In a country grappling with some of Asia’s highest electricity prices and intensifying climate risks, even deep-pocketed conglomerates are struggling to make the economics of data centres work.
That reality came into focus in late 2025, when one of the Philippines’ largest conglomerates, SM Investments Corporation (SMIC), announced that it was exiting the data centre business.
SMIC president Frederic DyBuncio confirmed in August that the firm was selling its stake in YCO Global Cloud Centres, citing soaring electricity costs and heightened natural disaster risks.
DyBuncio has also pointed to shifting investor preferences. In a separate media interview, he said that the move was partly driven by the tendency of large hyperscalers, including Amazon Web Services (AWS) and TikTok’s parent company, ByteDance, to favour markets such as Malaysia and Vietnam over the Philippines. Eco-Business reached out to SMIC for comment.
The move appears to be standing in contrast to the Philippines’ underlying market potential.
The Philippine data centre market was valued at about US$633 million in 2024 and is projected to nearly triple to US$1.97 billion by 2030, growing at more than 20 per cent annually, according to analytics firm Research & Markets. With around 97.5 million internet users and one of the world’s most digitally engaged populations, demand for cloud services, streaming, gaming and enterprise data storage continues to rise.
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Data is produced and consumed [at a pace] far faster than the data centres that house them [can be] built.
Maricar Burgos-Nepomuceno, country director, Digital Halo Philippines
But analysts warn that SMIC’s exit highlighted deeper structural constraints, rather than a single company’s business decision.
“[This] single corporate decision should not be viewed as a definitive judgment that the Philippines is an unattractive market, as companies often reallocate capital based on internal priorities and opportunities,” Alnie Demoral, energy analyst for Asia at think tank Ember, told Eco-Business.
“Instead, it should be seen as a prompt for what needs to improve in the power and regulatory landscape to attract data centre and clean energy investments in parallel,” said Demoral, adding that the Philippines’ power system needs to improve its sustainability and resilience by integrating more renewables and improving grid infrastructure.
“Rapid demand growth without matching renewable supply can also strain the grid, push up electricity prices and weaken energy security.”
A recent report by the Philippine Center for Investigative Journalism (PCIJ) found that at least 40 data centres are either operating or planned in the country, mostly in Metro Manila and its surrounding areas. Table: Philippine Center for Investigative Journalism (PCIJ)
Opportunities for the Philippines
Demand for artificial intelligence (AI) infrastructure and cloud services is driving strong growth in the Asia-Pacific data centre market, with nearly 2,300 megawatts (MW) added to the region’s development pipeline in 2025, according to UK-based consultancy Turner & Townsend.
And in Southeast Asia, where data-centre power consumption is projected to quadruple from 2.6 gigawatts (GW) in 2025 to 10.7 GW by 2035, data centres are rapidly becoming a defining pressure point for energy systems.
Over the next decade, some 7 to 10 per cent of all power demand growth in the region could come from data centres alone – equivalent to Singapore’s entire electricity consumption in 2024. By 2035, more than 10 per cent of Malaysia and Singapore’s electricity demand could come from just powering data centres.
Singapore currently dominates the sector, accounting for about 1.4 GW or more than half of Southeast Asia’s data-centre load, followed by Malaysia at 0.6 GW. But that balance is shifting. By 2035, Malaysia and Thailand are forecast to overtake Singapore, with projected data-centre loads of 4.5 GW and 2.6 GW, respectively, compared with 1.9 GW in Singapore.
The Philippines trails behind with a projected data centre capacity of less than 1 GW by 2035, although some estimate a slightly more optimistic 1.3 GW by 2030 data centre load for the archipelago.
Malaysia leads Southeast Asia in data centre project pipeline, accounting for 3.4 gigawatts (GW), or 60 per cent of all proposed projects in the region. Graph: Wood Mackenzie
“The [Philippines’] project pipeline for data centres is expanding, but it remains modest compared with Singapore, Malaysia and Indonesia,” Isabella Suarez, Southeast Asia lead of climate tech non-profit TransitionZero told Eco-Business.
“That gives the Philippines an opportunity to shape the sector early, but it also means the country must address structural constraints [with great speed] – most notably its continued reliance on coal and fossil gas.”
Many hyperscalers and large companies require their operations to run on clean power, so the Philippines will need to show that renewable energy projects are actually moving forward on the ground, Suarez said.
If data centre expansion were to outpace the rollout of renewable energy, the risks would include higher operating costs, difficulty meeting corporate clean-energy targets and added pressure on an already strained power grid.
Electricity is the single biggest operating cost for data centres, and this is where the Philippines faces its stiffest disadvantage. While Singapore remains the most expensive market in the region, with on-grid tariffs of around US$178 per megawatt-hour (MWh) in 2025, the Philippines follows closely at US$154/MWh – significantly higher than emerging rivals such as Vietnam and Indonesia.
The Philippines’ digital ambition
Philippine policymakers have publicly signalled ambitions to expand the country’s data centre capabilities as part of a broader push to strengthen digital infrastructure and competitiveness.
Under President Ferdinand Marcos Jr, the government has framed data centres as strategic assets supporting cloud services, artificial intelligence and the digital economy, with the Department of Information and Communications Technology (DICT) encouraging greater hyperscale investment and capacity build-out.
Flagship initiatives such as the Digital Cities 2025 programme and enhanced tax incentives are intended to position the Philippines as a potential regional data centre hub, even as execution challenges persist.
The Philippine data centre market was valued at about US$633 million in 2024 and is projected to nearly triple to US$1.97 billion by 2030, growing at more than 20 per cent annually, according to analytics firm Research & Markets. Map: Philippine Center for Investigative Journalism (PCIJ)
But analysts caution that incentives alone will not offset the Philippines’ deeper energy challenges. Without faster grid upgrades and clearer pathways to renewable power procurement, policy ambition risks running ahead of physical reality.
“Data is produced and consumed [at a pace] far faster than the data centres that house them [can be] built,” Maricar Burgos-Nepomuceno, country director of Digital Halo Philippines, told Eco-Business. Digital Halo launched its flagship hyperscale data centre campus in Cainta, Rizal – east of Metro Manila – last year.
Vic Barrios, country manager for data centre developer Digital Edge Philippines, said demand is being driven primarily by domestic digitalisation, pointing to the country’s strategic location, dense subsea cable network and large consumer base. Digital Edge Philippines runs NARRA1 Manila Data Centre, one of the country’s largest operational data centres since 2023 in Laguna – south of Metro Manila.
Energy, however, remains the critical variable. Both Digital Halo and Digital Edge Philippines have partnered with Meralco, the country’s largest private electric distribution utility.
“High-volume users [actually] pay rates comparable to Thailand and competitive with Malaysia – particularly after recent Malaysian tariff increases. The Philippines isn’t the cheapest market, but the ‘most expensive in Asia’ narrative is outdated,” Barrios told Eco-Business.
Digital Halo echoed this view. Burgos-Nepomuceno said that the power rates for running large data centres in the Philippines are “no longer cost-prohibitive.”
Still, industry leaders stress that competitiveness will hinge on how quickly renewable energy comes online.
“The variable going forward is renewable energy deployment speed. The regulatory framework is sound; execution will determine whether the Philippines can compete for hyperscale deployments with strict sustainability requirements,” Barrios said. “The main gap is less about policy frameworks and more about execution timelines – ensuring renewable capacity commitments translate to operational facilities on schedule.”
“The Philippines has a window to demonstrate that renewable capacity is coming online at pace. If that happens, coal dependency becomes a transition story. If it doesn’t, the market will struggle to compete for the most demanding deployments,” he added.
But execution challenges extend beyond generation capacity as permitting and coordination remain bottlenecks. While Digital Halo acknowledged recent reforms, it called for stronger centralisation.
“While we see and appreciate the efforts of the government in easing the difficulties of permitting, regulation and [infrastructure], in terms of permitting, it is our suggestion for the central government to form a multi-agency body that will be a one-stop shop where all documentation and requirements can be forwarded, reviewed and signed off, to reduce back-and-forth and multi agency coordination,” Burgos-Nepomuceno said.
Industry coordination is also improving. In late 2025, several major operators formed the Data Center Operators of the Philippines (DCPH), which aims to boost competitiveness through shared standards, policy engagement and infrastructure collaboration.
Building resilience to climate vulnerability
For the Marcos administration, the challenge is no longer about attracting interest, but about proving that the Philippines can deliver reliable, affordable and low-carbon power at speed – while building resilience in one of the world’s most climate-exposed environments.
The Philippines ranked first in the WorldRiskIndex 2025, underscoring its exposure to earthquakes from major fault systems as well as intensifying typhoons, floods and sea-level rise. These hazards increasingly collide with energy-intensive, power-sensitive investments such as data centres.
A World Bank report warns that floods, heat and drought are driving longer and costlier outages worldwide, with low- and middle-income countries among the most exposed. “Onsite power problems and cooling failures are among the main causes of major outages,” said Ember’s Demoral, pointing to typhoon-induced grid disruptions, flooded equipment and extreme heat that strains cooling systems.
Industry players argue, however, that this framing overstates the sector’s vulnerability. While the Philippines faces hazards such as typhoons, disasters are a global challenge rather than an exceptional condition, said Burgos-Nepomuceno of Digital Halo Philippines. Data centres, she said, are designed as “disaster aids, not vulnerable assets,” built to dampen climate risk through elevated and flood-resistant sites, earthquake-resilient design, strategic siting away from fault lines, and redundant systems such as large generator sets and uninterruptible power supplies.
“The Philippines data centre market isn’t contracting; it’s developing,” Barrios concluded. “And in developing markets, operators with advanced technical standards, proven sustainability performance and structural flexibility are the ones positioned for long-term success.”
