Demand for digital services is strong across all regions, and Asia-Pacific (AP) is no exception. Home to more than half of the world’s online population, AP sits at the center of some key digital trends such as e-sports, social commerce and streaming media. Rising incomes, combined with high rates of mobile internet adoption, are accelerating the pace of digital transformation across the region. IDC predicts that digital transformation spending in AP will reach US$375.8 billion in 2019, and that 60% of the region’s GDP will be digitized by 2021.[i]
To keep up with this exploding demand, enterprises and IT providers in the AP region are building digital infrastructures to connect to local ecosystems and maintain competitive advantage. In order for digital infrastructures to capture value, however, they must support real-time interactions between people, things, locations and clouds. This is driving demand for interconnection, the direct and private exchange of traffic between key business partners.[ii] In an independent study commissioned by Equinix, APCO Insight surveyed 2,485 IT global decision-makers, and 49% in Asia-Pacific said they believe interconnection is a key facilitator of digital transformation.[iii]
According to the third annual Global Interconnection Index (GXI), interconnection traffic is expected to grow faster in Asia-Pacific than in North America (46% compound annual growth rate, or CAGR) or Europe (51% CAGR), with interconnection bandwidth capacity increasing at a 56% CAGR over five years (2018–2022). The GXI measures and forecasts the growth of the private interconnection bandwidth required to support the companies driving digital business.ii By 2022, the GXI Vol. 3 estimates that installed interconnection bandwidth worldwide could reach 13,300+ terabits per second (Tbps), the equivalent of 53 zettabytes annually. In one minute, that amount of interconnection bandwidth could concurrently process 1.3 billion video games.
The AP region will make up nearly a third (29%) of this interconnection growth, reaching 3,800+ Tbps of interconnection bandwidth capacity over the same time period.
INTERCONNECTION BANDWIDTH GROWTH BY REGION
Asia-Pacific is accelerating its digital growth
The GXI highlights five major macro, technology and regulatory trends shaping the competitive landscape across all industries. These include rapid growth in digital business, urbanization, cybersecurity risk, data volumes and compliance requirements, and business ecosystems. AP has some of the largest urban population centers in the world, including Tokyo, Shanghai and Mumbai, and demand for digital services is strong in both developed and emerging markets.
Governments in Asia are committed to creating environments where businesses can achieve change through digitization. That commitment is helping some of them outpace western countries like the U.S. and U.K. in key infrastructure indicators like fiber deployment, average broadband speeds and 4G/5G mobile coverage. In fact, GMSA predicts that AP will be the world’s largest 5G region by 2025.[iv] This high rate of mobile adoption, combined with rising wealth levels across the region, is fueling demand for digital services and the infrastructure to support them. Here are a few indicators:[v]
- Online video: The online video market in AP is expected to double in size over the next five years from US$26 billion in 2019 to $52 billion in 2024.
- E-commerce: AP is the fastest growing e-commerce region in the world, with six of the top 10 fastest-growing countries. The region as a whole is expected to grow to $2.3 trillion in 2019, representing 64% of the global e-commerce spend.
- Digital payments: 60% of AP’s connected consumers use their mobile phone to purchase goods or services at least once a month.
- Digital infrastructure: Investment in new cable construction in AP is estimated at $7.6 billion between 2015 and 2020.
Cloud & IT Services is laying the foundation for other industries
Cloud providers such as Google, Amazon and Microsoft are major investors in as well as consumers of the additional infrastructure capacity in AP, so it’s no surprise that Cloud & IT Services is expected to be the largest industry segment in AP and in the world for total installed interconnection bandwidth (50% larger than North America). Growing at 50% CAGR, it is projected to reach 24% of total AP interconnection bandwidth by 2022.
As another major investor in infrastructure, the Telecommunications sector comes next in consuming the most interconnection bandwidth capacity (20%), followed by businesses in the Manufacturing (13%), Securities & Trading (11%) and Banking & Insurance (9.5%) sectors. AP manufacturers are growing in interconnection bandwidth as they harness the cloud for autonomic operations, robotic manufacturing and digital supply chain optimization. Financial services sectors are consuming interconnection bandwidth as they move workloads to the cloud for algorithmic trading, customer intelligence and new digital offerings.
The fastest-growing industries in interconnection for AP through 2022 will be Energy & Utility and Banking & Insurance (both 81% CAGR), according to the GXI. Utilities in AP, often government-owned, are focused on smart grid and smart energy use cases. This requires digital ecosystems that can securely interconnect participants, things, data and analytics engines with low latency, driving the need for greater interconnection bandwidth.
As an example, an online bank in Japan, had been quick to differentiate itself in the market through the adoption of innovations like artificial intelligence (AI) to offer new products and services to its customers. To maintain competitive advantage, it wanted to move from an on-premises environment to the cloud, but this would have required meeting stringent network security requirements for financial institutions. By implementing a hybrid multicloud solution via Equinix Cloud Exchange Fabric™ (ECX Fabric™) on Platform Equinix®, the bank was able to establish secure, reliable connectivity to cloud services that complied with regulations, while enabling instant scale-up of bandwidth as needed during peak times.
Consult the GXI Vol. 3 to see the full range of industries that are driving interconnection growth in AP.
Ecosystem interconnection in Asia-Pacific is thriving
Businesses in AP are rolling out new digital offerings to appeal to mobile-savvy consumers and improve operational efficiencies, while mobile operators and service providers continue to expand IT infrastructures. With these advances, enterprises and service providers are expected to nearly equally split the total number of private interconnections through 2022, although enterprises are slightly ahead at a 53% share and service providers at 47%. Enterprises are growing faster, at a 68% CAGR, while service providers are growing at a 47% CAGR.
AP enterprises are also expected to use 68% of their total installed interconnection bandwidth capacity to reach Network Providers, while another 24% will be connecting to Cloud & IT Providers. Network (63%) and Cloud & IT Providers (15%) also lead in the types of key business partners that service providers are accessing via private, direct and secure interconnection as they further expand AP digital infrastructures.
INTERCONNECTION BANDWIDTH BY ECOSYSTEM USE CASE—ASIA-PACIFIC
Five AP metros are driving the majority of interconnection growth
Nine out of the top ten megacities in the world (those with a population greater than 10 million) are located in AP. Tokyo and Shanghai are two of the largest megacities in the world, exceeding 30 million inhabitants.[vi] Dense urbanization like this intensifies the need to effectively manage finite resources for shared systems, services and experiences. As an example, intelligent city applications like smart grids, environmental monitoring and smart trash collection are helping AP smart cities manage their growth more efficiently and sustainably while minimizing pollution and waste. Supporting applications such as these requires shortening the distance between sensors, data, clouds, partners and users for optimal application performance and user experience. That’s one reason why interconnection growth in the Asia-Pacific region is expected to remain strong in major metros.
The top five AP metros are expected to contribute more than one-fifth (21%) of installed interconnection bandwidth worldwide by 2022, reaching 2,751 Tbps at a 52% CAGR over five years (2018–2022). That also equates to 72% of overall AP interconnection traffic over the same time period. As expected, Tokyo, the largest telecommunications hub and data center market in Asia-Pacific, will lead with 21% of the total AP interconnection bandwidth capacity. Coming in second is Singapore, where the government has recently launched a series of investments to boost the digital economy[vii]—the city is projected to account for 15% of AP traffic by 2022. Next is megacity Shanghai with 14.7%, followed by Sydney (11%) and Hong Kong (10%). With China’s growing importance in the global digital economy, it’s not surprising that Shanghai and Hong Kong will grow the fastest—both are expected to increase interconnection traffic by nearly sixfold on average during the five-year period.
To support the growing needs in these markets, Equinix continues to extend Platform Equinix across the Asia-Pacific region to enable organizations to meet their digital transformation goals. As an example, in 2019, we opened new data centers in Japan and South Korea, and launched ECX Fabric global connectivity in AP.
INTERCONNECTION BANDWIDTH BY TOP METROS—ASIA-PACIFIC
1. Rounding may affect totals.
2. These are the top metros and not inclusive of all metros.
Read the GXI Vol. 3 for more information on interconnection growth trends and deployment scenarios by region, industry and ecosystem partners.
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[i] IDC, IDC Expects Asia/Pacific* Digital Transformation Spending to Reach Nearly USD 375.8 Billion in 2019, June 2019; Microsoft, Digital transformation to contribute more than US$1 trillion to Asia Pacific GDP by 2021; AI is primary catalyst for further growth, Feb 2018.
[iii] APCO Insight survey, sponsored by Equinix, August 2019.
[v] Econsultancy, The best Asia-Pacific digital marketing stats from April 2019, May 2019; eMarketer, Global Ecommerce 2019; Inquirer.Net, Asia-Pacific: Where digital wallets are getting fatter, June 2019; TeleGeography, 2018 Submarine Cable and Capacity Pricing Trends in Asia-Pacific, Blog and Presentation, Feb 2018.