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China & Hong Kong Data Center Markets, 2022-2027 – Smart Cities Fuel Data Center Demand, Increased Investment in Ai-Based Applications & Rising Investment in Blockchain & Quantum Computing

China and Hong Kong data center market witnessed investments of USD 30.68 billion in 2021 and will witness investments of USD 35.11 billion by 2027, growing at a CAGR of 2.27% during 2022-2027.

The China & Hong Kong data center market is one of the most mature markets worldwide and is led by cloud, telecom services, and BFSI sectors. Most data centers in the region operate in major metros cities such as Shanghai, Beijing, and Hong Kong.

These locations have attracted considerable investments in recent years, and more data centers are planned for the forecast period. Also, high Internet penetration has accelerated the demand for hyperscale data centers with a power capacity of more than 15 MW in China & Hong Kong.

OPPORTUNITIES AND TRENDS

Sustainable initiatives in the country: The Chinese government has pledged to achieve carbon neutrality by 2060, and therefore, has invested in initiatives to minimize carbon emissions and improve air quality. In 2021, wind and solar power in China accounted for around 11% of the total power consumption, which is expected to increase to around 16.5% by 2025.

This is a huge opportunity for vendors to expand their business in the data centers market in China and Hong Kong by working in favor of sustainable initiatives. For instance, Apple, along with its suppliers in China will invest around USD 300 million in 2022 and develop projects generating around 1 GW of renewable energy in China.

5G deployment to empower the data center market: Till September 2021, 5G operators have deployed around 993,000 5G base stations in China. Around 390 million households have adopted 5G services, and the number is expected to grow during the forecast period. Thus, providing a 5G network has become a significant criterion for offering internet services. In September 2021, China Mobile and China Broadcasting Network (CBN), a national cable operator, partnered to deploy a 700 MHz 5G implementation plan.

In Hong Kong, SmarTone Mobile Communications entered the 5G market in 2020 with a fixed wireless network and partnered with Ericsson to deploy 5G in Hong Kong. The significant scope of 5G will propel the demand for edge data centers, especially in Tier II and Tier III cities in the China & Hong Kong region, and boost the internet data center market.

SOME RECENT DEVELOPMENTS & INVESTMENTS

  • In 2021, six firms, including telecom operators such as China Mobile, and civil engineering company Shanghai Tunnel Engineering, signed an agreement to provide 5G coverage at tunnels and bridges in Shanghai.
  • In December 2021, EdgeConneX invested in Chayora, wherein the two companies have partnered to offer services from Chayora’s existing data centers with further expansion plans across China
  • In February 2021, Mapletree acquired a parecel of land of around 43,000 square feet in the region, with an investment of around USD 104 million, and has plans to construct a 50 MW data center, which is expected to be operational by 2023.
  • In November 2021, Digital Realty opened a data center in Hong Kong (HKG11) with around 210,000 square feet and a power capacity of around 24 MW.

The following factors are likely to contribute to the growth of the China & Hong Kong data center market:

  • Increased adoption of work from home due to COVID 19
  • Increased big data & IoT spending
  • Sustainable initiatives in the country
  • 5G to Fuel Demand for Edge Data Centers
  • Rising Investment in AI, Blockchain & Quantum Computing

REGIONAL OUTLOOK

  • Beijing: Beijing is one of the major hubs for cloud operators as companies like Alibaba, Amazon Web Services (AWS), Tencent have their presence. Amazon Web Services (AWS) is likely to invest in the region to boost the digital economy of the country
  • Shanghai: Shanghai is also one of the mature markets with a presence of local and global data center operators investing in the region
  • Other Cities: Around 21% of the total investment in other cities was contributed by Langfang, followed by Foshan and Tibet.

VENDOR LANDSCAPE

  • New entrants in the form of global colocation and cloud service providers are investing in the Chinese data center market due to high customer demand to have a physical presence in the China & Hong Kong market such as CapitaLand investing in the region in 2021.
  • Global cloud service providers such as AWS, Microsoft, Alibaba, Tencent, IBM, Oracle, and Google are continuing to expand their presence in the region with new cloud regions.
  • Hewlett Packard Enterprise is a leading vendor in the server market in the region. The average selling price of its server infrastructure increased along with unit shipments due to an increase in demand.

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