcean examines the rise of this “Southeast Asian computing power hub” from the perspectives of geography, policy support, industry development, and Chinese enterprises.
01 Favorable Timing, Location, and Policy: The Foundations of a Computing Hub
Malaysia’s emergence as a new computing power hub can first be attributed to its unique geographic and environmental advantages. Located near the equator yet far from the Pacific Ring of Fire, Malaysia faces minimal risks from major natural disasters such as earthquakes. For data centers that require uninterrupted, 24/7 operations, a stable geological environment is a crucial assurance.
In addition, Malaysia sits along key East–West connectivity corridors and boasts abundant international subsea cable resources. Around 25 international submarine cables land across the country, providing high-speed pathways for data transmission. In geographic terms, Malaysia occupies an enviable position: largely free from major natural hazards while closely connected to global communications arteries—an ideal, stable, and well-connected base for data infrastructure.
Beyond geography, relatively low energy and land costs represent another major advantage. Malaysia enjoys ample power supply, with industrial electricity prices at roughly USD 0.135 per kilowatt-hour, among the lowest in Southeast Asia (by comparison, Singapore’s industrial electricity price is about USD 0.239 per kilowatt-hour). This means that operating a data center of the same scale in Malaysia can cost just over half as much in electricity as in Singapore.
Land availability is an even greater differentiator. Malaysia’s total land area is more than 450 times that of neighboring Singapore. Johor alone covers nearly 20,000 square kilometers—equivalent to about 26 Singapores.
Of course, favorable “location” also requires “people and policy.” Here, policy support refers to strong government backing and infrastructure investment. Malaysia has rolled out the national Malaysia Digital strategy, aiming to elevate the country’s digital economy to a new level. To attract investment in digital infrastructure such as data centers, the government has introduced a generous package of incentives. For example, under the Digital Ecosystem Acceleration Scheme (DESAC), qualifying data center projects can receive up to 100% investment tax allowances, with tax relief lasting up to ten years.
Companies granted Malaysia Digital Status (MDS) by the Malaysia Digital Economy Corporation (MDEC) are also eligible for a range of benefits, including corporate income tax relief, investment allowances, and exemptions from import duties. At the same time, the government has moved to address bottlenecks related to utilities and approvals. In 2023, Malaysia’s state-owned utility Tenaga Nasional Berhad (TNB) launched the Green Lane Pathway, cutting the grid-connection approval timeline for data centers from a lengthy 36–48 months to around 12 months.
02 Data Centers Everywhere: The Rise of Johor
With these advantages in place, Malaysia’s data center industry has entered a period of explosive growth in recent years. The southern state of Johor, in particular, has emerged as the brightest star in this computing power boom.
Located directly across the border from Singapore, Johor was once an obscure latecomer in the data center landscape. Yet within just a few years, it has undergone a dramatic transformation. When Singapore suspended approvals for new data center projects between 2019 and 2022, many multinational cloud providers and investors turned their attention to Malaysia. A wave of projects crossed the causeway into Johor and the Greater Kuala Lumpur area. Johor seized this spillover demand and, combined with its own resource advantages, surged ahead.
Although Singapore lifted its moratorium on data centers in 2022, it introduced much stricter sustainability standards, constraining expansion. By contrast, Johor—benefiting from its early-mover advantage and continued policy support—has maintained strong investment momentum.
According to estimates, by mid-2025 the total planned capacity of data centers under construction or already approved in Johor had reached approximately 5.7 gigawatts, far exceeding Singapore’s project pipeline of about 1.6 gigawatts during the same period. Johor has thus evolved from Singapore’s former “backup option” into an undisputed leading player in its own right.
From the data, the pace of data center expansion in Johor has been striking. Between 2019 and 2024, Johor’s data center supply grew at an average annual rate of 145%. By the end of 2024, Johor accounted for nearly 80% of Malaysia’s total data center IT load capacity. Although the number of operational data centers in Johor at the time represented only a small share of the national total (roughly a dozen), they were characterized by large single-site scale and high power density, often starting at hundreds of megawatts per facility.
By contrast, the traditional data center hub—the Klang Valley, encompassing Kuala Lumpur and Cyberjaya—hosts a larger number of sites, but most are small to mid-sized facilities below 20 MW. In simple terms, Johor has pursued a “scale-driven” strategy, where a single facility can rival several conventional data centers elsewhere.
According to official disclosures, as of the second quarter of 2025 the Johor state government had approved 42 data center projects, with total investment reaching approximately MYR 164.45 billion (around USD 35 billion). These projects are expected to create more than 6,000 high-skilled jobs and enable Johor to contribute about 78.6% of Malaysia’s online computing capacity. The Chief Minister of Johor has even stated that by 2030, the state aims to account for over 60% of the nation’s total data center capacity, laying the foundation for a regional digital innovation hub.
03 Chinese Companies Going Global: The Preferred Computing Power Transit Hub
Having examined Malaysia’s domestic development, we now turn to Chinese enterprises. In recent years, a growing number of Chinese technology companies have come to view Malaysia as a critical node in their Southeast Asian—and even global—expansion strategies. For Chinese cloud service providers and AI firms, choosing Malaysia as an overseas base reflects multiple considerations and distinct advantages.
The first is the cost and scale advantages discussed above. More crucial, however, is the regulatory convenience of “exporting computing power.” In recent years, the United States has imposed stringent export controls on China’s high-tech sectors, particularly restricting access to high-performance chips such as GPUs and prohibiting companies like NVIDIA from selling cutting-edge AI chips directly to China. This has created a significant bottleneck for Chinese AI firms seeking access to top-tier computing resources.
The emergence of third-party countries such as Malaysia has offered a pragmatic “detour.” Chinese companies can deploy training workloads in Malaysian data centers, sourcing GPU hardware legally from U.S. suppliers through global supply chains to Malaysia, and then accessing those resources remotely via Chinese engineering teams. Because the hardware does not physically enter China, these arrangements do not directly trigger U.S. export control restrictions.
In this sense, Malaysia has become a “transit hub” for China’s access to advanced computing power. Malaysia’s GPU imports have surged in recent years; in the first four months of 2025 alone, it imported GPU chips worth USD 6.45 billion, a substantial share of which was driven by AI projects deployed in the country by Chinese and U.S. technology companies.
In mid-2025, the United States at one point threatened to impose a 25% tariff on Malaysia on the grounds of preventing circumvention of chip export controls. The Malaysian government quickly responded by opposing illegal resale practices and introducing licensing requirements for the transshipment of certain high-end chips. This episode underscored the sensitivity of Malaysia’s role as a computing power transit hub: navigating geopolitical pressures while carefully balancing competing interests, it has preserved a realistically viable institutional space for Chinese companies’ computing power to go global.
Political and legal considerations also weigh heavily in Chinese firms’ calculations. Malaysia maintains friendly relations with China and does not impose discriminatory policies on Chinese technology companies, in sharp contrast to many Western countries. At the same time, Malaysia pursues a pragmatic, balanced foreign policy, maintaining neutrality between China and the United States. For Chinese companies, placing regional cloud nodes in Malaysia helps avoid potential security scrutiny associated with U.S. allies’ territories and faces less domestic resistance than in some other Southeast Asian countries.
For these reasons, an increasing number of Chinese companies are positioning Malaysia as a key springboard for their expansion across Southeast Asia and into global markets.
From the perspective of Chinese enterprises, Malaysia’s role can be captured by a vivid metaphor: it is the “Strait of Malacca” of the 21st-century digital era.
In today’s data-driven world, Malaysia has become a transit hub for East–West computing power flows. Centuries ago, Zheng He’s fleets stopped repeatedly at Malacca to replenish spices and fresh water on their voyages; today, Chinese AI model “fleets” sailing into global markets likewise choose Malaysian ports to refuel with computing power.
In this sense, Malaysia has taken on a new mission in the digital age: serving as an “AI computing power refueling station” for the world—while positioning itself as one of the biggest beneficiaries along this new “spice route.”
04 Conclusion
Malaysia’s rise from relative obscurity to a position of prominence on Southeast Asia’s computing power map is nothing short of remarkable, driven by both strategic foresight and favorable historical timing.
As global demand for computing power intensifies like the tropical midday sun, Malaysia has opened its doors, welcoming investors with ample land, a stable environment, and supportive policies. Johor has transformed from a rubber and palm oil heartland into Southeast Asia’s “computing capital,” while Kuala Lumpur and Cyberjaya continue to upgrade and consolidate their roles as established technology hubs.
Looking ahead, the Malaysian government has made clear its ambition to turn the country into a regional digital powerhouse and AI innovation center in the early 2030s. This points to continued investment in computing infrastructure, alongside a growing pipeline of homegrown innovations reaching beyond Malaysia’s borders.
That said, a sober assessment suggests challenges remain, including energy transition, talent development, and rising competition from neighboring countries. Still, for a nation once known globally for tin and pepper, Malaysia is carving out a new identity in the digital age. As one Malaysian industry insider put it, “We foresaw that AI would trigger an explosion in data center demand, so we had to move early.” Judging by current developments, Malaysia has indeed secured a strong strategic position.
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