The Japan Data Center Market is expected to register a CAGR of 3.7% over the forecast period 2021 - 2026. The growing cloud computing (further fueled due to COVID-19), increasing high-speed internet penetration, government regulations for local data security, and growing investment by global players are some of the major factors driving the demand for data centers in the country.
- The information and communication technology (ICT) industry is the largest industry sector in Japan, with a market value of USD 1.2 trillion (as of 2011). Japan’s Ministry of Internal Affairs and Communications aims to double the market to USD 2.4 trillion by 2020.
- The Japanese data center market is unique, as it has traditionally been dominated by systems integrators, like Fujitsu, Hitachi, Mitsubishi Electric, and NEC. These giants exist because Japanese companies prefer a single vendor with a broad portfolio, instead of having to provision each service individually.
- A range of global companies invested in data center infrastructure in Japan either by building their own data centers or acquiring large wholesale space within global data center specialist providers. These include global multimedia and content providers, financial services firms, and IT companies.
- While local enterprises constitute a significant portion of demand, requirements for cloud services have driven new growth. Cloud players are looking to fulfill this demand quickly via self-builds or deployment via hyperscale operators, usually in locations outside of Metropolitan Tokyo.
- Japan has a comprehensive suite of modern laws that support and facilitate the digital economy and cloud computing, including a convention on cybercrime, comprehensive privacy legislation, and intellectual property laws that cover the full range of protections relevant to cloud services.
- Equinix is one of the companies that brings a significant percent of Tokyo’s colocation revenue, and it is known for building data centers in the city. With a mix of colocation, public cloud, and interconnection services in its facilities, Equinix allows customers to define their needs on a seasonal basis, offering more flexibility than any system integrator could.
- The need to store two categories of protected data, i.e., personal information and “special care- required” personal information, is driving the demand for data centers. The first refers to personally identifiable information (PII), such as name, date of birth, email address, or biometric data. Special care- required personal information includes medical history, marital status, race, religious beliefs, and criminal records.
- Furthermore, COVID-19 has put high pressure on end-user companies to support remote working, and they are fast-tracking cloud and digitization journeys. There have been several instances where the vendors are keen to occupy a majority share in the market. For instance, the Japanese government has agreed on a deal of more than USD 273 million with Amazon Web Services (AWS) till 2026.
Key Market Trends
Growing Demand for Cloud Computing is Boosting the Market Growth
- Cloud computing in Japan is well established and has been continuously evolving. Public and private cloud models are both standards in Japan. A current trend within the private cloud model is the growing usage of the 'community cloud,' where a limited number of companies share a private cloud. Japan has more cloud-ready fortune 2000 businesses than any market outside the United States. Japan is the world's second-largest enterprise software market.
- According to a survey by the Ministry of Internal Affairs and Communications (Japan) in 2018, close to 53% of business enterprises in Japan stated that they used cloud computing services for file storage and data sharing and around 33% said that they already implemented cloud computing in all of their departments. More than 50% of the surveyed companies used cloud-based email services during the measured period.
- Nearly all primary hosting and cloud providers globally have built a presence in Japan. To encourage collaboration between the government, industry, and academia in cloud computing services, the MIAC, the Ministry of Economic, Trade, and Industry (METI) and the Ministry of Agriculture, Forestry and Fisheries, have established the Japan Cloud Consortium.
- International cloud computing providers in Japan include Microsoft, Amazon.com, Google, and IBM for both public and private cloud computing services. In Japan, local cloud computing providers include NTT DATA Corporation, NTT Communications Corporation, KDDI Corporation, NEC Corporation, Fujitsu Limited, and Internet Initiative Japan Inc.
- In July 2019, Equinix opened its 11th data center in Tokyo, since it was looking to tap Japan's growing cloud adoption and digital transformation drive. Called TY11, the latest site was part of the company's efforts to grow its global footprint. The company claims that its newest facility may see reductions in energy consumption and CO2 footprint through the implementation of energy-efficient lighting systems, adaptive control systems that consumed less power, and better cooling capabilities.
BFSI to Hold Significant Market Share
- Data centers are considered the backbone of banking and financial services in Japan. Hyper-converged infrastructures are the reasons for a better approach to building, designing, and managing banking data centers.
- The increasing implementation of regulatory standards, coupled with the rise in the adoption of cloud-based security solutions and increasing modes of online payments due to high internet penetration, is expected to give rise to advanced security solutions in Japan. According to a Cint survey, 72.41% of respondents in Japan stated they are using an internet bank.
- In December 2019, Development Bank of Japan Inc. (DBJ) had invested in Vertex Master Fund II LP (VMF II), a venture capital fund newly launched by Vertex Venture Holdings Ltd., a Singapore-based venture capital arm of Temasek Holdings.
- The BFSI sector is one of the critical infrastructure segments that suffers several data breaches and cyber-attacks in the region, owing to the large customer base that the industry serves and the financial information that is at stake. According to the National Police Agency (Japan), in 2018, the number of reported online banking fraud cases amounted to 322, down from 425 occurrences in the previous year.
- The financial service institutions have been identified to be four times more susceptible to cyberattacks than other industries, which is expected to drive the demand for Data Center solutions. For instance, according to NPA (Japan), in 2018, approximately 127 thousand cybercrimes were reported to the Japanese police, up from about 78 thousand consultations in 2012.
The Japan Data Center Market is moderately competitive and consists of several major players. These key players engage in introducing innovative solutions to gain a competitive edge. The major players are adopting strategies like product and service innovation and mergers and acquisitions. Some of the recent developments in the market are:
- In April 2020 - Equinix announced a joint venture with GIC, Singapore government’s sovereign wealth fund, to build three hyperscale data centers in Tokyo and Osaka for the world’s largest cloud platforms. The three future facilities may provide close to 140 MW of power capacity in total.
- In April 2020 - Japan-based bank Fukui Bank announced its plans to migrate its distributed process system to IBM Cloud to drive an operational transformation. As the Bank continues to move data, applications, and associated services from its existing infrastructure to the cloud, it is using IBM Cloud Migration Factory to take a multi-pronged approach to re-host, re-platform, re- architect, and modernize its infrastructure.
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Table of Contents
1.2 Scope of the Study?
4.2 Industry Attractiveness - Porter's Five Forces Analysis?
4.2.1 Bargaining Power of Suppliers
4.2.2 Bargaining Power of Consumers
4.2.3 Threat of New Entrants
4.2.4 Threat of Substitutes
4.2.5 Intensity of Competitive Rivalry
5.1.1 Large Digital and Cloud Based Population
5.1.2 Growing Demand for High Speed Service
5.2 Market Challenges
5.2.1 High Infrastructure Costs
5.3 Market Opportunities
7.2 By Electrical Infrastructure
7.2.1 UPS Systems
7.2.3 Transfer Switches and Switchgears
7.2.4 Rack PDU
7.2.5 Other Electrical Infrastructure
7.3 By Mechanical Infrastructure
7.3.1 Cooling Systems
7.3.3 Other Mechanical Infrastructure
7.4 By Type
7.4.1 Enterprise Data Centers
7.4.2 Managed Services Data Centers
7.4.3 Colocation Data Centers
7.4.4 Cloud Data Centers
7.5 By End-user Industry
7.5.2 Telecom and IT
7.5.5 Other End -user Industries
8.1.1 Digital Realty Trust Inc.
8.1.2 Equinix Inc.
8.1.3 Telehouse (KDDI Corporation)
8.1.4 Oracle Corporation
8.1.5 Arteria Networks Corporation
8.1.6 Fujitsu Ltd
8.1.7 NTT Communications Corporation
8.1.8 Telstra Corporation Limited
8.1.9 Cyxtera Technologies Inc.
8.1.10 Verizon Japan Ltd
8.1.11 Singtel Telecommunications Ltd
8.1.12 IBM Corporation
A selection of companies mentioned in this report includes:
- Digital Realty Trust Inc.
- Equinix Inc.
- Telehouse (KDDI Corporation)
- Oracle Corporation
- Arteria Networks Corporation
- Fujitsu Ltd
- NTT Communications Corporation
- Telstra Corporation Limited
- Cyxtera Technologies Inc.
- Verizon Japan Ltd
- Singtel Telecommunications Ltd
- IBM Corporation