Equinix, Singapore fund GIC to invest in cloud data centers in Japan

(Reuters) - Data center firm Equinix Inc said on Tuesday that it signed a joint venture worth more than $1 billion with Singapore sovereign wealth fund GIC [GIC.UL] to build three data centers in Japan for the cloud computing market.

FILE PHOTO: The logo of Equinix is pictured at the entrance of a data center in Pantin, outside Paris, France, December 7, 2016. REUTERS/Benoit Tessier

Equinix has more than 200 data centers around the world that it leases to a base of 9,700 customers, making it one of the biggest players in the industry. Many of those customers lease space, power and connections to the wider internet from Equinix, but purchase and operate their own data servers and equipment.

By contrast, cloud computing companies such as Inc’s Amazon Web Services, Alibaba Group Holding and Microsoft Corp spend billions of dollars to build and operate their own data centers, renting out the computing power itself rather than physical space.

But the two businesses also overlap. Cloud players often use Equinix services to connect to customers, sometimes even renting space from Equinix to bolster their geographic coverage, which has become important as countries worldwide require data on citizens to be stored within their own borders.

The three planned Japanese data centers - two in Tokyo and one in Osaka - will target large operators, Jim Smith, managing director for hyperscale business at Equinix, told Reuters.

Equinix expects the data centers to house perhaps four to six customers each, where a similar size building targeted at smaller companies would accommodate hundreds or thousands of customers, Smith said.

The buildings will have more robust electrical systems and even larger doors and loading docks to accommodate customers who make their profit by squeezing more computing power into each square foot of space.

“The cloud customers are super good at efficiency,” Smith said. “The physical building might be the same size, but you may have two to three times the energy density, which means more generators, more uninterruptible power supplies, more cooling equipment on the roof.”

Under the deal, Singapore’s GIC Private Ltd will own an 80% equity interest in the joint venture, while Equinix will own the remaining 20% but run the operations. The joint venture is expected to close in the second half of 2020.

Smith said Equinix will fund a portion of its contribution to the joint venture with debt and that it expects to sign up tenants before the data centers become operational, for which he did not provide a timeline.

Reporting by Stephen Nellis in San Francisco; Editing by Himani Sarkar