Beijing and Shanghai

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1 MARKET FORECAST DEC 2016 Beijing and Shanghai Multi-Tenant Datacenter Market Teddy Miller, Associate Analyst, Multi-Tenant Datacenters Kelly Morgan, VP Services This report provides an overview of the competitive dynamics in the Beijing and Shanghai markets, a 451 Research Market Map TM of the competitors in each area, market share of the dominant providers, supply-demand and utilization trends, and discussion of planned multi-tenant datacenter builds RESEARCH, LLC

2 ABOUT 451 RESEARCH 451 Research is a preeminent information technology research and advisory company. With a core focus on technology innovation and market disruption, we provide essential insight for leaders of the digital economy. More than 100 analysts and consultants deliver that insight via syndicated research, advisory services and live events to over 1,000 client organizations in North America, Europe and around the world. Founded in 2000 and headquartered in New York, 451 Research is a division of The 451 Group Research, LLC and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication, in whole or in part, in any form without prior written permission is forbidden. The terms of use regarding distribution, both internally and externally, shall be governed by the terms laid out in your Service Agreement with 451 Research and/or its Affiliates. The information contained herein has been obtained from sources believed to be reliable. 451 Research disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although 451 Research may discuss legal issues related to the information technology business, 451 Research does not provide legal advice or services and their research should not be construed or used as such. 451 Research shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice. NEW YORK SAN FRANCISCO LONDON BOSTON 20 West 37th Street 3rd Floor New York, NY P F Geary Street 9th Floor San Francisco, CA P F Gower Street London, UK WC1E 6HH P +44 (0) F +44 (0) Federal Street 5th Floor Boston, MA P F ABOUT THE AUTHORS TEDDY MILLER ASSOCIATE ANALYST, MULTI-TENANT DATACENTERS As an Associate Analyst for 451 Research, Teddy focuses on covering the multi-tenant datacenter market in the Asia-Pacific region, particularly mainland China. KELLY MORGAN VP SERVICES Kelly joined 451 Research in April 2011 as an analyst covering the economics and finances of the datacenter and hosting industries. In her current role, she leads the services analyst teams, which track hosting, managed services and multi-tenant datacenter providers worldwide. Coverage includes providers, market size, datacenter supply and demand, and the dynamics of the industry overall. II

3 Key Findings Although China s state-owned carriers still dominate the country s datacenter market, a growing number of carrier-neutral providers are making an impact. Global operators are also beginning to open up space in China, navigating the government s complex regulatory landscape by partnering with domestic companies or carefully adhering to legislative directives. The introduction of these players in particular has precipitated a shift in the strategy of the incumbent telcos, which have added a variety of managed services to remain competitive. Internet giants Baidu.com, Alibaba Group and Tencent, collectively known as BAT, drive much of the Chinese technology sector s rapid growth and change. Their cloud business in particular has altered the course of the Chinese colocation market by driving demand for facilities that can provide the power and reliability to support high-density computing environments. Despite government restrictions limiting datacenter builds, Beijing continues to see strong demand for new datacenter supply. New facilities are increasingly located in clusters on the outskirts of the city, in areas like the Beijing Economic and Technological Development Area and the Tianzhu Free Trade Zone. As China s capital, Beijing is home to most of the country s big enterprises, so while China Unicom still has the most space in the city, private providers like 21Vianet Group and GDS Services are quickly developing large builds to serve these goliaths ever-increasing IT needs. As China s primary financial hub, not to mention its most critical manufacturing and shipping center and largest city by both population and gross domestic product (GDP), Shanghai is seeing some of the country s fastest and most interesting datacenter market growth. While the city s municipal authorities express a similar concern regarding new datacenter builds as Beijing s do, Shanghai s burgeoning financial sector is attracting even more new large-scale, carrier-neutral builds than its northern counterpart. This dynamic activity has even attracted the likes of Equinix, CenturyLink and other global datacenter operators seeking to use Shanghai as a launching pad for their China business. III

4 Executive Summary THE 451 TAKE Even Chinese nationals say that doing business in China is not easy. There are plenty of hoops to jump through, especially for datacenter and cloud service providers (CSPs), and if the company is owned by a non-chinese entity, things are even more complicated. There are ways to set up shop in the country and be successful, however, and we believe there will be more international entrants in the next two to three years. The well-documented surge in affluence of China s middle class is currently driving a technological revolution that in many ways surpasses that in the US, and could be a potential boon for both datacenter providers and CSPs, suggesting that the hassle will be worth the effort. METHODOLOGY The data in this report was assembled in part through the use of 451 Research s Datacenter KnowledgeBase, which tracks hundreds of companies in the space, including product mix and regional market shares. Our methodology includes tours of many of the datacenters in the markets, surveys of datacenter providers, phone briefings and data collection from competitors. 451 Research also interviews real estate professionals as part of our research. This report was written by: Teddy Miller, Associate Analyst, Multi-Tenant Datacenters Kelly Morgan, VP Services 451 Research client input and comments on this report are encouraged. Any questions about the methodology should be addressed to datacenter@451research.com. In cases where metrics are not available from the company, we have used general industry averages and assumptions. The report identifies all datacenter providers discovered by 451 Research in each market, except for those with less than 1,000 square feet of space, and estimates market share for the top three to five providers in each area. Market share is calculated based on operational square footage. For wholesale providers that also lease to retail colocation providers, such space is counted only once in the retail listing as the retail colocation provider s space since they are selling to the end customer. In other words, this report depicts market share from the viewpoint of the customer that leases space. The only exception is for the wholesale market share graphs, where retail space is not subtracted in order to give a clearer sense of the true wholesale market share. This report uses the most up-to-date information received from datacenter providers to estimate market size, supply, demand and utilization. Figures in this report represent year-end numbers and can differ from previous editions of our reports due to more disclosures received from more providers. The maps in this report may not reflect all datacenter facilities in a particular market because not all datacenter providers disclose addresses. The datacenter market includes facilities located within roughly a 50-mile radius from each city center. Datacenter supply and demand is often referred to in the industry in terms of power available (typically in megawatts, MW), and we expect to convert our graphs to MW eventually. However, not all datacenter providers have given us power metrics and, even when obtained, such metrics can be difficult to confirm (particularly for utilization). Thus, for the time being, we continue to show supply and demand in terms of operational square footage or square meters. IV

5 Table of Contents 1. THE DATACENTER MARKET IN CHINA 1 Figure 1: As of Q4 2015, China Lags Behind Other Countries in Datacenter Space MARKET HISTORY Figure 2: Carrier-Neutral Supply in China Has Grown Even More Rapidly Than Carrier-Owned MARKET DRIVERS CUSTOMERS Cloud and Internet Service Providers BAT Financial Institutions Large Enterprise and Public Services MARKET SIZE AND GROWTH High-Performance Datacenters DATACENTER LOCATIONS THE MTDC COMPETITIVE LANDSCAPE IN CHINA SERVICES WHOLESALE BEIJING MULTI-TENANT DATACENTER MARKET 7 3. BEIJING COMPETITIVE OVERVIEW 9 Figure 3: 451 Research Market Map TM for Beijing Figure 4: MTDC Providers in Beijing MARKET SHARE LEADERS Figure 5: Beijing MTDC Total Market Share Leaders Figure 6: Beijing MTDC High-Performance, Carrier-Neutral Market Share Leaders BEIJING MTDC SUPPLY AND DEMAND 13 Figure 7: Total MTDC Supply, Beijing Figure 8: MTDC Supply/Demand/Utilization, Beijing SUPPLY ADDITIONS AND INVESTMENT ACTIVITY Figure 9: Announced MTDC Pipeline Beijing V

6 BEIJING AND SHANGHAI: MULTI-TENANT DATACENTER MARKET EXECUTIVE OVERVIEW 5. SHANGHAI MTDC MARKET SHANGHAI COMPETITIVE OVERVIEW 16 Figure 10: 451 Research Market Map TM for Shanghai Figure 11: MTDC Providers in Shanghai MARKET SHARE LEADERS Figure 12: Shanghai MTDC Total Market Share Leaders Figure 13: Shanghai Market Share Leaders for High-Performance, Carrier-Neutral Space SHANGHAI MTDC SUPPLY AND DEMAND 20 Figure 14: Total MTDC Supply, Shanghai Figure 15: MTDC Supply/Demand/Utilization, Shanghai SUPPLY ADDITIONS AND INVESTMENT ACTIVITY Figure 16: Announced MTDC Pipeline Shanghai TERMINOLOGY TAXONOMY 23 MULTI-TENANT DATACENTERS RETAIL COLOCATION WHOLESALE DATACENTER INTERCONNECTION MANAGED HOSTING INDEX OF COMPANIES 25 VI