Setting Up a Data Centre Company in Japan
- Roger Pay
- 20 hours ago
- 5 min read
Japan Data Center Setup Guide
Setting Up a Data Centre Company in Japan
Setting up a data center company in Japan involves several key considerations. Here's a breakdown of the process and important factors:
Market Overview
Growing Market: The Japanese data center market is experiencing significant growth, driven by increasing cloud adoption, AI technologies, the outsourcing of IT services, and data onshoring trends.
Strong Growth Forecast: Projections estimate a market size of $13.35 billion by 2030, with a compound annual growth rate (CAGR) of around 5%. The colocation market is also expected to see substantial growth.
Hyperscale Demand: The hyperscale data center segment is a major driver of this growth, with significant investments from cloud platform providers.
New Entrants: Several international data center operators are entering the Japanese market, indicating strong growth potential.
Government Support: The Japanese government is promoting the development of regional data centers with subsidies available for land development and infrastructure in areas outside of Tokyo and surrounding prefectures.
Key Steps for Setting Up a Data Center Company
Business Planning and Market Research:
Conduct thorough market research to understand the specific demands and competitive landscape in your target region (e.g., Tokyo, Osaka, or regional hubs like Kyushu).
Develop a detailed business plan that includes financial projections, target customers, service offerings (colocation, cloud services, etc.), and a unique value proposition.
Decide whether to build a new facility or utilize an existing data center.
Legal and Regulatory Requirements:
Company Incorporation: Understand the process of establishing a legal entity in Japan.
Data Protection Laws: Be aware of Japan's data protection regulations (e.g., Act on the Protection of Personal Information) and ensure your data center operations comply.
Building Codes and Standards: Adhere to Japanese building codes, fire safety regulations, and seismic standards, which are crucial in an earthquake-prone country like Japan. The Japan Data Center Council (JDCC) has formulated its own Data Center Facility Standard.
Environmental Regulations: Comply with environmental regulations, including energy efficiency targets set by the government for new data centers.
Telecommunications Regulations: If you plan to offer network services, understand the relevant telecommunications regulations.
Trust Entrustment (TMK Law): If using a Trust Master Company (TMK) as an investment vehicle, be aware of regulations regarding the entrustment of movable assets (like data center fit-out).
Site Selection and Acquisition:
Identify suitable locations considering factors like power availability and reliability, connectivity (proximity to fiber networks and submarine cables), land costs, and potential disaster risks.
Land acquisition can be challenging and requires local expertise. Building relationships with local brokers and land aggregators is essential.
Consider both urban centers (Tokyo, Osaka) for connectivity and potentially rural areas (Hokkaido, Kyushu) for renewable energy opportunities and potentially lower costs.
Infrastructure Development:
Power: Secure a stable and sufficient power supply, working with major providers like TEPCO and KEPCO. Consider renewable energy options to meet sustainability goals and potentially benefit from government incentives.
Connectivity: Ensure robust connectivity through partnerships with telecommunication carriers and access to submarine cable networks.
Cooling Systems: Implement advanced and energy-efficient cooling systems to manage the heat generated by IT equipment.
Physical Security: Establish robust physical security measures, including access control and surveillance.
Disaster Resilience: Implement measures to protect against geological risks like earthquakes and tsunamis, including redundant infrastructure (2N, N+1 setups).
Construction and Fit-Out:
Construction costs in Japan are relatively high compared to other APAC regions. The average construction cost can range from $12.5 million to $13.5 million per MW and is expected to increase.
Engage experienced construction companies, potentially those with data center expertise. Be aware of Japanese contractor culture, which may involve implicit understanding and a focus on trust.
Ensure the data center design meets the required tier standards (Tier I-IV) based on your target service levels.
Operations and Maintenance:
Develop operational procedures and service level agreements (SLAs).
Hiring skilled technical personnel can be a challenge due to Japan's aging population and demand for tech talent. Consider partnerships or global operation and maintenance (O&M) services.
Sales and Marketing:
Develop a sales and marketing strategy to attract target customers, including cloud service providers, enterprises, and AI companies.
Highlight the reliability, security, and connectivity of your data center services.
Challenges and Considerations
High Construction Costs: Building data centers in Japan can be expensive.
Land Availability and Costs: Finding suitable land, especially in urban areas, can be challenging and costly.
Power Costs: Energy prices in Japan can be relatively high.
Geological Risks: Earthquakes, tsunamis, and typhoons require robust disaster resilience measures.
Skilled Labor Shortage: Hiring and retaining qualified technical staff can be difficult.
Cultural Differences: Understanding and adapting to Japanese business culture is crucial for successful partnerships and project management.
Long Power Lead Times: Obtaining sufficient power capacity for new data centers can take time.
By carefully considering these factors and conducting thorough planning, a data center company can successfully establish and grow its presence in the promising Japanese market.
How Bestar can Help
Setting Up a Data Centre Company in Japan
Bestar can significantly help in setting up a data center company in Japan by providing specialized expertise and guidance across the various complex stages. Here's how Bestar can contribute:
Market Research and Analysis: Bestar can provide in-depth analysis of market trends, demand drivers, competitive landscape, and growth opportunities in specific regions.
Business Strategy Development: We can help develop a tailored business plan that considers the unique aspects of the Japanese market, including target customer segments, service offerings, and pricing strategies.
Regulatory Guidance: Bestar can navigate the complex legal and regulatory environment in Japan, ensuring compliance with company incorporation, data protection laws, building codes, environmental regulations, and telecommunications rules.
Partner Identification: We can assist in identifying and establishing relationships with key local partners, such as telecommunication carriers, power providers, construction companies, and real estate brokers.
Company Incorporation: Bestar can guide the process of establishing a legal entity in Japan.
Contract Drafting and Review: We can draft and review contracts with customers, suppliers, and partners, ensuring they comply with Japanese law.
Financial Planning and Fundraising: Bestar can help develop financial projections, secure funding, and navigate the Japanese financial landscape.
Tax and Accounting Services: Bestar can provide guidance on Japanese tax regulations and accounting practices.
Network Design and Implementation: IT consultants can design and implement the data center's network infrastructure and connectivity solutions.
Security Planning: Cybersecurity experts can develop and implement robust security measures to protect the data center and its customers' data.
Operational Strategy: Consultants can help develop operational procedures, service level agreements (SLAs), and staffing plans.
Maintenance Planning: They can establish maintenance schedules and procedures to ensure the long-term reliability and efficiency of the data center.
By engaging these professional services, companies can mitigate risks, navigate complexities, and accelerate the successful establishment of their data center business in Japan. Our local knowledge and specialized expertise are invaluable in a market with unique cultural, regulatory, and technical considerations.
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