Alphabet's Google is planning to build a large data centre in Vietnam, according to sources by Reuters. This initiative would be the first investment of its kind in the Southeast Asian nation by a U.S tech giant.

Google is weighing setting up a "hyperscale" data centre close to Ho Chi Minh City, Vietnam's southern economic hub, the source said, declining to be named because the information was not public.

The investment, the size of which the source did not specify, would be a shot in the arm for Vietnam, which has so far failed to attract major overseas capital in data centres due to its patchy infrastructure, with large tech companies preferring to house their centres in rival nations in the region.

It was not clear how quickly Google would reach a decision on an investment, but the source said internal talks were taking place and the data centre could be ready in 2027. A spokesperson for Google declined to comment about the data centre plan.

Hyperscale centres are the largest in the industry, with power consumption usually similar to that of a big city. A hyperscale data centre with power consumption capacity of 50 megawatts (MW) could cost between $300 million and $650 million, according to estimates based on data published by real estate consultant Jones Lang LaSalle in a report this year on data centres in Vietnam.

Google's move was motivated by the large number of its domestic and foreign cloud services clients in Vietnam and the country's expanding digital economy, the source said, noting the Southeast Asian nation was one of the fastest-growing markets for YouTube, Google's popular online video sharing platform.

Currently the top data centre operators in Vietnam, based on computing space, are industrial investment firm IDC Becamex and telecommunications company VNPT, both Vietnamese state-owned enterprises, according to an internal market report by an industrial park in Vietnam seen by Reuters.

The Nikkei reported in May that Chinese e-commerce company Alibaba was considering building a data centre in Vietnam. Alibaba declined to comment on the matter on Thursday when contacted by Reuters.

GROWTH STRATEGY

Despite growing demand for digital services from Vietnam's 100 million population, foreign investors in the sector have largely shunned the country because of occasional power shortages, less attractive investment incentives and weak internet infrastructure which relies on a handful of ageing subsea cables, according to industry experts.

In Southeast Asia, Singapore, Malaysia and Thailand are well ahead in the industry, and have attracted far bigger investments from global tech giants. Google said in May it would invest $2 billion in Malaysia to develop its first data centre and Google Cloud region in the country.

Unattractive regulations on foreign ownership and data localisation have also long been a hurdle, but in a reform approved in November Vietnamese legislators decided to allow overseas data centre operators to retain full ownership.

Vietnam has strict cybersecurity rules and has long clashed with foreign tech companies about storing data in the country – a requirement that it has, however, not regularly enforced. Undeterred, Google is opening a representative office in Vietnam, and is already hiring dozens of engineers, marketing experts and other professionals, according to ads on LinkedIn.

"We now have a team on the ground to better serve our Vietnam-based advertising customers and support the country's digital transformation," a spokesperson for Google told Reuters.

Google is also offering 40,000 scholarships in Vietnam for basic AI courses and $350,000 each for 20 selected AI start-ups, Google Vietnam Managing Director Marc Woo said on LinkedIn last month. The company already has a large network of suppliers in Vietnam that assemble its products, including Pixel smartphones.