Vietnam boasts 27 data centers across the country. Photos: VNG

Supply-demand imbalance

Vietnam's government strategies, digitization initiatives, fiber connectivity expansion, and 5G rollout position the country as an emerging data center market in Southeast Asia, according to the latest Arizton Research report.

The Telecommunications Authority under the Ministry of Information and Communications pointed out that the surge in demand for data centers in recent years can be attributed to the Covid-19 pandemic, which has made Vietnamese users accustomed to using online services for everything from shopping to entertainment. This has increased the need for technology companies to rent additional servers to ensure the best customer experience.

To meet this demand, giants such as Google, Amazon, Facebook, and others need to set up data centers in Vietnam, aligning with current regulations.

Meanwhile, the demand from domestic enterprises to use data centers has also increased significantly every year as they realize the cost-saving benefits of data storage and ensuring data security.

The country currently has 27 data centers spread across eight service providers, according to the Authority. "The data center infrastructure in Vietnam has not kept pace with the potential of enterprises and the growing demand for data and digital transformation," it said.

The Savills report also showed that the current number of data centers in Vietnam can only meet a maximum of 30% of demand.

Hoang Van Ngoc, CEO of Viettel IDC, believes that the Vietnamese data center market is still in its infancy. This also shows the immense potential of Vietnam and Asia. Vietnam's seed phase is expected to last for the next 10 years, allowing for continued strong growth in the number of customers and the size of the data center market.

He added that in the next five years, Vietnam's data center market could reach $1 billion with double-digit growth. This represents an opportunity for domestic data center providers. However, the market is also highly competitive.

"The number of national companies operating data centers is likely to drop from the current 40 to about four or five with larger capacity," he predicted.

Green data centers

VNG opens its new data center in Ho Chi Minh City last December.

Although the data center market is attractive, technology companies seeking to enter it face many challenges. In addition to infrastructure costs and competition from domestic and foreign companies, "green development" is becoming a necessary requirement, according to local insiders.

Data centers around the world are under pressure to reduce carbon emissions and switch to green models to save energy costs (up to 30%) and increase revenue.

"Some foreign companies leasing data centers in Vietnam require compliance with green standards, especially in energy optimization," said Ngoc of Viettel IDC.

According to Tran Tuan Anh, Head of the Policy and Planning Division under the Authority of Telecommunications, "green" data centers will soon be a mandatory standard.

"Vietnam encourages the application and use of new technologies in the investment and construction of green IT infrastructure to reduce energy consumption and CO2 emissions. Rules and regulations on energy consumption for information technology will be studied and issued," he said.

He stressed that reducing greenhouse gas emissions and carbon footprint in the industrial production chain is not only a global trend, but also a commitment of Vietnam and the international community at the 26th UN Climate Change Conference.

"With its favorable geographical location, Vietnam has many opportunities to become a hub for connectivity and data storage in the ASEAN and Asia-Pacific regions. To realize this potential, the starting point is to align with international trends and green data centers," he said.

According to a recent report by ResearchAndMarkets.com, Vietnam's data center market is expected to grow at a compound annual growth rate (CAGR) of 14.64% during 2019-25, reaching more than $1.6 billion by 2025.