This article first appeared in The Edge Malaysia Weekly on March 17, 2025 - March 23, 2025

MALAYSIA has not seen the peak of its data centre construction boom, says construction chemicals producer Sika Kimia Sdn Bhd (Sika Malaysia), amid recent concerns about a potential change in demand following the latest developments in the artificial intelligence (AI) space.

Sika Malaysia, which produces speciality chemicals for sealing, bonding, damping, reinforcing and protecting structures in the construction industry, has been tapping into that segment as well as industrial projects, which contributed to the 7.4% growth in the construction sector last year.

“What’s booming right now is really industrial projects,” Sika Malaysia’s general manager Francisco Retondo tells The Edge in an interview.

“It [the data centre push] just started last year. We have not seen the peak yet. We are in the growth phase, and a lot of good things are coming in the next three years.”

Malaysia’s data centre and AI ambition has seen rapid project developments, especially in the last two years. From January to October 2024, the country secured RM141.7 billion worth of data centre investments — triple that for the whole of 2023 — for an annual take-up of 429mw, far ahead of regional runner-up Indonesia (93mw).

However, a global AI software technology race that culminated with the potential of using less computing power has prompted some industry observers to argue that the demand for high-performance chips — and as such, data centres — may be lower than previously anticipated.

But Sika Malaysia, which serves the likes of Google’s Elmina Park facility for data centre projects, sees a pipeline of jobs based on conversations with potential clients on specifications needed for their facilities in the country, explains Retondo.

The Malaysian unit of Swiss-listed Sika AG enjoyed revenue growth of more than 15% in 2024 — or 8.9% excluding revenue from new acquisitions — and Retondo wants to maintain a double-digit growth of 10% to 15% this year, compared with Malaysia’s construction industry’s estimated average annual growth of 5.4% from 2024 to 2028.

This is despite Malaysia experiencing higher price pressures in this operating segment compared with its regional peers, where prices have remained stagnant despite the rising cost of raw materials like cement and calcium carbonate, as well as labour and other services such as logistics.

The higher specifications and longer warranties required by data centres and industrial projects add to margins, compared with more commoditised products, says Retondo.

Meanwhile, the wider Sika group also provides solutions for automotive manufacturing facilities and the bonding in vehicle production, particularly in electric vehicles.

Sika Malaysia supplies to SIBS Sdn Bhd, another Swiss-backed outfit, which produces modular units for Saudi Arabia’s mega city Neom at its facility in Penang. It is also in conventional infrastructure projects, including hydroelectric dams, although these are more competitive due to the less-sophisticated products involved. “But those are higher-volume projects,” Retondo points out.

Overall, the Sika group commands an estimated 10% to 15% of the domestic market share for its product range, he says. Infrastructure developments that have used Sika Malaysia’s solutions in the past include the Merdeka 118 skyscraper and the Klang Valley mass rapid transit.

Sika operates six processing plants in the country, says Retondo. “I would say roughly 75% of what we sell in Malaysia is produced here,” he adds. Its Bukit Raja plant makes Malaysia a hub for ucrete (special polyurethane resin) flooring solutions, which it exports to the rest of Asia. 

On the sustainability front, Sika Malaysia sees its products contributing to less emissions in the construction process through the use of supplementary cementitious materials. Asked about the premium pricing that comes with higher ESG compliance for its solutions, Retondo explains that the incremental quality improvements contribute to the lower cost of maintaining the structures for clients in the longer run.

The group recently moved its headquarters from Petaling Jaya to Bangsar South, which centralises the group’s supporting functions in one place to improve efficiency and create a common culture for the 420-strong workforce.

“With all the things that are currently in the pipeline, I see a very positive landscape, not just for Sika Malaysia, but for the construction industry in general, at least for the next few years. It’s going to be good for Malaysia,” says Retondo. 

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