Hong Kong's ongoing efforts to build data centers lays a solid foundation for the digital upgrade of its industries and development of the city's innovation and technology sector.

Throughout the 25 years since the establishment of the Hong Kong Special Administrative Region, the international financial hub has attracted many of the world's leading multinational corporations to set up their regional headquarters and offices in the city, bringing with it a huge international data flow.

With the digital economy emerging as a new driver of the global economy, the application of digital technologies is becoming the future direction for innovative technology companies in Hong Kong, driving a surge in demand for data centers and digital transformation of businesses in the city, said Lin Erwei, director and executive vice-president of China Mobile International.

The growing demand for cloud computing, virtual reality, artificial intelligence, big data and the internet of things is expected to drive a booming data center industry in Hong Kong, Lin said.

In December, CMI began construction of its Fo Tan Data Center in Hong Kong, which will offer a comprehensive range of services to local and international customers, including 5G, cloud computing, AI and edge computing.

The new facility will span around 100,000 square meters, and house over 9,000 server cabinets, making it one of the largest single data centers in Hong Kong. It will be a key component of the core data center cluster in the Guangdong-Hong Kong-Macao Greater Bay Area.

Following the opening of the China Mobile Global Network Center in Tseung Kwan O in November 2014, the new Fo Tan Data Center will be the second self-owned data center built by CMI in Hong Kong.

"The two data centers, together with CMI's international submarine cable resources in Hong Kong, Guangdong-Hong Kong cross-border system, and local 5G networks resources, will enable China Mobile to build a new system of '5G + Computing network + Smart Center' information services in Hong Kong, laying a digital base for the development of Hong Kong's digital intelligence and helping the development of Hong Kong's digital economy," Lin said.

The national 14th Five-Year Plan (2021-25) emphasizes the need to develop Hong Kong into an international innovation and technology hub, accelerate the building of an integrated national system of large data centers, with the Greater Bay Area and other national hubs and nodes as preferred locations for new data center clusters.

More land, power supply needed

Hong Kong has a number of favorable conditions for the development of the data center industry. The city is ranked among the six top markets globally in terms of market size, fiber connectivity, cloud availability, low taxes and development pipeline in Cushman & Wakefield's Data Center Global Market Comparison report.

Hong Kong enjoys relatively low barriers of entry, limited natural disaster and mature data protection ordinance, said John Siu Leung-fai, managing director and head of project and occupier services for Cushman & Wakefield Hong Kong.

To promote Hong Kong as a data center base of excellence in the Asia-Pacific region, the HKSAR government has introduced concessionary measures, including waiving the fees for partial change of use of existing industrial buildings, formulating lease modifications for industrial land for data center use, and introducing land sale conditions for land dedicated to data centers to facilitate the industry in removing barriers to the establishment of data centers.

However, shortages in land availability and power supply remain two big challenges for the city.

"Data center operation is a capital-intensive business. Initial investments including land costs, construction costs and facility installation costs could be tremendous.

"It also requires high consumption of electricity to keep the facilities running, while the existing power network cannot fully support such power consumption," Siu said.

He said he believes that the city's government should add power support and land supply to data center operators.

"With more land sites to be allocated specifically for data center use and made available for public tender, land costs could be lowered, hence reducing the initial setup costs for investors and operators," he said, suggesting that the government consider taking out clauses such as public car park provisions that are appropriate for other types of buildings.

To further promote the city as a world-class data center hub, Hong Kong should promote investments in fiber infrastructure, including underground fiber networks and international submarine fiber optic cables and landing stations, Siu added.