Alibaba heats up the Vietnamese data center market

Alibaba is reportedly developing a data center in Vietnam to meet with legislative requirements. Among these is Decree 53, which takes effect in October 2022 and requires certain types of internet data to be retained within Vietnam.

A representative from Alibaba Cloud noted that the company is presently using Viettel and VNPT infrastructure to store client data. They do, however, back up data on other servers throughout the world, including Taiwan and Singapore.

Alibaba noted that the intention to create this new data center is not just to comply with regulatory laws, but also to suit the demands of Vietnam, a market with tremendous potential and opportunity for expansion.

Furthermore, establishing a data center in Vietnam that is independent of third-party services allows Alibaba to save money while improving information security and management.

Although Alibaba officials declined to provide exact figures, a data center installation can cost more than $1 billion.

Alibaba's announcement helps to make the Vietnamese data center industry hotter than before. Not only do analysts see the sector as promising, but it continues to attract projects from large technological companies.

According to a report by Savills Asia Pacific, the Vietnamese data center market is one of the fastest-growing in the world, thanks to the digitalization process of small and medium enterprises, a young population knowledgeable about digital technology, the emergence of 5G, data localization laws, etc.

Statistics show that by early 2024, Vietnam will have 44 data center service providers with 28 projects, reaching a total capacity of 45MW.

Recently, on April 10, 2024, the Viettel Group officially inaugurated the Viettel Hoa Lac Data Center. In terms of size, this is currently the largest data center in Vietnam, with a total floor area of 21,000 m², a capacity of 2,400 racks, and a total power of 30MW.

Previously, on August 15, 2022, CMC Group launched the CMC Data Center Tan Thuan. Located in the Tan Thuan Export Processing Zone, it serves as both a data center and a cloud computing infrastructure. The center spans 13,000 m², with an investment of 1,500 billion VND, featuring some of the most modern and safe technologies in Vietnam.

This is an example of a local Vietnamese business. Furthermore, Vietnam invites proposals from international businesses.

Notably, while Amazon is well-known for its e-commerce platform, it makes more from cloud computing. In late March 2022, Amazon named Hanoi as one of 10 Asia-Pacific cities where it intends to develop data centers. Amazon intends to develop local data centers that are lower in size but better serve local consumers.

Meanwhile, NTT, the Japanese telecoms company, revealed a similar proposal around the same time. Specifically, at the end of April 2022, they announced a $56 million investment to create a data center in the Ho Chi Minh City High-Tech Park. Upon completed, this will be Vietnam's largest standard data center.

According to Viettel, the Vietnamese data center industry is predicted to expand by 15% per year in the near future, and this figure might rise even higher if a big cloud computing business such as Alibaba completes its data center project.

The increasing data center business in Vietnam emphasizes the relevance of this service type.

When multinational corporations create data centers in Vietnam, the facilities are known as local data centers. Local data centers cannot compete on scale with main data centers, and their processing capability is likewise lower. However, they have a key advantage: they are "near" to local clients, resulting in quicker data transfer and reduced latency.

In Asia, this advantage is substantial. Most clients are small and medium-sized businesses, therefore they do not require strong, massive data centers, but rather quick data centers that enable the simple creation of services like as gaming, e-commerce, and streaming. Thus, local data centers enable service providers to reach a broader consumer base and boost their regional position.

As a result, it's reasonable that both domestic and foreign companies are pursuing plans to develop data centers in Vietnam. Although the projects from Amazon and NTT have yet to begin, the present centers are from local firms; yet, Alibaba's initiative illustrates that the Vietnamese data center industry is still booming.

This also bodes well for the desire to "transform Vietnam into the world's digital center in the coming period," as expressed by Minister of Information and Communications Nguyen Manh Hung during the inauguration of the Viettel Hoa Lac Data Center.