Google and other Western tech behemoths are increasingly basing their Greater China region operations in Taiwan.

The Silicon Valley giant will plow NT$26 billion (US$850.5 million) into the island’s bourgeoning data center sector after deciding to build a second storage hub there. The move will ramp up its business on the island and boost services for Hong Kong and mainland China.

Significantly, a commission under Taiwan’s Ministry of Economic Affairs signed off on Monday on a capital injection into a local unit from an affiliate of Google parent Alphabet. The additional funds will bolster the group’s investment activities there.

Google commissioned its first data center in Taiwan at the end of 2013. The US$780 million campus in Changhua is now home to 200 staff and is one of the largest of its kind in Asia.

The racks of servers cater to growing data processing and storage demand from individual and corporate clients. Still, Google was lured to Taiwan because of its stable political scene, cheap land and competitive energy costs.

Google also acquired part of HTC’s smartphone business in early 2018 and outsourced part of its research and development work to its labs and suppliers in Taiwan for its own Pixel phones.

The exterior of Google’s first data center in Taiwan, one of the largest of its kind in Asia. Photo: Handout
A file photo shows Taiwan’s President Tsai Ing-wen inspecting Google’s data center in Changhua. Photo: Handout

While continuing to pile into Taiwan, Google scrapped its US$300 million plan for another data center in Hong Kong and handed back a 2.7-hectare plot in an industrial park in east Kowloon previously earmarked for the project, not too long after the start of construction in Taiwan. Hong Kong’s land constraints, no space for further expansion and the lukewarm response from the local government were cited as key push factors.

“To keep up with the rapid growth in users and usage across the region, we need to focus on locations where we can build for economies of scale,” Google said back then in a statement about the pullback.

Hong Kong used to be a bridgehead to tap the massive Chinese market as mainland’s internet censorship, largely non-existent free flow of information and onerous application and approval procedures all deterred Google and its peers from building data centers and other facilities there.

Yet the steady erosion of the Hong Kong’s autonomy over the years and the recent spate of political turmoil during which partially shutting down the internet is reportedly discussed by local officials to quell the protests have apparently dented Western firms’ faith in the sustainability of the city’s business environment going forward.

Other than Taiwan, Google is also running two data centers in Singapore under the auspices of the city-state, where its Asia-Pacific headquarters are also located.