As Korea's data center market has been growing rapidly in recent years, major construction companies are moving one after another to win data center construction contracts.
According to the construction industry on the 19th, builders are accumulating experience and technical expertise in data center construction, centered on large projects. Daewoo E&C signed a memorandum of understanding (MOU) with 11 private institutions in South Jeolla on the 16th to build an ultra-large AI (artificial intelligence) data center with a total power-receiving capacity of 500 MW. Daewoo E&C will participate as the consortium's key construction partner and take part in all stages, including engineering, procurement and construction (EPC).
Daewoo E&C appears to have made the data center business a new revenue source to hedge against volatility in the dwellings market. In June last year, it completed the 40-megawatt (MW) Empyrean Digital AI Campus, a large data center in Yangjae-dong, Gangnam District, Seoul, and it participated as an investor and construction company in Jangseong Pine Data Center, the first data center in South Jeolla. Chairman Jeong Won-ju of Daewoo E&C attended the groundbreaking ceremony for Jangseong Pine Data Center on the 15th of last month and emphasized, "Data centers are core infrastructure leading the AI era and will be the backbone of revitalizing the regional economy and strengthening national competitiveness."
The company that has built the most data centers among domestic builders is Hyundai Engineering & Construction. In October last year, Hyundai Engineering & Construction completed the 64 MW Pacific Sunny Data Center, then the largest in Korea. The company plans to expand its scope from data center development to operations and to extend its reach overseas, starting with Japan. Hyundai Engineering & Construction has carried out major projects such as the Korea Financial Telecommunications and Clearings Institute's Bundang Center, KT Mok-dong IDC, NH and KB integrated IT centers, and Naver Sejong Center.
Samsung C&T is fostering data centers as a strategic business at the corporate level, including by independently developing an immersion cooling system. It has secured construction rights for 13 data centers to date, and at the Tadawul Tower data center in Saudi Arabia it obtained the highest Tier 4 certification. DL E&C also moved to win overseas orders after completing the 20 MW Gasan Data Center in September last year. GS Engineering & Construction is growing its data center business through its subsidiary DC Bridge, bundling development and operations with financing.
The reason large construction companies are jumping into the data center business is the rapidly growing market. According to commercial real estate services firm Rsquare, the number of private data centers in Korea increased from five nationwide in 2010 to 36 in 2020 and to 66 as of early last year. Supply has nearly doubled over the past five years.
However, concerns about project delays persist in the industry. Opposition from nearby residents has been increasing, as they point to the potential for electromagnetic waves, noise and the heat island effect (a rise in temperature). According to the Ministry of Land, Infrastructure and Transport, of 33 projects in the Seoul metropolitan area permitted in 2024 for the purpose of building data centers, 17, or 51.5%, faced delays or other difficulties. For example, the data center in Gimpo, Gyeonggi Province, being built by DL E&C received a building permit in 2021, but amid opposition including a petition signed by more than 10,000 residents, the groundbreaking was pushed back four years.
An industry official said, "Data centers have a high proportion of equipment and require advanced technology, so construction costs and profitability are higher than in general building projects," adding, "Recently, companies are directly purchasing land and participating in operations to seek long-term revenue." The official added, "Some raise concerns about oversupply in a few years, but given Korea's high interest in AI, the prevailing view is that developers should jump into data center projects now to secure volume."