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Amazon to build smaller ‘local’ data centers in Asia-Pacific

Written by Nikkei Asia Published on   3 mins read

AWS aims to better serve the region as “data sovereignty” laws impact business.

Amazon plans to complement its network of massive data centers in the Asia-Pacific region by building smaller “local zones,” the e-commerce company’s cloud services arm told Nikkei Asia.

Amazon Web Services offers clients a range of digital capabilities, such as data storage and processing. Like its major competitors—including U.S.-based Microsoft and Google, and Chinese giants Alibaba Group Holding and Tencent—it has been racing to build large, multibillion-dollar data centers in Asia.

But in an interview with Nikkei, Phil Davis, the director who oversees the Asia-Pacific region and Japan for AWS, said his company has spotted a new opportunity. “What we’ve seen now is that many smaller countries may not need the full capability [of megadata centers] but need much more local infrastructure.”

Amazon has announced it will build ten so-called local zone data centers in six countries: Australia, India, New Zealand, the Philippines, Thailand, and Vietnam.

“I think you’ll see us announce more in the future,” Davis added.

Amazon’s local data centers are smaller than its megadata centers, which the company calls AWS Regions.

An AWS Region comprises a cluster of data center facilities that offer customers redundancy and resiliency. It costs Amazon billions of dollars to set up this infrastructure. Amazon currently has eight AWS Regions in the Asia-Pacific, including in Japan, Australia, India, and Hong Kong.

Davis said AWS would continue building more AWS Regions in the area, and the company has announced it will add megadata centers in Auckland and the Indian city of Hyderabad.

But by constructing many smaller data centers, Davis said, the company will be able to strengthen its position in the Asia-Pacific region.

Local zones will allow AWS customers to run “latency-sensitive” services like real-time gaming and live video streaming as well as new applications—including autonomous driving and virtual reality—throughout the region. Customers will be able “to build and deploy applications that require single-digit millisecond latency,” Davis said, referring to minimal lag times in data transfers.

Davis also said local data centers will help users better comply with data sovereignty regulations and requirements in their respective countries.

“Take a look at Indonesian financial regulators. They are requiring more and more of the actual processing [to be done] onshore,” he said. “You have data sovereignty and processing sovereignty issues, both of which are problem statements.”

Vietnam is also planning to introduce extensive rules governing how companies use and move data.

Since the e-commerce giant pioneered cloud computing services 16 years ago, AWS has become a major cash cow for Amazon.

AWS accounted for more than 70% of Amazon’s consolidated operating income in the most recent fiscal year, growing more than 36% year on year.

Although Amazon does not disclose the regional breakdown of AWS’ revenue and profit, Davis mentioned that the region he oversees is “in a comparable type of growth.”

According to Synergy Research Group, Amazon maintained its top share of over 30% in the global cloud market in Q4 2021, topping Microsoft, Google, and Alibaba. Amazon is also the market leader in the Asia-Pacific region, capturing top positions in all areas except China, where Alibaba leads.

“China remains a unique market dominated by local companies, while in the rest of the APAC region, there is strong competition between global cloud providers, with some local companies also challenging for business in their home countries,” said John Dinsdale, chief analyst at Synergy Research Group.

AWS says it has “millions of customers” worldwide and serves various sectors in the Asia-Pacific region, including startups, large corporations, and government agencies.

Asked about the competitive landscape in the region, Davis said, “We were here early and have been here the longest. We are significantly advantaged compared to any other competitors.”

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.


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