Unpacking the hurdles of Sea’s Malaysian mission

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Sea Group seems to be striking all the right notes as it looks to firmly establish itself in Malaysia through a mega warehouse and a data center – two initiatives that come with nearly US$3 billion in investments and are expected to generate 2,000 jobs.

But a closer look will reveal the full scale of the task at hand for the Singapore-based tech titan. A host of systemic issues has raised doubts among investors and former government officials about the Q1 2024 deadline set for Sea’s three-story green facility in Johor, Malaysia’s southernmost state.

The skeptics point to Microsoft’s history of delays in Southeast Asia’s sixth largest economy, as detailed in today’s featured piece. The US-based behemoth holds similar dreams of building a data center in Johor, but the project that was announced in 2014 is yet to be completed.

Nonetheless, the data center market in Malaysia remains ripe for growth, with demand likely to outstrip supply in the next two or three years. The premium story also sheds light on how Shopee, Sea’s ecommerce unit, is following in the footsteps of its rival Lazada through the construction of a mega warehouse in Klang, Selangor.

Read on to uncover the finer details of Sea’s plan in Malaysia.

Today we look at:

• Sea’s hurdles in Malaysia
• An Indonesia-based social commerce startup scaling down operations
• Other newsy highlights such as the uncertain fate of an iCandy project

Premium summary

Mission Malaysia

Image credit: Timmy Loen

An ideal concoction of manufacturing, tariffs, water supply, land, and tax incentives has made Malaysia a fertile ground for cloud service providers looking to build data centers.

The government, too, has acknowledged the country’s potential in this space and harbors ambitions of becoming a regional hub for data centers. However, some problematic regulatory requirements that would subject data centers to enforcement, including search-and-seizure, have done little to aid its cause.

• One reason is all it takes: There has been a trend of data center firms locating their campuses outside developed markets such as Hong Kong and Singapore to other Southeast Asian countries, a Kuala Lumpur-based tech equity analyst tells Tech in Asia. Reasons for choosing those countries include lower operating costs as well as increasing digitization.
• Growing skeptical: An investor who has experience in setting up data centers in Malaysia tells Tech in Asia that Sea Group’s goals may be “a tad ambitious” because the company still needs to check a wide range of boxes, from acquiring hardware to talent to ensuring that the whole system doesn’t fail. “It’ll normally take more than a year,” the investor says.
• Ecommerce war brews: Shopee, Sea’s ecommerce unit, is mimicking rival Lazada by building a warehouse in Malaysia, according to a tech analyst. With a large-scale central warehouse in the Klang Valley and an investment in state-backed local fintech company Touch ‘n Go, Lazada is already entrenched within the Malaysian ecosystem. This is an advantage Sea lacks.

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