2026-03-25

Notes on JB: The Data Center Boom Next to Singapore

Personal analysis. Data from Knight Frank 2024/2025 Malaysia Data Centre reports, Johor Investment Authority, TNB, and official press releases. Capacity figures as of mid-to-late 2025. March 2026.

I live in Kuala Lumpur. Since 2023, it has been impossible to read Malaysian business news without encountering another data center announcement. Microsoft. ByteDance. Google. Equinix. Numbers in the billions of dollars, with Johor Bahru as the destination. I kept noting them without understanding the actual structure of what was happening.

This is what I found when I sat down to understand it.

Why JB

Singapore ran out of space.

In 2019, Singapore imposed a moratorium on new data center construction. Data centers were consuming 7 percent of Singapore's electricity, and the government froze approvals on sustainability grounds. The ban was lifted in 2022, but large hyperscale projects have remained difficult to get through since.

Then ChatGPT launched in November 2022 and demand for AI compute exploded — at precisely the moment Singapore's doors were closed. JB was the obvious answer. Not because it was the cheapest or most convenient in isolation, but because it is one kilometer from Singapore.

That one kilometer matters. Sub-5ms latency to Singapore makes a JB data center functionally equivalent to being in Singapore for multinationals headquartered there. Bangkok and Jakarta cannot replicate this. The distance itself is the competitive advantage.

The institutional framework followed. Malaysia and Singapore signed an MOU in January 2024, and the Johor-Singapore Special Economic Zone (JS-SEZ) formal agreement was signed by both governments on January 7, 2025. Qualifying activities get corporate tax rates as low as 5 percent for up to 15 years. Land in JB is abundant and cheap. Johor state government has a long track record running industrial parks and has been actively courting investment.

The Scale

Numbers from mid-2025 (which likely understate the current position):

Live capacity: 487MW
Under construction: 324MW
Committed: 1.4GW
Pipeline: 3.4GW

Total committed investment: MYR182.96 billion ($41 billion). 51 approved projects. IT capacity projected to grow from ~1.5GW to 6.4GW by 2031 — roughly four times current levels.

Who Is Here

The industry splits into four layers.

Developers and operators are a genuinely multilateral mix. Malaysian: YTL (275-acre, 500MW campus in Kulai). Singapore-based: Keppel, Princeton Digital Group, STT GDC, Nxera (Singtel's infrastructure arm). Chinese: GDS and Bridge DC (Bain Capital-backed). Western: Yondr, Vantage, AirTrunk, EdgeConneX, Equinix.

Tenantsare dominated by US and Chinese hyperscalers: Microsoft (planning a second Azure region in JB), ByteDance, AWS, Google, Oracle, Sea (Shopee's parent).

Construction (EPC) goes to Malaysian contractors. IJM won a RM1.4 billion contract for a JB data center. This is where investment most directly reaches the local economy.

Financingcomes from international institutional lenders in large consortiums. Yondr's JB campus drew IFC, DBS, Deutsche Bank, BlackRock's GIP, HSBC, ING, and Natixis CIB for over $900 million.

The US-China Problem

ByteDance has committed over $2.1 billion in Malaysian investment. Bridge DC is widely understood to have ByteDance as its anchor tenant. GDS serves Chinese tech companies as its primary customer base.

A common assumption is that Malaysia sits outside US chip export controls. The reality is the opposite.

In February 2025, three people were charged in Singapore for illegally reselling NVIDIA GPUs routed through Malaysia to China. Questions arose about whether NVIDIA chips in Malaysian data centers were used in training DeepSeek models. The US identified Malaysia as a potential GPU transit route and began drafting export license requirements. Malaysia's trade minister formed a task force and strengthened controls under the Strategic Trade Act 2010.

Malaysia is structurally caught between drawing Chinese investment while being scrutinized by the US as a bypass route. Anwar's “non-alignment” posture reflects this directly. China has criticized Malaysia for cooperating with the US against Chinese firms. The US continues pressing for tighter controls. JB's boom sits at the front line of this.

Power, Water, and the Regulatory Shift

JB has experienced both blackouts and water shortages historically. A drought in 2016 forced water rationing for residents. Large Tier 1 and 2 data centers can consume up to 50 million liters of water per day — equivalent to the daily needs of over 300,000 households, per Johor state authorities.

TNB (Malaysia's national utility) has committed approximately RM43 billion in grid upgrades for 2025–2027. Whether this keeps pace with the 3.4GW pipeline is an open question.

The regulatory response has tightened in stages: a vetting committee in June 2024 (rejected ~30% of applications); Tier 1 and 2 approvals suspended in November 2025; Anwar declared a halt on non-AI data centers nationally in February 2026.

The near-term effect on the existing pipeline is limited. The $41 billion already committed continues flowing regardless.

Community tension has become visible. Residents near JB submitted a formal protest to the Johor Chief Minister's office in February 2026, citing construction noise, dust, and concerns about power and water supply. The mayor of JB acknowledged the problem at an investor conference: “People are too hyped about data centers. We do not have enough water and power. Investment should not come at the expense of local people.”

Employment: The Honest Answer

Anwar has consistently conditioned investment approval on local spillover — high-paying jobs and knowledge transfer.

Construction is local and direct. IJM and other large contractors are booking substantial contracts.

Operations technicians are hired locally at MYR3,500–4,000/month — below the Malaysian information and communications sector median of MYR5,300/month.

Engineers and management are the structural problem. Data center engineer salaries in JB are above the Malaysian ICT median, but Singapore's ICT sector median is SGD7,600/month (~MYR26,000). Crossing the causeway more than doubles the salary. As long as that gap holds, the gravitational pull toward Singapore persists.

1.86 million Malaysians live abroad. 1.13 million of them are in Singapore. The result: construction is local, operational expertise is imported or has drained across the causeway.

The MYR Effect

DC investment drives FDI inflows, which increase demand for MYR. In 2025, MYR was Asia's top-performing currency — up roughly 9% against the dollar to 4.07, the strongest level since 2018. Analyst consensus for end-2026 is RM3.95–4.10, with DC-related FDI continuing as structural support.

Who benefits: Malaysian economy broadly, MYR-denominated asset holders, consumers (cheaper imports).

Who pays: Anyone living on foreign income while spending in MYR. In KL, this is a meaningful group — education migrants, people on foreign-currency contracts paying local rent and school fees. The appreciation works against them directly.

What I'm Taking From This

The facilities were developed by a multinational mix. The compute is used by US and Chinese hyperscalers. The money came from Western institutional investors. The buildings were constructed by local contractors. The operational expertise comes from expatriates or Malaysian engineers who moved to Singapore. The power and water costs are borne by JB's residents. The currency appreciation effect works against people living on foreign income in Malaysia. The geopolitical risk of the US-China squeeze falls on Malaysia as a country.

The regulatory shift from quantity to quality has started. But the $41 billion pipeline flows regardless, and the structural asymmetries aren't being resolved — they're being managed while the pipeline executes.

Following from KL, that's what it looks like from here.

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