Market Trends of Japan Data Center Construction Industry
Tier III Segment Held the Majority Market Share in 2023
- In 2023, Japan boasted over 70 data centers holding tier III certification, with Tokyo leading the pack. The nation's demand for tier III data centers is primarily fueled by their reliability and affordability. SMBs, in particular, favor tier III centers for their robust redundancy features. Notably, tier III data centers elevate uptime significantly, boasting an impressive 99.982% annual uptime, a marked improvement over tier II facilities.
- Industries like BFSI, telecom, and media, especially those emphasizing entertainment, are pivoting toward wholesale and hyperscale colocation facilities, elevating the demand for tier III data centers. These centers are distinguished by their robust power and cooling redundancies alongside a comprehensive suite of onsite services. Notably, in 2023, over 80% of Japan's population engaged with social media.
- While tier III data centers remain the industry's favored choice for their financial and operational stability, tier IV facilities are gaining traction. Tier IV facilities, known for their superior performance and an impressive 99.99% uptime, are increasingly becoming the next go-to for large businesses. Despite this, tier III data centers maintain their dominance as the most prevalent standard in the industry, with tier IV facilities projected to exhibit the highest growth rate.
- There is a noticeable decline in demand for tier I and tier II data centers as they struggle to meet the rising demand for seamless services from businesses. The lower reliability and higher downtime of tier I and tier II data centers render them less favorable. Consequently, tier III data centers are on the rise in the market.
- Currently, more than five tier III data centers are under construction nationwide. Notably, ST Telemedia Global Data Centres (STT GDC), Daiwa House Industry, and Vantage Data Centers are leading this market expansion. Such developments are fueling the growth of data centers in the country, prompting operators to either expand existing facilities or construct new ones to meet the rising demand for data processing.
Understand The Key Trends Shaping This Market
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IT and Telecom Segment Held a Significant Market Share in 2023
- The market is witnessing a notable surge in growth as more enterprises shift to cloud platforms. Major global players, including Microsoft, Amazon Web Services (AWS), Google, Oracle, Tencent Cloud, IBM Cloud, and Alibaba Cloud, are heavily investing in Japan's data center market. These companies are swiftly expanding their footprints by establishing cloud regions and data center facilities in the country, solidifying Japan's position as a key hub for cloud operations.
- In January 2024, Amazon Web Services announced a USD 15.2 billion investment to bolster its cloud computing infrastructure in Japan by 2027. The focus is on ramping up data center capabilities in Tokyo and Osaka.
- In April 2024, Microsoft announced a substantial investment of US$2.9 billion in Japan's AI and cloud infrastructure. This move is not only aimed at bolstering the nation's technological capabilities but also focuses on enhancing skills, research, and cybersecurity measures.
- Japan's government has set an ambitious target to connect nearly all households to high-speed fiber optic networks by 2028. Additionally, it has aimed for 99% of the population to be covered by next-generation 5G wireless networks by the close of FY 2030. As part of its digitalization drive, Japan plans to have its shores completely encircled by seabed cables by the conclusion of FY 2025.
- The deployment of 5G networks in the country is set to significantly enhance the digital economy, leading to a surge in demand for high-bandwidth networking infrastructure. Notably, companies like KDDI Corporation and SoftBank Corp. are actively bolstering 5G expansion through strategic collaborations. In a recent move, on May 8, 2024, the two companies announced discussions to potentially broaden the scope of their joint venture, 5G JAPAN Corporation ("5G JAPAN"), which is dedicated to building 5G networks in Japan. Such initiatives not only propel the growth of data centers in the country but also incentivize operators to either expand their existing facilities or construct new ones to meet the escalating data processing demands.
