Southeast Asia’s digital economy is surging. As demand for compute and data infrastructure skyrockets, AI companies are racing to establish a local presence. But where’s the best place to deploy?

You might want to look at Johor, Malaysia.

Once seen periphery, the city is quickly becoming a strategic hub for data centers in the region due to a combination of location strengths, competitive costs, and strong policy support.

And the world’s top tech players are taking notice:

• In December 2023, NVIDIA partnered with YTL to build a $4.3B AI data center in Johor
• In February 2025, Microsoft acquired its second site there for MYR 694M (~$147M)
• ByteDance, the parent company of TikTok, is investing $2.1B to expand its regional infrastructure.

Johor’s capital, Johor Bahru, has already reached a 1.4 GW total data center power capacity—on par with Singapore, the region’s long-standing hub.

 

 

What’s driving Johor’s rise?

Proximity to Singapore

Singapore currently hosts 70+ data centers with over 1.4 GW in capacity, making it Southeast Asia’s most mature digital infrastructure market. But land and energy constraints led the government to pause data center development from 2019 to 2022, forcing many global businesses to look for nearby alternatives.

That spotlight turned to Johor. Just across the Johor Strait, its capital is just a 20–30-minute drive to Singapore via the Johor–Singapore Causeway. With a sub-5-millisecond latency between the two hubs and access to 20 international subsea cables, Johor is ideally positioned to support low-latency, cross-border data exchange.

Competitive land and energy costs

For AI infrastructure, cost control is critical—and Johor offers a compelling advantage. Land costs are 1/3 to 1/2 of Singapore’s. Industrial parks offer both freehold and long-term lease options, with access to power, water, and fiber.

Energy costs are also significantly lower, with Malaysia’s industrial power rate at ~$0.10 USD/kWh vs. Singapore’s ~$0.27 USD/kWh.

In fact, according to CBRE, a world-leading commercial real estate and investment firm, average data center build costs in Johor are around $8.40 USD per watt—among the lowest in Asia.

Pro-business policies and the JS-SEZ

In January 2025, Malaysia and Singapore launched the Johor–Singapore Special Economic Zone (JS-SEZ), establishing nine flagship districts with incentives targeting high-value industries like AI and quantum computing.

Policy highlights include:

• 100% tax exemptions for data center, cloud, and infrastructure providers
• Accelerated permitting and infrastructure guarantees
• Targeted support to attract AI industry clusters to the zone

 

Together, these measures significantly reduce the cost and complexity of entering the market.

 

 

What infrastructure challenges should AI companies prepare for?

While Johor offers huge potential, deploying AI infrastructure still comes with challenges:

Power reliability and cooling efficiency

AI clusters require consistent, high-volume power. In some parts of Johor, grid instability or outage risks may require investment in UPS, diesel generators, or renewable energy backup. The hot and humid tropical climate also raises cooling costs, which may necessitate advanced techniques like liquid or natural cooling.

High upfront investment

Launching AI infrastructure means purchasing high-performance servers, GPUs, and software licenses, along with building or leasing cross-border fiber for low-latency workloads. This can complicate budget planning, especially when factoring in electricity, cooling, and ongoing IT operations.

Cross-border data compliance

AI workloads often involve sensitive user data or IP, so companies must balance latency needs with compliance to ensure that infrastructure aligns with Malaysia’s Personal Data Protection Act and regulations in Singapore and other markets. This means strong encryption, access controls, and carefully designed hybrid cloud or cross-border data flows.

 

 

Zenlayer is your one-stop infrastructure solution for AI expansion in Southeast Asia

We have been operating in Southeast Asia for over a decade, with 65+ edge nodes across the region—more than any public cloud provider. We help AI companies deploy infrastructure quickly, stay compliant, and connect with low latency at scale.

Enterprise-grade colocation in Malaysia

Zenlayer offers high-performance edge colocation across six independent data centers in Johor and Kuala Lumpur. We partner with world-class operators like Equinix, Digital Realty, and Global Switch, supporting:

• Tier 3-level reliability with redundant power and smart cooling
• Direct backbone connectivity for real-time AI training and inferencing
• Multi-site disaster recovery architecture for continuous availability
• 24/7 intelligent operations for rapid support and optimization

 

Hyperconnected fabric for AI

Zenlayer has built a 130+ Tbps network fabric that connects nearly 60 data centers in Southeast Asia, including Johor, Kuala Lumpur, and Singapore. We use 800 Gbps single-fiber transmission to ensure:

• High-speed, low-latency data exchange between AI clusters
• Sub-millisecond performance for latency-sensitive services
• Direct connections with AWS, Alibaba Cloud, and other public clouds for hybrid cloud operations

 

Edge compute services tailored for AI

Zenlayer provides flexible compute options, including bare metal, GPU cloud, and elastic compute, all delivered at the edge. Key benefits include:

• Localized infrastructure for low-latency AI workloads
• Elastic scaling and global interconnection across compute pools
• Seamless integration with hybrid or multi-cloud architectures

 

 

Accelerate AI deployments with confidence

We’re actively expanding partnerships with top regional ISPs like Telin (Indonesia), PLDT (Philippines), and NeutraDC (Malaysia) to deliver cloud-optimized networking across Southeast Asia. We’ve already helped companies in global hospitality, fintech, cybersecurity, agtech, manufacturing, and other industries accelerate deployments and streamline operations.

Whether you’re building new AI models or expanding your global reach, we have the right infrastructure to support you—from core data centers to the edge.

Contact a Zenlayer AI infrastructure expert today to get started.