Seoul, South Korea’s capital region, is experiencing a rapid expansion in its data center industry. With a total capacity of 605 MW, the Greater Seoul area holds the largest concentration of data centers in the country. Historically dominated by domestic telecom companies and local firms, the market has now become a hub for international developers seeking to capitalize on the growing demand for data center space. By 2026, the supply of data centers is expected to increase by two-thirds.

However, power availability restrictions imposed by the government have become a significant challenge for developers. These restrictions are leading many companies to seek land outside of Greater Seoul, where incentives such as discounted power and infrastructure support are available. Despite these hurdles, demand for data center capacity remains strong, driven primarily by hyperscale cloud providers who pre-lease much of the new space, leaving limited capacity for enterprise users.

This surge in data center growth mirrors a broader trend across South Korea, where the total data center capacity is projected to reach 2.02 thousand MW by 2029, with a compound annual growth rate (CAGR) of 12.73% from 2024. This growth is fueled by the increasing demand for digital services, media consumption, and AI applications, solidifying Seoul’s role as a key regional digital hub. However, power supply constraints and the need to diversify developments beyond the capital will remain critical challenges.

Key Challenges Facing Seoul's Data Center Market

Despite the booming demand for data centers in Seoul, several significant challenges hinder the progress of many projects. Developers face issues related to regulatory hurdles, land scarcity, and community resistance, among others.

Regulatory Hurdles

The South Korean government has introduced new restrictions on power supply within the Seoul Metropolitan Area (SMA), a critical factor for large-scale data center projects. The approval process for power supply requests through Korea Electric Power Corp. (KEPCO) has been extended from two to three months to nearly a year. Additionally, new policies limit power supply applications for projects exceeding 5 MW, making it more difficult for larger data centers to secure the necessary electricity for their operations.

Civil Complaints and Community Resistance

Many data center projects face delays due to complaints from local residents. These civil objections can lead to longer approval processes and disruptions in construction timelines. This community resistance complicates the development process, as developers must navigate local concerns in addition to technical and regulatory challenges.

Limited Availability of Land

Seoul’s high density and limited land availability create another barrier for data center expansion. Most of the prime locations for large-scale data centers are already occupied by existing infrastructure, leaving few options for new entrants. As a result, developers are increasingly looking outside the Seoul Metropolitan Area for new projects, though this shift introduces its own set of logistical and regulatory challenges.

Difficulty in Securing Tenants

Attracting tenants, particularly large operators, is essential for financing data center projects. However, the pool of potential tenants is limited, with only a few global cloud service providers (CSPs) dominating the market. As a result, many approved projects remain inactive for extended periods due to difficulties in securing operators. This creates uncertainty for developers, as securing reliable tenants is crucial for both funding and project success.

Construction Delays

Once projects receive approval, construction can be slow to commence. Around 30% of ongoing data center projects have taken over a year to begin construction, significantly longer than the typical four- to five-month timeline seen with projects developed by major telecom carriers. These delays hinder the ability of the data center market to keep pace with growing demand.

Financial Constraints

The development of data centers requires significant capital investment, a challenge that many local telecom carriers are unwilling to prioritize. As these companies focus on their core telecommunications businesses, fewer resources are available for data center expansion. This financial strain further limits the growth potential of the market.

Emerging Solutions in Seoul's Data Center Market

In response to these challenges, developers are exploring alternatives like edge data centers, which offer smaller-scale facilities with fewer regulatory obstacles. Edge data centers are typically located closer to end-users, enabling low-latency services that are vital for sectors such as e-commerce and artificial intelligence. These centers can be built more quickly and offer a promising investment avenue for developers seeking to overcome the difficulties associated with traditional, large-scale data center projects.

As demand for data centers continues to increase, overcoming the regulatory, logistical, and financial challenges in Seoul will be critical for the continued growth of the market.

Types of Data Centers in Development

Several types of data centers are under development to meet the growing demand for data storage and processing. The specific type of facility depends on factors like the size of the organization, its industry, and its IT strategy.

Enterprise Data Centers

Enterprise data centers are owned and operated by a single organization, designed to support the company's internal IT infrastructure. These facilities vary in size and complexity depending on the organization’s needs. They provide a high level of control over security and operations, making them a preferred option for companies with strict data management requirements.

Colocation Data Centers

Colocation data centers provide space, power, cooling, and networking for multiple organizations to house their IT equipment. By sharing infrastructure, companies can avoid the high capital costs associated with building and operating their own data centers. This flexible model allows businesses to scale their infrastructure as needed without significant upfront investment.

Cloud Data Centers

Cloud data centers are designed to support cloud computing services, using virtualization to maximize resource utilization. These facilities provide on-demand access to computing resources and are operated by cloud service providers, offering businesses scalable and flexible options for their IT needs.

Edge Data Centers

Edge data centers are smaller facilities located closer to end-users, often in urban office buildings or remote locations. These centers provide low-latency access to computing resources and support emerging technologies like the Internet of Things (IoT) and 5G. Their smaller size and proximity to end-users make them an ideal solution for applications requiring real-time data processing.

Hyperscale Data Centers

Hyperscale data centers are massive facilities designed to support large-scale cloud computing workloads. Operated by major cloud service providers such as Amazon, Google, Microsoft, and Facebook, these data centers are built to handle thousands of servers and are optimized for efficiency and scalability.

Data Center Hardware: The Role of GPUs

The integration of Graphics Processing Units (GPUs) into data centers is transforming how organizations handle data-intensive workloads such as artificial intelligence (AI), machine learning, and high-performance computing. GPUs offer significant advantages over traditional CPUs in tasks requiring large-scale parallel processing, making them a critical component in modern data centers.

Commonly Used GPUs in Data Centers

Several GPU models are widely used in data center environments, including products from NVIDIA, AMD, and Intel.

NVIDIA GPUs

NVIDIA dominates the GPU market for data centers, with models such as the A100, T4, L40, and H100. These GPUs are optimized for AI training, inference, and graphics-intensive applications, offering significant memory capacity and processing power.

AMD GPUs

AMD’s MI series, including the MI100 and MI200, are designed for high-performance computing (HPC) and machine learning tasks. These GPUs offer efficient parallel processing capabilities, making them a popular choice for data centers requiring large-scale computational power.

Intel GPUs

Intel’s Flex and Data Center GPU Max Series are designed for a variety of data center workloads, including media streaming, AI inference, and high-performance computing. These GPUs aim to provide a balance between performance and cost, making them an attractive option for data center operators looking to optimize their infrastructure.

Infrastructure Considerations

Data centers that integrate GPUs must also consider infrastructure upgrades to support the increased power and cooling requirements. High-performance GPUs generate significant heat, necessitating advanced cooling solutions to maintain optimal operating conditions. Additionally, high-performance storage systems, such as SSDs, are essential to support the rapid data access needs of GPU-accelerated applications.

Seoul's Data Center Infrastructure: A Closer Look

Seoul’s data center infrastructure is evolving rapidly to meet the growing demand driven by advancements in technology, particularly in AI, cloud computing, and e-commerce.

Capacity Growth

The total capacity of data centers in Seoul is projected to increase from 1.3 GW in 2023 to approximately 3.2 GW by 2027. This expansion is driven by investments from both financial institutions and global colocation operators, indicating a bright future for the market.

Key Locations

Major data center developments are concentrated in urban areas such as Sangam-dong and Gasan, where high connectivity and access to telecom infrastructure make these areas ideal for new projects. The Sangam Digital Media City, for instance, is home to a thriving ecosystem of tech companies and offers diverse fiber routes for connectivity.

Regulatory Challenges

Recent regulatory changes pose challenges for large-scale data center projects in Seoul. Restrictions on power supply and civil resistance from local communities have led to delays in both project approvals and construction. Developers must navigate these obstacles while continuing to meet the increasing demand for data processing and storage.

Market Dynamics

The Seoul data center market has shifted from being dominated by telecommunications carriers to including significant participation from institutional investors and global operators. This diversification is expected to promote competition and innovation, creating new opportunities for growth.

Take Your Data Center Infrastructure to the Next Level with Vertical Data

As Seoul’s data center market continues to expand, making sure you have the right infrastructure in place is crucial for staying competitive. Vertical Data provides solutions tailored to the needs of modern data centers. From sourcing hard-to-find GPUs to providing turnkey infrastructure services, we streamline the process to help you grow faster. Whether you need GPU-as-a-Service (GPUaaS), colocation support, or high-density solutions, Vertical Data has the expertise to optimize your operations.

Partner with us to:

• Access cutting-edge NVIDIA and AMD GPUs for AI and HPC workloads
• Scale your infrastructure quickly with our ready-to-deploy solutions
• Minimize operational delays and maximize revenue opportunities with our flexible financing options

Ready to meet the future of data center demands? Contact Vertical Data today and explore how our infrastructure solutions can help power your next project.