SM Investments Corp. (SMIC) is cautiously exploring the potential for launching a data center business of its own in Batangas although the company faces significant challenges due to foreign hyperscalers’ hesitance to come and experience the Philippine market. Despite the tantalizing prospects of such an investment, SMIC is wary of committing fully without addressing key external factors influencing a favorable decision.
SMIC president and CEO Frederic C. DyBuncio, at the breakfast meeting of Tuesday Club members at EDSA Shangri-la Hotel in Mandaluyong, highlighted the critical role timing plays in the proposed data center venture. While demand from foreign investors remains strong, DyBuncio noted that the country’s high energy costs and vulnerability to natural disasters are major deterrents for hyperscalers such as Google, Amazon, and Meta. These companies, he said, would rather locate in more stable markets like Malaysia and Vietnam where the risks are less pronounced.
“Their reluctance is largely due to the recurring natural calamities in the Philippines and the high cost of power,” DyBuncio said. “As of now, they’re really not coming in yet.” Additionally, the sustainability requirements of hyperscalers, particularly their commitment to transitioning to renewable energy sources, are also influencing their decision, although SMIC is taking steps to address these concerns.
The company has already identified a strategic site in Batangas for the data center, but DyBuncio said any move forward will depend on overcoming these significant challenges.
But no matter ttel hurdles, SMIC remains optimistic about its long-term growth prospects, bolstered in the main by the resilience of the Philippine economy. DyBuncio pointed to the strength of the company’s diverse business portfolio, which spans across retail, banking, and property, as a buffer against external risks. In particular, SMIC’s integrated ecosystem, combining retail through SM malls, banking services via BDO, and expansive real estate holdings, is seen as a critical advantage in navigating the macroeconomic uncertainties.
In a recent analysis, CLSA, an equity research firm, noted that SM’s retail sector stands to benefit significantly from macroeconomic trends, including wage increases and sustained remittances, which are expected to drive household spending. This resilient consumer base, alongside SMIC’s expansive retail operations and growing minimart network, positions the company well to continue fostering consumption-led growth.
DyBuncio said, “Our businesses complement each other—our expanding retail footprint enhances mall traffic, while BDO provides financial solutions that fuel both consumption and enterprise growth.” As SMIC moves forward, its ability to tap into new sectors like data centers while leveraging its existing business synergies will be pivotal in sustaining growth amid ongoing market challenges.
Data centers are not cheap. Those that operate them at present, such as Narra Technology Park Development Inc., ePLDT and Converge ICT Solutions quote investments in the hundreds of millions of US dollars or even in excess of USD1billion, depending on scale and specification.
