Digital infrastructure is quickly becoming a cornerstone for how businesses achieve competitive advantage and succeed in a digital economy. Governments and organizations are taking notice and recognizing that, now more than ever, establishing an extensive digital infrastructure is vital to fueling economic growth in their countries.
In the Asia-Pacific (APAC) region, several organizations have announced and launched initiatives to build out infrastructure that supports in-region economic growth through connectivity with the rest of the world. Various forms of network and internet traffic are being securely routed along the original Silk Road, to cloud, network and IT services providers in carrier-neutral data centers and across ocean floors using subsea cables. This is creating a digital silk road, which is comprised of modern digital infrastructure and where business traffic is exchanged across a “digital corridor.” It’s not a new concept; previously, we wrote about another new digital silk road that traverses a digital corridor across four main European markets.
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There are three macro trends that are driving efforts to build out a foundation of digital infrastructure that will support the growth of new silk roads across digital corridors in the region for years to come.
Macro Trend #1: More internet traffic is staying within Asia
Historically, lack of peering infrastructure in the region made it necessary to do what’s referred to as tromboning internet traffic when content is hosted somewhere else. Instead of exchanging internet traffic locally, it was typically routed to access content on servers in other countries as far away as the United States and Canada and then redirected back to APAC. This caused a significant latency issue for individuals and businesses when accessing the internet.
Peering infrastructure in the region has matured as more options are available for keeping traffic flowing locally through internet exchanges. One of the reasons for the expansion of exchanging traffic locally is that global companies coming into Asia are positioning edge POPs in APAC. Further, additional carrier-neutral data center facilities and increased subsea cable capacity in the region have contributed to the build-out of peering infrastructure.
As use of the internet continues to grow in support of the expansion of an already-thriving digital economy, Intra-Asia capacity is becoming increasingly more important. While the growth on trans-Pacific routes remains robust, the share of international bandwidth connected from Asia to the U.S. and Canada has been on a steady decline over the years as shown in the chart below.
Macro Trend #2: Subsea cables add depth to digital infrastructure
With the increasing number of Intra Asia, Asia-Europe and Asia-America subsea cables coming online in the next two to three years as well as many cables in the planning stage, the traditional Asia hubs such as Singapore, Hong Kong and Tokyo will have better than ever connectivity to other cities in Asia. While those three hubs remain integral to intra-Asian connectivity, other countries in Asia such as Korea, India and other Indo-China countries such as Cambodia, Laos, Malaysia, Myanmar, Thailand and Vietnam are becoming more integrated.
In addition to the traditional South China Sea corridor for the North to Southeast Asia path, there will be a new corridor that will run on the east side of the Philippines, providing diversity in subsea paths in APAC. Apricot will be the first subsea cable running in that corridor when it is ready to operate in 2024 and will connect Singapore, Japan, Guam, the Philippines, Taiwan and Indonesia. Alongside Apricot will be the Echo cable, forming two complementary systems to provide multiple paths in and out of Asia, while providing businesses and start-ups with lower latency, more bandwidth and increased connectivity resilience.
The expansion of subsea cable systems in Asia-Pacific provides high-speed, low latency and low-cost data connections that can accelerate the growth and expansion of companies. Subsea connectivity can help companies build and enhance local peering ecosystems in new markets that have previously been constrained by access and cost. Here’s a count of subsea cables currently operating and in the planning stages.
Number of Submarine Cable Systems
Macro Trend #3: Global pandemic drives up internet traffic and interconnection bandwidth
Demand for internet access increased exponentially during the global pandemic. While some of the growth in internet traffic was occurring prior to the COVID-19 outbreak, it naturally accelerated during the pandemic, especially during extended lockdown periods. Here at Equinix, our monitoring of internet traffic on Equinix Internet Exchange revealed that in Sydney, there was more than a 20% spike in internet traffic during the extended lockdown period of July 2021 to November 2021. This sizeable increase in internet traffic aligns with the Equinix 2021 Global Interconnection Index (GXI), Volume 5 forecast of interconnection bandwidth capacity growth in APAC, from 1,335 Tbps in 2020 to 2,049 Tbps in 2021.
As the most populated region worldwide, APAC has the highest number of internet users in the world. However, it falls behind Europe and the Americas by internet penetration rate, which further validates the need to expand digital infrastructure in proximity to more users.
The pandemic also forced the economy into digital transformation overdrive, increasing the demand for greater interconnection between companies worldwide. Interconnection is the direct and private traffic exchange between two or more parties, inside a carrier-neutral colocation data center. It also has been proven to be a good barometer of a company’s digital transformation progress. Interconnection helps companies quickly and easily connect digital infrastructure and services on a global scale. According to the GXI, Vol. 5, a market study published by Equinix, the APAC region’s interconnection bandwidth is expected grow at a 46% CAGR to 2024, making up 28% of the total global interconnection bandwidth.
The pandemic also forced the economy into digital transformation overdrive, increasing the demand for greater interconnection between companies worldwide."
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How the global pandemic drove digital transformation in IT
The global pandemic is still having a significant impact on IT strategies and workplace practices. As it turns out, 60% of global leaders who responded to the Equinix 2022 Global Tech Trends Survey reported that they are further along in their digital transformation journey because of COVID-19. 54% reported that IT budgets have increased because of the COVID-19 pandemic.
Another interesting finding is the clear transition toward Everything as a Service (XaaS) with 81% of IT decision-makers in Asia-Pacific indicating they are moving toward that model. While the “anywhere economy” was thriving before the pandemic, it surged with the increased 24/7 demand from consumers and businesses. More than ever before, they relied on the internet for essential services from companies like Amazon, Netflix and Adobe. Digital infrastructure is essential to meet the increasing expectation of access to anything, anytime and anywhere. As the survey respondents reported, the XaaS model simplifies IT infrastructure, is more flexible and improves user experience.
Powering digital transformation in India
Our coverage of Asia-Pacific would not be complete without taking a closer look at what’s happening in India. As the government continues to advance digital technology adoption, including the upcoming rollout of 5G, there are endless opportunities to accelerate digital transformation, fuel innovation by new industry entrants, and grow new digital corridors in the country. The Indian government has made it a priority to give data centers and energy storage systems infrastructure status and special incentives have been offered by many individual states. Many sectors like government, education, finance, entertainment and e-commerce are highly dependent on digital ecosystems, which will continue to drive demand for data centers and digital infrastructure that includes interconnection. With massive growth in digital services consumption, good subsea cable momentum and state-sponsored data center incentives, India is well positioned to establish itself as a critical hub in Asia and the global data center market.
Businesses connect with the world on the digital silk road
As this multi-faceted digital corridor in Asia-Pacific continues to expand, it will provide the solid infrastructure companies and national economies require to grow.
To learn more about how companies are deploying digital infrastructure for competitive advantage, read the Leaders’ Guide to Digital Infrastructure.
As the government of India continues to advance digital technology adoption, including the upcoming rollout of 5G, there are endless opportunities to accelerate digital transformation, fuel innovation by new industry entrants, and grow new digital corridors in the country."