You might get a perplexed “huh?” when someone mentions hyperscale data centers and the Philippines in the same breath. It’s not an uncommon reaction when I mention in conversation that I work for a critical digital infrastructure company focused on building sustainable and carrier-neutral facilities for hyperscalers.
Among the uninitiated, reactions run from mild surprise to slightly incredulous when I say that the Philippines is certainly the next data center hub in Southeast Asia. Sure, I get it. The Philippines is yet to fully overcome the perception that it does not have much to offer beyond our stunning beaches and equally hospitable people. But sometimes, what’s underneath your nose is the hardest to see, and here’s what most of us are missing when it comes to the inevitable arrival of hyperscale data centers in the Pearl of the Orient Seas:
Data Consumption.
Close your eyes and imagine a country with a total population of 116 million, with 96.2 million people already connected to the Internet. That same country spends an average of 8 hours and 52 minutes a day on the Internet, doing everything from listening to music and catching up with friends and family to buying groceries and booking flight and hotel reservations online. The thing is, you don’t have to imagine: that country is the Philippines, where there are more mobile phone connections (122 million) than Filipinos.
The continued dominance of social media use in the Philippines and the high adoption of ecommerce and online payment transactions make the country a veritable force when it comes to data consumption. In 2024 alone, the total volume of online purchases for consumer goods and services is pegged at $8.7 billion, with 37 million of the population already adopting digital payments. And let’s not forget the daily volume of transactions now that financial institutions have embraced online banking.
According to a survey commissioned by Alibaba Cloud, 85% of local businesses are planning a full-scale migration to cloud services by this year, citing the government’s steady push for digitalization and the growing availability of local data centers as the main drivers. On the practical side, maintaining on-site servers on your own premises has become cost-prohibitive, and most office spaces require retrofitting and expensive equipment to meet even a Tier II TIA-942C rating, putting it out of reach for most businesses.
Given the vast amounts of data generated by all this online activity, it is only a matter of time before hyperscalers open local availability zones within the Philippines. Doing so allows the hyperscaler to bring its services closer to its own customers, and to enable easier compliance with compliance requirements.
Connectivity.
In a country where internet speed seems to be a universal frustration for its citizens, it’s almost shocking to discover that there are eleven active international submarine cable systems linking us to the rest of the world. And it doesn’t stop there: there are six more trans-Pacific and intra-Asia subsea cables under construction and expected to come online in the next three years.
Skeptics might ask, how did this happen? The answer is rooted in geography: disputes in the region make it difficult to deploy and repair submarine cables. The Philippines, along with Indonesia, are uniquely positioned to offer cable landing stations and routes through uncontested waters.
Subsea cables are a vital part of a complex infrastructure value chain, and the Philippines is now sitting at a geographic location that is highly connected to the rest of the world.
In essence, the presence of these submarine cable systems now provide a very large amount of capacity and connectivity, which are vital to the operation of data centers in general. The availability of more subsea cables drives down the cost of international bandwidth, and provides additional points of entry into more geographic locations to boost accessibility.
Another box ticked off for the Philippines off the hyperscale list.
Power.
As data centers are significant consumers of power, it may seem natural for some to discount the Philippines as a viable hyperscale destination due to historically high power rates compared to our neighbors in the region. The case of Singapore disproves this outright, as Singapore has the highest power rates in Southeast Asia, but this did not deter it from becoming the data center power house it is today.
Such a limited view does not fully take into account the benefits of power deregulation in the country, and how our current power framework is largely beneficial for the industry.
First, the Retail Competition and Access Policy provides for the concept of a contestable customer, or a large electricity end user, to source their power directly from different retail electricity suppliers. This means that contestable customers can negotiate the kind of supply that their needs require, thereby giving them better control over their energy mix in line with their sustainability goals. Given the critique the data center industry has received for being power-gobbling monoliths, the sustainability aspect has become more imperative in the last years, playing a substantial role in site selection processes.
Apart from greater control over the mix, contestable customers also have the flexibility to negotiate better rates with generation companies or independent power producers instead of being limited to the supply of their distribution utility.
This flexibility over mix and price provides an attractive counterbalance to less expensive power offered by our neighboring countries like Vietnam and Thailand.
Water and Land.
We all know that water prices vary according to location within the country, but even on the average, water costs in the Philippines are generally competitive across ASEAN.
We also have an entire slew of industrial parks across the country – from sprawling industrial estates with supporting infrastructure, to vertical buildings that can host edge data centers. Data center locators will be spoilt for choice when it comes to selecting swaths of land that will suit their needs, given that long-term leases of land for over 50 years are allowed under Republic Act 7652.
All these factors taken together bodes fairly well for the country, and our young workforce will benefit greatly from the training and upskilling that hyperscalers usually bring when they enter a particular market, in a big way. We’re on the precipice of a good kind of explosion – something that will happen sooner than most of us think.
And that’s not a prediction, that’s a spoiler. Exciting times ahead, indeed.
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