Why an AI Boomtown Is Sprouting in an Unlikely Place

[00:00:00] [SPEAKER_02]: Robert Half Research indicates 9 out of 10 hiring managers are having difficulty hiring. Robert Half is here to help. Our recruiting professionals utilize our proprietary AI to connect businesses with highly skilled talent. At Robert Half, we know talent. Visit roberthalf.com today.

[00:00:23] [SPEAKER_03]: Welcome to Tech News Briefing. It's Tuesday, October 15th. I'm Zoe Thomas for The Wall Street Journal.

[00:00:30] [SPEAKER_03]: It's been more than two and a half years since Russia invaded Ukraine. And to combat Russia's much larger military, Ukraine is relying on tech, specifically drones in the war.

[00:00:43] [SPEAKER_03]: However, we'll tell you about the drone innovations it's made. And then, many things are being reshaped by artificial intelligence.

[00:00:52] [SPEAKER_03]: But nowhere on Earth has been physically reshaped by AI as quickly as the Malaysian state of Johor.

[00:00:59] [SPEAKER_03]: Our reporter Stu Wu visited the region and will join us to talk about what's behind the change.

[00:01:04] [SPEAKER_03]: But first, Ukraine has a smaller military and fewer resources than Russia.

[00:01:14] [SPEAKER_03]: But on the front lines of Ukraine's defense, soldiers and manufacturers are innovating to counter Moscow's battlefield advantages.

[00:01:23] [SPEAKER_03]: Here to tell us more is our reporter Isabel Coles.

[00:01:26] [SPEAKER_03]: So Isabel, from a broad perspective, what is it about drones in particular that have made them the focus of innovation in Ukraine?

[00:01:34] [SPEAKER_01]: Well, Ukraine is waging an uneven fight against a much bigger and more powerful army.

[00:01:41] [SPEAKER_01]: So it's really having to do everything it can to find some sort of edge on the battlefield.

[00:01:47] [SPEAKER_01]: And since the early days of the war, it's used commercially available drones initially to drop kind of small bombs on Russian forces.

[00:01:57] [SPEAKER_01]: And also as kamikaze style drones that detonate on impact with a target.

[00:02:03] [SPEAKER_01]: But increasingly, it's been deploying drones in more novel ways.

[00:02:08] [SPEAKER_01]: So you've begun to see drones being used to perform all kinds of roles, from planting mines,

[00:02:14] [SPEAKER_01]: to trying to smoke Russians out of their positions, to even, you know, intercepting Russian reconnaissance drones.

[00:02:23] [SPEAKER_03]: Let's talk a little bit more about the specific ways Ukraine is using drones.

[00:02:28] [SPEAKER_03]: First off, you're reporting that Ukraine is using drones to fight Russia in the tree line.

[00:02:33] [SPEAKER_03]: How is it doing that?

[00:02:34] [SPEAKER_01]: This is a kind of drone that appeared on the battlefield in recent months.

[00:02:39] [SPEAKER_01]: It's been dubbed the Dragon's Breath drone.

[00:02:41] [SPEAKER_01]: And they shower Russian soldiers hiding in trees.

[00:02:45] [SPEAKER_01]: They shower those positions with thermite, which is a mixture of powdered aluminium and iron oxide that burns at a very high temperature.

[00:02:54] [SPEAKER_01]: And the purpose of this is to sort of burn through tree cover to expose Russian troops.

[00:03:00] [SPEAKER_01]: And Russians themselves have also begun trying to replicate this, which suggests that it's proving quite effective.

[00:03:07] [SPEAKER_03]: What about using drones to fight Russia's drones?

[00:03:10] [SPEAKER_03]: How does that work and why is it important?

[00:03:13] [SPEAKER_01]: The use of drones to intercept Russian reconnaissance drones is potentially one of the, like, more significant developments here.

[00:03:21] [SPEAKER_01]: Ukraine's aim is to sort of blind Russia and to make it much harder for Russia to pinpoint targets and correct fire.

[00:03:30] [SPEAKER_01]: Essentially, you know, Ukrainian drones have, in recent months, knocked hundreds of Russian spy drones out of the sky.

[00:03:37] [SPEAKER_01]: And this is really important because one of the things that Ukraine really is lacking is sufficient air defenses to protect its skies.

[00:03:46] [SPEAKER_01]: And whereas it's extremely expensive to take out Russian reconnaissance drones with more traditional air defense systems, these drones are inexpensive.

[00:03:57] [SPEAKER_03]: What alterations has Ukraine made to its drones to allow them to carry heavier payloads?

[00:04:02] [SPEAKER_01]: You know, Ukraine has been producing a lot of these quadcopters that frontline units are modifying and adapting in different ways.

[00:04:10] [SPEAKER_01]: We spent time with a unit in eastern Ukraine that had attached a rocket propelled grenade to the underside of a drone.

[00:04:19] [SPEAKER_01]: And they took us to a training field and showed us how this works.

[00:04:23] [SPEAKER_01]: So essentially, the advantage of this innovation is that it enables Ukraine to fire from a distance.

[00:04:30] [SPEAKER_01]: Usually, a drone would either have to be directly above its target or collide with it in order to cause an explosion.

[00:04:38] [SPEAKER_01]: And the problem with that is that it makes Ukrainian drones more vulnerable to Russian electronic jamming.

[00:04:44] [SPEAKER_01]: And we saw them attach an assault rifle to a drone.

[00:04:49] [SPEAKER_01]: At this stage, by their own admission, it's like a fairly crude invention and it's quite difficult to aim.

[00:04:56] [SPEAKER_01]: But the hope is that over time, they'll be able to refine this.

[00:04:59] [SPEAKER_01]: And perhaps, you know, AI can also help with targeting, particularly when we're talking about like a moving target.

[00:05:06] [SPEAKER_03]: That was our reporter, Isabel Coles.

[00:05:10] [SPEAKER_03]: Coming up, 100 miles from the equator, rising next to tropical trees near the Singapore border is one of the biggest AI boom towns.

[00:05:19] [SPEAKER_03]: We'll tell you about it after the break.

[00:05:28] [SPEAKER_02]: Robert Half Research indicates 9 out of 10 hiring managers are having difficulty hiring.

[00:05:34] [SPEAKER_02]: Robert Half is here to help.

[00:05:35] [SPEAKER_02]: Our recruiting professionals utilize our proprietary AI to connect businesses with highly skilled talent.

[00:05:42] [SPEAKER_02]: At Robert Half, we know talent.

[00:05:44] [SPEAKER_02]: Visit roberthalf.com today.

[00:05:52] [SPEAKER_03]: The Malaysian state of Johor has gone from tech industry backwater to AI boomtown,

[00:05:59] [SPEAKER_03]: as demand for AI and more conventional cloud computing has spurred the construction of new data centers.

[00:06:05] [SPEAKER_03]: Johor has a lot of things going for it when it comes to building and supporting these power-hungry buildings filled with thousands of computer chips.

[00:06:14] [SPEAKER_03]: In all, investments in data centers in Johor are estimated to reach $3.8 billion this year, according to regional bank Maybank.

[00:06:23] [SPEAKER_03]: Here to tell us about this development is our reporter, Stu Wu.

[00:06:27] [SPEAKER_03]: Stu, can you describe what this area looked like just three years ago before the AI boom and what it's like now?

[00:06:33] [SPEAKER_00]: So I live in Singapore, and right across the Straits is this Malaysian state called Johor.

[00:06:38] [SPEAKER_00]: And it's most famous for the outlet malls that Singaporeans like to go to.

[00:06:43] [SPEAKER_00]: And besides that, it's full of palm oil plantations.

[00:06:46] [SPEAKER_00]: So they're basically this type of palm tree that you can make oil from.

[00:06:49] [SPEAKER_00]: So it's a super unlikely place to be important to the tech industry.

[00:06:53] [SPEAKER_00]: But what started happening about two years ago is that some of the world's biggest tech companies,

[00:06:59] [SPEAKER_00]: including ByteDance, which is TikTok's parent company, and Microsoft,

[00:07:02] [SPEAKER_00]: started investing hundreds of millions of dollars there to build these data centers.

[00:07:08] [SPEAKER_00]: And that's happening because the world's tech companies need more and more data centers to train artificial intelligence.

[00:07:13] [SPEAKER_00]: But there's not enough power and water supply in the U.S.

[00:07:17] [SPEAKER_00]: So they started looking abroad.

[00:07:18] [SPEAKER_00]: They found this state that you might have never heard of.

[00:07:21] [SPEAKER_00]: It's called the Malaysian state of Johor.

[00:07:23] [SPEAKER_03]: You mentioned TikTok's parent company, ByteDance.

[00:07:26] [SPEAKER_03]: What other companies have invested in data centers there?

[00:07:29] [SPEAKER_00]: ByteDance is one of the really big tech companies that have really invested in Johor.

[00:07:33] [SPEAKER_00]: But Oracle just announced a $6.5 billion investment in Malaysia.

[00:07:37] [SPEAKER_00]: And there's also Blackstone, which just spent $16 billion to buy this data center operator,

[00:07:43] [SPEAKER_00]: this third-party operator that has sites all across Asia, including in Johor.

[00:07:47] [SPEAKER_00]: So these are really some blue-chip names that are spending a lot of money in this Malaysian state.

[00:07:51] [SPEAKER_03]: How much of the data center market is being operated directly by these big tech companies versus, say, third-party operators?

[00:07:59] [SPEAKER_00]: Okay.

[00:07:59] [SPEAKER_00]: So in the U.S., about 70% of data centers are operated by these big companies themselves.

[00:08:05] [SPEAKER_00]: And you've heard of these companies.

[00:08:06] [SPEAKER_00]: They're Meta, Amazon, Microsoft, Oracle.

[00:08:09] [SPEAKER_00]: But abroad, that's less of the case.

[00:08:11] [SPEAKER_00]: Only 10% of those companies are operated by the big companies.

[00:08:14] [SPEAKER_00]: And they outsource 90% to these third-party data center operators.

[00:08:17] [SPEAKER_00]: What's happening in Johor is kind of the same.

[00:08:20] [SPEAKER_00]: Most of these data centers are run by these third companies like Equinix or Princeton Digital Group.

[00:08:24] [SPEAKER_00]: You might have never heard of.

[00:08:26] [SPEAKER_00]: But what they do is that they basically build the hotel, if we're going to use this analogy.

[00:08:30] [SPEAKER_00]: There are these big boxes that cost $1 to $2 billion each.

[00:08:33] [SPEAKER_00]: And they provide the interconnectivity and the HVAC to cool these data centers that run really hot.

[00:08:38] [SPEAKER_00]: And then the companies like Oracle, Microsoft, ByteDance, they come in as tenants.

[00:08:43] [SPEAKER_00]: And they put in their own servers there.

[00:08:45] [SPEAKER_00]: And they operate it as if they were running their own, except they don't have to put up the infrastructure themselves.

[00:08:50] [SPEAKER_03]: What is it about this corner of Malaysia in particular that's made it a hub for data centers in the AI boom?

[00:08:56] [SPEAKER_00]: So if you look at what a data center really needs, it needs power and it needs water to cool down these computer chips because they run so hot.

[00:09:03] [SPEAKER_00]: And the third thing they need is interconnectivity.

[00:09:05] [SPEAKER_00]: Because they're training so much data and they want to be able to send it around the world to their other data centers so that they can talk and interact with each other and analyze that data.

[00:09:13] [SPEAKER_00]: So Malaysia has a surplus both of power and land.

[00:09:17] [SPEAKER_00]: They have enough water.

[00:09:18] [SPEAKER_00]: But the other important thing is that it's right next to Singapore, which has one of the world's densest intersection of these undersea cables that just sling data around the world.

[00:09:28] [SPEAKER_00]: That leads to the other question, which is why didn't these tech companies just build in Singapore?

[00:09:32] [SPEAKER_00]: Well, Singapore is this tiny and really densely populated country.

[00:09:35] [SPEAKER_00]: That has energy constraints.

[00:09:37] [SPEAKER_00]: So five years ago in 2019, they put a moratorium in data centers.

[00:09:40] [SPEAKER_00]: So the tech companies did the next best thing, which is they went across the bridge about an hour away to Johor.

[00:09:46] [SPEAKER_03]: Stu, you mentioned what the Singaporean government has done.

[00:09:49] [SPEAKER_03]: What about the steps the Malaysian government has taken?

[00:09:52] [SPEAKER_00]: The Malaysian government has been really supportive of this because they see a chance for Malaysia to become a world-leading data center hub.

[00:09:59] [SPEAKER_00]: What they've done is that they've really streamlined the process for permitting.

[00:10:02] [SPEAKER_00]: So they set up this one-stop shop eventually where if you're a data center operator, you can go there and get all your permits that you need for power, electricity, whatever, and get it done really quickly.

[00:10:11] [SPEAKER_00]: And I talked to one company, Princeton Digital Group, that said they were able to apply for permits, build their data center, and have it operating within 15 months.

[00:10:20] [SPEAKER_00]: And they said there's nowhere else in the world where we could do it that quickly.

[00:10:24] [SPEAKER_03]: What does this all mean for locals in Johor?

[00:10:26] [SPEAKER_00]: I went there and I was wondering, okay, are they destroying palm oil plantations or anything else to build these data centers?

[00:10:33] [SPEAKER_00]: That's not the case.

[00:10:34] [SPEAKER_00]: There's plenty of land there.

[00:10:35] [SPEAKER_00]: The first concern is that much of this power is coming from coal.

[00:10:39] [SPEAKER_00]: So we have to watch for the long-term implications from that.

[00:10:41] [SPEAKER_00]: I talked to a politician that said, yes, that's not ideal, but we're investing in more renewable energy.

[00:10:46] [SPEAKER_00]: The second thing is water.

[00:10:47] [SPEAKER_00]: These things require a lot of water to cool down the data centers.

[00:10:51] [SPEAKER_00]: And there have been some water shortages in the past.

[00:10:53] [SPEAKER_00]: The mayor of the state capital said, we have to look into things like building desalination plants and make sure that we don't run out of water in the future.

[00:11:01] [SPEAKER_03]: That was our reporter, Stu Wu.

[00:11:03] [SPEAKER_03]: And that's it for Tech News Briefing.

[00:11:05] [SPEAKER_03]: Today's show was produced by Julie Chang with supervising producer Catherine Millsop.

[00:11:10] [SPEAKER_03]: I'm Zoe Thomas for The Wall Street Journal.

[00:11:12] [SPEAKER_03]: We'll be back this afternoon with TNB Tech Minute.

[00:11:15] [SPEAKER_03]: Thanks for listening.