Could South Korea be a future Data Centres hub?

June 3, 2020 / By  

Amid the COVID-19 outbreak, a number of companies have implemented a work-from-home policy, following the government’s recommended social-distancing measures. Consumers are refraining from going outdoors and avoiding physical contact with others. Meanwhile, online entertainment services, such as Netflix, Watcha Play and Wave, have positioned themselves to be the biggest beneficiaries of the COVID-19 situation, along with growing e-commerce platforms. Collectively, these online services have caused an upsurge in IT servers and cloud-based services.

South Korea launched the world’s first 5G commercial services in April 2019. As a consequence, the country is emerging as a new data centre hub in Asia. It is accelerating commercialisation of 5G, autonomous vehicles, cybersecurity operations and the digital transformation of companies. Furthermore, the country also has a geographical advantage with comparably low risk of natural disasters, such as earthquakes, which ensures a stable electrical supply.

There are 32 new data centres to be established by 2025, of which five will be government and public, whereas 27 private (Korea Data Center Council). Having a well-established data centre infrastructure is a challenge, not just limited to IT or telecom companies but for many other businesses. Notably, the Export-Import Bank of Korea is planning to build a data centre to process large sets of data as well as to prevent security breaches. The centre would also strengthen the company’s digital finance capabilities, such as loan approval processes and foreign exchange services.

Presently, US firms dominate the cloud market in Korea. The experts in the Internet Data Center(IDC) claim that more than 80% of domestic companies store their data in cloud services operated by Amazon and Microsoft. Naver, a web portal, is considered the sole domestic competitor in the cloud market. Naver operates its own data centre in Chuncheon and plans to build another one in Sejong. The company’s new hyper-scale cloud-based data centre in Sejong will take up about GFA 250,000 sqm, which is five times larger than the Chuncheon centre. Naver aims to win global market share in artificial intelligence (AI) and cloud services with the expansion of data centres. On the other hand, telecom companies, such as KT and LG Uplus, lease data centre facilities to other companies rather than operating internal cloud-based data centres.

From a macroeconomic perspective, ample supply of data centres coupled with robust demand could boost the overall economy. More investors are likely to develop an interest in prime data centres over time. The expected economic effects include, but are not limited to, the creation of new jobs and business opportunities, as well as spurring growth of establishing high-tech industrial infrastructure such as 5G, robotics, AI and big data.

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