Market Trends of indonesia data center Industry
Rising demand for 5G smartphones at reasonable price led to increased sales in smartphones, this would create data center demand
- Smartphone users in Indonesia are witnessing steady growth owing to the availability of 4G services nationwide and the launch of 5G in 2021. The user base reached 170 million in 2021 from 107 million in 2016, exhibiting a CAGR of 9.7% during the historical period. Smartphone penetration more than tripled from 43% in 2016 to 72% in 2021.
- Improvement in the 4G network and the launch of 5G technology are touted to drive smartphone penetration in the country further. 5G smartphones in the price bracket of USD 350-450 gained major traction in 2022. From the customer's perspective, these smartphones offer better performance and connectivity, and 5G support makes them future-ready compared to 4G smartphones in the same price segment.
- This growth in 4G and 5G smartphones and affordable data packs are projected to drive data consumption among the populace, thus impacting the Indonesian data center market positively. As more smartphones were sold, average screen time increased from 45 minutes in 2016 to 5 hours in 2022. This change in smartphone usage patterns is also triggered by the ease of services by various digital apps, which ultimately rely on either cloud or data centers to provide their services. For instance, the BFSI segment has majorly benefited by providing digital services in the country via smartphones. In 2022, over 70% of banking transactions were carried out via smartphones. BFSI, one of the country's major end users of data centers, is projected to invest more in colocation services in the coming years. Therefore, the growing smartphone user base in the country is predicted to positively drive the Indonesian data center market during the forecast period.
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"Digital Indonesia Roadmap 2021-2024 launched by Indonesian Government boost the market demand
- The average broadband speed over FTTx connection stood at 21.2 Mbps in 2022 compared to 12.6 Mbps via copper cables. The government drafted the "Digital Indonesia Roadmap 2021-2024," which focuses on digital infrastructure improvement in the country. It is touted to boost the average broadband speed over fiber and copper cable during the forecast period.
- The fixed broadband connections in the country reached 12.4 million in 2021, where 77% of the user base experiences had an average speed of ≥ 10 Mbps. The broadband network in Indonesia is expensive and slow due to the high price and the low quality of internet connectivity. The country comprises 17,000 islands with a disparity in economic development and connectivity between islands, a major bottleneck in providing uniform broadband connectivity, primarily in eastern islands. To address this disparity, the Indonesian government completed the Palapa Ring Project in 2019, with seven island groupings (Sumatra, Jawa, Kalimantan, Nusa Tenggara, Sulawesi, Maluku, and Papua) connected with stable broadband connectivity.
- The growing demand for the internet in the country drives companies to establish new networks. In September 2022, Indonesian operator Indosat Ooredoo Hutchison (IOH) announced to broaden its service portfolio by launching a fiber-to-the-home (FTTH) service, branded Indosat HiFi, as it looks to capitalize on the growing demand for high-speed internet access at home.
- With the internet being the primary requirement for the smooth operation of any data center and the rise in average broadband speed, predominantly FTTx, and with improvement in digital infrastructure in the eastern region of the country, data center construction projects are expected to be more focused in the country during the forecast period.
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OTHER KEY INDUSTRY TRENDS COVERED IN THE REPORT
- Prioritizing digital initiatives, such as 5G, digital payment and attracting sizable population of working immigrants boost the market demand
- Increasing Fiber connectivity projects in the country to drive the market
- The launch of the 5G network and expansion of 4G network to drive the data centers market
