How data center giant Chindata make its business smart, secure and sustainable?
Serving tech giants to meet their increasing digital demands, Chindata has recently launched a new greenfield project in Johor, Malaysia, with a capacity of more than 80 megawatts ready to be delivered to its anchor client in several phases starting 2022. It is also finalizing a strategic acquisition in Bangkok, Thailand, which, upon completion of technical upgrade, will be hosting 5 megawatts of IT capacity and capable of supporting key clients’ business development in Southeast Asia.
When readers see this article online, they might not be aware of the powerful facilities behind every website, mobile app and their zillions of data.
Data centers are the critical infrastructure in the internet era, a physical facility that organizations use to house their digital applications and data. Industry leader Chindata Group has recently announced solid financial results and progress in the Southeast Asian market, one of the regions with the highest potentials.
Serving tech giants to meet their increasing digital demands, Chindata has recently launched a new greenfield project in Johor, Malaysia, with a capacity of more than 80 megawatts ready to be delivered to its anchor client in several phases starting 2022. It is also finalizing a strategic acquisition in Bangkok, Thailand, which, upon completion of technical upgrade, will be hosting 5 megawatts of IT capacity and capable of supporting key clients’ business development in Southeast Asia.
“Furthermore, we are also actively exploring opportunities in other countries within Southeast Asia, such as Vietnam and Indonesia,” Jing Ju, founder and chief executive officer of Chindata, said at an earnings call in late November when announcing the third quarter results.
Between July and September, the company enjoyed a revenue growth of 58.5% and net income stayed positive for three consecutive quarters.
Chindata’s story isn’t only about making money, but also making data centers smart, secure and sustainable.
An emerging data center expert
Chindata specialises in the so- called hyperscale data center, which often support web-scale and high-performance computing applications. They also have higher scalability and customer retention that a contract is usually valid for five to ten years.
As of the end of September, the company had in total 370 megawatts of IT capacity in service across China, India and Southeast Asia.
Hyperscale data centers have outpaced other types of the facilities. The market size of hyperscale data centers is expected to increase by 14.2% between 2020 and 2025, while the growth rate for retail and wholesale, the smaller ones, is only 4.1% and 7%, respectively, according to consultancy Frost & Sullivan.
Chindata’s robust research and development capabilities have ensured that several of its metrics are above industry average. Around 90% of the pre-fabricated data center solution for overseas deployment is made through in-house R&D, while the company held 268 patents, either approved or pending, related to data center building designs and modules, by the end of the third quarter.
Chindata is able to deliver a hypersacle data center in six months, compared to industry average of nine to ten months, while the construction cost per megawatt is US$3 million, less than half of the industry level. In addition, it achieved power usage effectiveness (PUE) to 1.19, lower than its peers’ 1.59, according to company filings and advisory organization Uptime Institute.
The firm has reported solid and healthy financials for multiple quarters. Revenues in the first nine months of 2021 jumped by 62% to nearly 2.1 billion yuan, with net income of 201 million yuan, comapred with a loss-making period the same time last year.
Fitch Ratings commented that Chindata’s credit profile “will remain solid, supported by the strategic location of its data centers, use of renewable energy and adequate rating headroom.”
Go green from day one
Chindata started to develop tech-driven operations system with computing power optimization to improve PUE in 2015, the year when it was founded. It also started relatively early, in 2019, to do relevant reporting on environmental, social and corporate governance (ESG).
It is in line with Chinese authorities’ stance on how data centers should operate. In May and July this year, the National Development and Reform Commission (NDRC) and the Ministry of Industry and Information Technolog (MIIT) issued policies calling for data centers to improve energy efficiency and usage of renewable energy.
With the goal of achieving 100% renewable power in all its global data centers by 2040, Chindata is a recognized environmentally-firendly company, which was ranked by Greenpeace as the top tech player in China terms of renewable energy performance in 2019 and 2020. It also won the MIIT’s “National Green Data Centers” last year, became the corporate participant of the United Nations Global Compact in Asia Pacific, and won the Best Environmental, Social, Governmental (ESG) Initiative in the 17th Global Carrier Awards (GCA), the first computing infrastructure company in Asia Pacific to receive the honor.
As a electricity consumer, it is also looking to make more footprint in green power generation. It has signed agreement to develop 1.05 gigawatt of wind and solar energy development that’s capable of providing 1.2 billion kilowatts green power each year.
Company chief financial officer Wang Dongning said in the November earnings call that “the development of renewable energy is a long term strategy that we will commit ourselves to.”
When asked if renewable energy is more costly, CEO Ju said at the call that the cost is “close to the normal electricity prices, and even in some regions and certain time periods, these transaction costs are lower than the grid electricity prices.”
“In the future, as China’s dual carbon policy continues to mature, the future cost of renewable energy consumption will fluctuate in different regions and different business models, affected by supply and demand. Chindata will strive to do its part to keep renewable energy costs stable in the long run,” Ju said.
Regulatory headwinds?
The entire internet and technology industry, no matter data centers or other sectors, have faced harsh regulations this year, from antitrust to data security investigations.
The Cyberspace Administration of China, the top internet regulatory authority, proposed in July change to the “Measures for Cybersecurity Review” that asked processors of over 100 million user data to be reviewed before an initial public offering overseas. In August, the State Council published the “Rules on the Protection of the Security for Critical Information Infrastructure” to put companies in the telecoms, energy, transport, finance and defence sectors under closer cybersecurity scrutiny. In November, the Personal Information Protection Law, deemed as China’s answer to the European Union’s General Data Protection Regulation, took effect in November.
Chindata CFO Wang said in August that the the company’s service “does not involve the ownership or processing of any external data or information.”
“We primarily provide hardware/infrastructure level services such as colocation services, including the deployment of customers’ servers and other equipment in our properties and providing water, electricity, cooling and other relevant utilities,” Wang said. “Our hyperscale data center services in China are strictly restricted to domestic use, without any cross-border transfers of data/information.”
Wang ensured that Chindata “will closely monitor such regulatory updates and take further necessary measures to comply with any new or updated regulatory requirements that the company may be subject to.”
As for another challenge, the recent power shortage in China primarily due to the lack of coal, it has been an issue that investors and observers are concerned.
So far Chindata hasn’t been much affected, as the majority of its centers “are located in energy abundant regions”, Wang said.
“We believe our long term commitment to renewable energy development and the improvement of the related capacity will contribute to a stable and secured power supply as well as to serve as an adequate hedge against power tariff inflation, if any,” Wang said.
Fitch’s comment backed up the stance.
“We do not believe regulations to date have significantly affected Chindata’s client’s business model and ability or willingness to meet its obligations to Chindata”, the credit rating agency said.
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