The data center market in Vietnam: High demand, great potential

DNHN - According to Minister of Information and Communications Nguyễn Mạnh Hùng, investing in data centers is a new type of investment for telecom operators.

High demand, great potential

Minister of Information and Communications Nguyễn Mạnh Hùng stated that investing in data centers is a new trend for telecom operators. This not only creates new growth opportunities but also helps avoid the risk of being replaced. To ensure effectiveness, investment in data centers needs to be accompanied by cloud services. Vietnamese telecom operators must focus on developing cloud services and renting cloud services to enhance investment efficiency and value.

The Ministry of Information and Communications is preparing to submit a draft decree to the government guiding the Telecommunications Law, requiring data from government agencies to be stored in Vietnam. This not only ensures safety and efficiency but also supports the development of domestic digital technology enterprises. Vietnam aims to become a Digital Hub of the region by 2030, with advantages in geography, infrastructure, resources, and government policies.

According to the plan, by 2025, 100% of government agencies will use cloud computing, with 70% of it provided by Vietnamese enterprises. Decree 53/2022/ND-CP on data localization has stipulated that foreign enterprises providing services in Vietnam must store user data domestically. This forces giants like Google, Facebook, and Apple to rent servers in Vietnam.

The boom in the e-commerce market and the strong development of cloud computing and fintech companies are driving the demand for data storage and processing. This has encouraged Vietnamese technology enterprises to invest in building data centers and developing digital infrastructure based on cloud computing, artificial intelligence (AI), and big data.

The Telecommunications Law 2023, effective from January 2025, clearly defines and guides data center and cloud computing services as telecommunications services. This law creates a favorable legal framework, attracting foreign investment, and allows 100% investment in data center services. However, this also places great pressure on domestic investors.

Mr. Nguyen Thanh Danh, CEO of VNG Data Center, commented that Vietnam does not yet have a brand or reputation in the international market, and the infrastructure and operations of domestic data centers do not meet the requirements of large foreign companies. However, Vietnamese enterprises have the advantage of market knowledge, understanding of domestic laws, timely customer service, and lower service costs.

Mr. Hoang Van Ngoc, CEO of Viettel IDC, believes that Vietnam is in the early stages of the cloud and data center services growth cycle, with significant growth potential over the next 10 years. The market is expanding but will be subject to strict selection, requiring businesses to leverage government data management and protection policies to attract customers from Bigtech companies.

Currently, Vietnam has 32 small and medium-sized data centers, with a total of more than 20,000 racks. Each year, Vietnam needs to build an additional 3 medium-sized data centers to meet demand. Domestic investors such as VNG, VNPT, MobiFone, and FPT Telecom are actively expanding their scale and partnering with foreign partners to improve infrastructure and operations quality.

Foreign companies like Alibaba, Edge Centres, GAW Capital, and NTT Global Data Centres are also actively investing in Vietnam's data center market. According to Research and Markets, the data center market in Vietnam is expected to reach USD 1.03 billion by 2028 and USD 1.26 billion by 2030, with an average annual growth rate of 10.8%.

Vietnam is considered a potential market for data center services but still lags behind other countries in the region. Compared to countries like Singapore, Indonesia, and Malaysia, Vietnam's market size is still modest. However, with competitive construction costs and land prices, along with a prime geographical location, Vietnam remains an attractive destination for investors.

Ms. Trang Bui, CEO of Cushman & Wakefield, noted that the data center market in Vietnam is still in its infancy but has strong potential for future growth. With government support and investment from both domestic and foreign sources, Vietnam could become a significant data center hub in the region.

Vietnam is facing many challenges in building a green data center market. Major barriers for providers include incomplete policies and legal frameworks for this type of service. Other factors such as the reliability and affordability of the power grid, regional temperatures, the availability of water resources, sustainable and renewable energy, and regulations on power capacity allocation and supply for data centers are also significant challenges.

Pressure on green trends

FPT Chairman Truong Gia Binh shared that when FPT negotiates million-dollar contracts, partners are concerned about whether “you are green or not.” This shows that the “green” factor is becoming a vital factor for securing large contracts in the future. In many countries, the data center industry consumes a large amount of electricity. In the U.S., data centers account for about 2-3% of total electricity consumption, while in Singapore, this figure is up to 12%.

Although the energy consumption of the data center industry in Vietnam is not yet large, with AI and big data analytics increasingly being applied in manufacturing, business, and services, the demand for energy for data centers is sure to surge. Vietnam aims to achieve net-zero emissions by 2050, along with a digital transformation goal. This sets requirements for green standards, energy optimization, and emission reduction for data centers.

Mr. Hoang Van Ngoc, CEO of Viettel IDC, said that many large customers renting data centers have begun to require green standards.

Mr. Byung Ki Lee, Director of Data Development at Nokia, noted that the data center market is under pressure to reduce carbon emissions. In fact, the data center market has consumed a huge amount of energy annually. Providers are gradually shifting to green models to save energy costs (up to 30%), thereby increasing revenue.

“When many countries start to follow the ‘green path,’ transitioning to greener, more environmentally friendly technologies will be a mandatory task for data centers,” Lee commented.

Vietnam is in the early stages of the cloud and data center services growth cycle, with significant growth potential over the next 10 years. However, to meet the increasing demand for energy and maintain commitments to low carbon emissions, investing in green technologies and infrastructure will be key to the sustainable development of this market. As more countries begin to follow the "green path," transitioning to environmentally friendly technologies will become a mandatory task for data centers in Vietnam.

Collaboration with foreign partners and leveraging the government's data management and protection policies will help Vietnam not only meet international standards but also attract more major customers and investors, contributing to the sustainable development of the domestic data center industry.

Anh Nguyen