Philippines Data Center Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Philippines Data Center Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The Philippines data center market is forecasted to grow at a CAGR of 11.2% during the period 2022-2027. Manila is the most preferred location for data center operators, with 12 unique third-party data center facilities accounting for more than 75% of the country's existing power capacity. Other upcoming cities witnessing increased data center installations include Cebu, Clark, Mindanao, and Laguna.

Key Highlights

• In April 2021, the Philippines launched the CREATE Act. One of the factors is to reduce the corporate income tax for companies with net income over USD 95,000 from 30% to 25% and 20% for MSMEs with net income of less than USD 95,000 and assets less than USD 1.9 billion. This move has helped to thrive the data center market in the country due to increased cash in hand for companies for additional spending on IT infrastructure.
• Data center operators partner with local operators to do business in the Philippines market. In March 2022, Globe, a digital solution platform in the Philippines, constructed data centers in the country with ST Telemedia Global Data Centers (STT GDC) and Ayala Corporation (AC), a conglomerate based in the Philippines. Under the agreement, STT GDC and AC will underwrite new shares in Karman Edge Inc, a wholly owned subsidiary of Globe. This subsidiary will house a carved data center business that could expand halfway with a capacity of up to 100 MW in the mid to long run.
• The country is also witnessing significant investments in the studied market. As per Manila Bulletin, the country is expected to witness many data centers set up by 5-6 operators by the end of 2022.
• However, the country faces challenges in power supply and ESG (Environment, Sustainability, Governance) principles, according to leading real estate services company Santos Knight Frank (SKF).
• Over the past few years, the Philippines has emerged as a key player in the development of data centers because of elements including COVID-19's adoption of the Internet, the rise in popularity of CDNs and gaming, the booming BPO sector, and strategically located data centers.

Key Market TrendsIT and Telecommunications Sector to Exhibit Significant Growth Rate

• Singapore and Indonesia have been high-priority locations for most data centers, but the Philippines is now becoming a big player in the market. Many companies have started investing in the country amid the growing demand. For instance, Space DC announced plans to build a wealth of hyperscale data centers in the country by the end of 2022.
• In addition, Beeinfotech PH, a telephone company-neutral data center operator, announced the availability of the first data center in the Philippines. Called "The Hive," the facility is one of the country's largest telecom-neutral data center facilities and can accommodate at least 3,000 server racks on three floors with a rack height of up to 45U.
• With the increasing demand for digital services under the ongoing COVID-19 pandemic and recent efforts to improve national connectivity and IT infrastructure, the government is trying to bring hyperscalers and other large partners to the Philippines.
• Property services firm Colliers Philippines sees data center investments doubling to over PHP35 billion in five years on booming cloud services and e-commerce in the global capital of internet usage. In a July 2022 report, Colliers sees the Philippines as "one of Southeast Asia's major emerging data center markets" and predicts that industry investment will increase by 13.4% annually from 2022 to 2027.
• Moreover, the country is also rapidly expanding its ability to provide non-voice BPM and IT services to an increasingly wide range of customers worldwide, with horizontal BPM services in areas such as finance, accounting, and healthcare information services.
• With large flexible rack spaces, telecom-neutral data centers like The Hive are great colocation facilities for hyperscalers. This allows businesses to quickly scale resources and establish a local footprint without the difficult and tedious process of building a DC from scratch.

Increased Adoption of Artificial Intelligence in the Philippines

• The Philippines is gaining pace in outsourcing services to various overseas organizations, including customer assistance and technical services. The Philippine IT industry is promising because it is growing continuously, making this a perfect moment to outsource the various company's technology needs. Hence, in a world where data science and artificial intelligence contribute the most to generating IT revenue, the Philippines' economy is thriving with technological advancements.
• In 2021, the national artificial intelligence (AI) roadmap was introduced by the Department of Trade and Industry (DTI) of the Philippines, making it one of the first 50 nations globally to establish a national AI strategy and policy. According to research estimates, the DTI claimed that adopting AI may boost the Philippine GDP by 12 percent, or US$92 billion, by 2030. In addition, according to the agency, the AI roadmap aims to hasten the adoption and application of AI in the entire country to boost industrial development, foster higher-caliber entrepreneurship, and create chances for Filipinos to earn more money.
• As the Philippines government aims to become an AI powerhouse in the region through its National AI Roadmap, it has established a private sector-led National AI Research Center (NCAIR) to serve as a shared hub for AI research.
• In August 2021, Uniphore, a market player in Conversational Service Automation (CSA), released research findings revealing Filipino consumer perspectives on the challenges and opportunities of video conferencing. The findings also showed that Filipino customers are enthusiastic about using artificial intelligence (AI) technology to improve their experience.
• Furthermore, an increasing number of internet users are driving the demand for data centers in the country. According to ITU, 15.49 million households in the country are expected to have internet connections compared to 12.47 million in 2021. The additional data generated in the country could be used in AI and ML for advertising purposes.
• Also, the surge in the adoption of artificial intelligence in the Philippines, particularly in Manila, the nation's capital, offers a wide range of job options. Specialists in artificial intelligence are greater in demand than ever since it is a technology that is being used more frequently and expanding. Big data engineer, AI engineer, business intelligence developer, ML engineer, data scientist, research scientist, and robotics scientist are among the most AI jobs in demand that are prevailing in the Philippines.

Competitive Landscape

The Philippines data center market is moderately fragmented. The key players in this market are Fujitsu Ltd, Reliance Group, Capgemini, HCL Technologies Limited, etc. These major players, with a prominent share in the market, are focusing on expanding their customer base across foreign countries. These companies are leveraging strategic collaborative initiatives to increase their market share and increase their profitability. However, with technological advancements and product innovations, mid-size to smaller companies are increasing their market presence by securing new contracts and by tapping new markets.

• May 2022: Ayala Land Inc and PAG's Flow Digital Infrastructure have announced they are partnering to develop a carrier-neutral data centers in the Philippines. The first rollout is expected to target 4.5MW of capacity in Phase 1 of the larger hyperscale facility, which is expected to be ready for service around Q4 2023.
• March 2022: Globe, a digital solutions platform in the Philippines, announced the formation of a joint venture partnership with ST Telemedia Global Data Centre and Ayala Corporation (AC) for the operation, construction and development of data center projects in the Philippines. The expansion of Globe's data center capacity and capabilities will be accelerated by this project, which will also help the company meet the country's sizable and rising demand for data center services from both domestic businesses and international hyperscalers, including some of the largest content providers in the world.

Additional Benefits:

• The market estimate (ME) sheet in Excel format
• 3 months of analyst support

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