At last week's Asia Data Center Expo, the booth of Chinese optical communications equipment maker Jiangsu Zhongtian Technology Co.,Ltd. (ASX: 600522) drew attention. Amid national security concerns, US data center operators' purchases of Chinese-made batteries, cooling systems, optical modules and other equipment are coming under scrutiny. But Chinese equipment makers hold a competitive edge over their US counterparts: American manufacturers are plagued by supply chain shortages and lengthy delivery cycles. As a result, even though the Trump administration has issued executive orders and the US Congress has introduced legislation aimed at restricting Chinese suppliers, US data center builders such as Amazon.com (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL), Microsoft (NASDAQ: MSFT) and Oracle (NYSE: ORCL) still cannot avoid Chinese manufacturers.

The Asia Data Center Expo held in Singapore last week — one of the largest AI infrastructure industry summits in the Asia-Pacific region — vividly demonstrated this symbiotic relationship. Chinese component makers exhibited on a large scale, with products covering liquid cooling systems, generator sets, load bank testing equipment and various smart energy solutions. Several industry insiders at the event told me they had never seen so many Chinese companies exhibiting alongside established European and American manufacturers. Data centers are widely welcomed in Asia, with countries generally taking an accepting attitude; this stands in stark contrast to the United States, where many communities resist data center projects.

According to a McKinsey report, to meet surging demand in Asia, Amazon.com (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL), Microsoft (NASDAQ: MSFT) and Oracle (NYSE: ORCL) have collectively committed more than US$160 billion over the past few years to build AI data centers in the Asia-Pacific region. To obtain the advanced equipment needed for construction, for example, Google's Taiwan team held talks with Chinese companies such as Shenzhen Envicool Technology Co.,Ltd. (SZSE: 002837) earlier this year to purchase liquid cooling systems, which have become an increasingly critical supporting facility for next-generation AI computing rooms.

The popularity of Chinese products mainly stems from two factors: price advantages and proven project track records. A data center executive in Indonesia said: "We conduct tenders, putting Chinese companies and established overseas manufacturers head to head, and Chinese manufacturers always win on cost." He also mentioned an obvious trend: Chinese clients of local data centers in Asia-Pacific will proactively recommend and prefer Chinese suppliers in the procurement process; this is also a business practice that China has long encouraged in its companies' overseas expansion.

Another executive responsible for supplier selection for a Malaysian data center said that thanks to years of accumulation in China's domestic data center industry, some Chinese suppliers' product quality has become quite outstanding. A large number of modular data center products were exhibited at the event, with entire computer rooms assembled from prefabricated container modules that can be shipped directly to project sites. This technology has been applied in China for many years; under the AI infrastructure boom, the United States has only recently begun to deploy it at scale. Elon Musk's SpaceX-AI computing park used this modular construction approach (my colleague Grace Kay has related coverage). The executive's only complaint was that many Chinese suppliers have not yet established overseas after-sales support networks. For computer room operators, local overseas after-sales support is crucial to ensuring uninterrupted data center operations.

Chinese companies find it difficult to openly promote their products in the United States, but the Asian market is different. Data center practitioners in Asia-Pacific can talk freely about using Chinese suppliers without worrying about public backlash. At this event, I saw many small Chinese companies exhibiting overseas for the first time, as well as larger enterprises such as Midea Group Co.,Ltd. (SZSE: 000333) and Jiangsu Hongxin Intelligent Manufacturing. Even so, many exhibitors candidly told me that geopolitical tensions have profoundly affected their procurement and expansion decisions. Many companies are seeking US clients by changing their brand entities and setting up overseas entities. Suzhou liquid cooling connector maker NetonX is considering establishing corporate entities in the United States and Singapore to sell products directly to US clients. The company's CTO Frank Gao said 30% of revenue comes from overseas, but currently all relies on overseas distributors, making it difficult to maintain customer relationships directly.

Modular data center maker EPG, founded in China in 2004, has served clients such as Alibaba and Tencent. The company has repositioned itself as a Singaporean enterprise, completed US$100 million in international financing this year, and built a factory in Johor, Malaysia, specifically to serve US clients unwilling to purchase products from its Shanghai factory. Data center operators hoping to maintain a neutral stance must also carefully procure sensitive components close to server hardware. Even if some components show no obvious security risks on the surface, they could potentially be used to steal proprietary operational data from inside the computer room. Christopher Han, managing director of Singapore infrastructure investment fund Seraya Partners (which holds data center operator Empyrion Digital), said that for example, UPS uninterruptible power supplies are highly sensitive, as they can precisely capture power consumption trends in the computer room. Computer room air conditioning (CRAC units) also output large amounts of operational data, "from which outsiders can roughly infer the type of business workload the data center actually carries."

Industry enthusiasm is unprecedented, and the organizer of this year's Singapore Tech Week had to double the exhibition hall area to accommodate 38,000 attendees. Andy Kivanuka, Asia-Pacific general manager of organizer CloserStill Media, said: exhibiting suppliers grew from 346 companies from 40 countries last year to 580 companies from 70 countries this year; the proportion of Chinese companies exhibiting soared from 5% in 2023 to 30% this year.