Malaysia is recognized as one of the emerging global data hubs, yet the neighboring country of Indonesia is now facing significant challenges.

The nation has been affected by the trade tensions between the United States (US) and China, leading the US to pressure Malaysia to prevent China from using its territory as a backdoor to access US AI chips.

Losing China as a partner would also mean Malaysia potentially losing one of its largest trading partners.

Recently, Reuters reported that Malaysia announced regulations requiring permits for activities involving US chips, including products from Nvidia. These permits cover exports, re-exports, and high-performance chip transits.

Experts suggest that chip oversight will continue to increase, as Malaysia works to finalize a trade agreement with the US.

The US Department of Commerce had previously raised concerns about data centers outside China, fearing that China might buy AI chips and train models for military purposes.

Malaysia has become a favored investment destination for global tech giants such as Microsoft, Amazon, Alphabet (Google’s parent company), as well as major Chinese companies like Tencent, Huawei, and Alibaba.

Investors are attracted by Malaysia’s competitive land prices, lower electricity costs, and the potential demand for AI from the local market.

As of December 2024, Reuters recorded 12 operational data centers in Johor, Malaysia, with a total capacity of 369.9 MW.

Knight Frank also reported an additional 28 data centers with a combined capacity of 898.7 MW.

Johor has secured investors for 42 projects valued at 164.45 billion ringgit (Rp 640 trillion) up to the second quarter of 2025. Altogether, these projects account for 78.6% of global IT operational capacity.

Meanwhile, PT Telkom Indonesia (Persero) Tbk / TLKM aims to increase the contribution of its data center business to revenue to 10 percent, in order to reduce dependence on Telkomsel, which currently accounts for around 70 percent of total Telkom Group revenue. Telkomsel is controlled by Telkom, with Singtel as the second-largest shareholder.

Telkom’s Director of Wholesale and International Services, Honesti Basyir, stated that revenue from the company’s data center business is growing at 30 percent per year.

He explained that Telkom operates data centers both domestically and abroad, ranging from hyperscale data centers to smaller-scale centers in dozens of Indonesian cities.

“Revenue from data centers comes not only from the capacity used but also from associated services, including full connectivity,” Honesti said at the Bali Annual Telkom International Conference (Batic) 2025 on Wednesday (August 27, 2025).

According to the data presented at Batic, Telkom now owns 35 data centers domestically and internationally.