GDS Holdings Limited develops and operates data centers in the People’s Republic of China, (the ‘PRC’ excluding Taiwan, the Hong Kong Special Administrative Region (the ‘Hong Kong SAR’) and the Macau Special Administrative Region (the ‘Macau SAR’)), Hong Kong SAR, Singapore, Malaysia, and Indonesia.
The company’s facilities are strategically located in primary economic hubs where demand for high-performance data center services is concentrated. The company also builds, operates, and transfers d...
GDS Holdings Limited develops and operates data centers in the People’s Republic of China, (the ‘PRC’ excluding Taiwan, the Hong Kong Special Administrative Region (the ‘Hong Kong SAR’) and the Macau Special Administrative Region (the ‘Macau SAR’)), Hong Kong SAR, Singapore, Malaysia, and Indonesia.
The company’s facilities are strategically located in primary economic hubs where demand for high-performance data center services is concentrated. The company also builds, operates, and transfers data centers at other locations in mainland China selected by its customers to fulfill their broader requirements and expanded its presence to serve the Southeast Asia and Northeast Asia.
The company’s data centers are designed and configured as high-performance data centers with large net floor area and power capacity, high power density and efficiency, and multiple redundancy across all critical systems. The company is a carrier and cloud neutral, which enables its customers to access all the major telecommunications networks, as well as the largest PRC and global public clouds which it hosts in many of its facilities.
The company offers colocation and managed services, including direct private connection to leading public clouds, an innovative service platform for managing hybrid clouds. The company’s innovative and unique platform of interconnected data centers enables cloud service providers to expand in a flexible way in their key markets, and also enables enterprises to deploy their hybrid clouds in close proximity to the networked nodes of leading public clouds.
The company has a 23-year track record of service delivery, successfully fulfilling the requirements of some of the largest and most demanding customers for outsourced data center services. As of December 31, 2023, the company had an aggregate net floor area of 572,555 sqm in service, 92.8% of which was committed by customers, and an aggregate net floor area of 182,746 sqm under construction, 76.4% of which was pre-committed by customers.
The company’s platform of interconnected data centers and secured expansion capacity is strategically located to address this growing demand. The company develops and operates its data centers predominantly in and around Shanghai, Beijing, Shenzhen, Guangzhou, and Chengdu/Chongqing, the primary financial, commercial, industrial, and communications hubs in each region. The company refers to the areas in and around these hubs as Tier 1 markets. The company’s customers typically use its data centers in Tier 1 markets to house their mission-critical, latency-sensitive data, and applications. The company’s data locations provide convenient access for its customers and, furthermore, the extensive multi-carrier telecommunications networks in these markets enable its customers to enhance the performance and lower the cost of connectivity to its facilities.
The company’s data centers are largescale, highly reliable and highly efficient facilities that provide a flexible, modular, and secure operating environment in which its customers can house, power, and cool the computer systems and networking equipment that support their mission-critical IT. The company installs high power density (which refers to the ratio of power capacity to net floor area) and optimize power usage efficiency, which enables its customers to deploy their IT systems more efficiently and reduce their operating and capital costs. Within its data centers, the company has also developed an innovative service platform to assist its enterprise customers to integrate and control every aspect of their hybrid cloud computing environment across their private servers and one or more public cloud service providers.
As of December 31, 2023, the company served 864 customers, including PRC and global hyperscale cloud service providers and large internet companies, a diverse community of financial institutions, telecommunications carriers and IT service providers and large domestic private sector and multinational corporations, many of which are leaders in their respective industries. The company hosts the largest public cloud platforms operating in mainland China, some of which are present in multiple GDS data centers. Agreements with the company’s hyperscale cloud service provider and large internet customers generally have terms of three to ten years, while agreements with its financial institution and enterprise customers typically have terms of one to five years.
As of December 31, 2023, the company operated 93 self-developed data centers with an aggregate net floor area of 565,062 sqm in service. The company also operated capacity at 19 third-party data centers with an aggregate net floor area of 7,493 sqm in service, which it leases on a wholesale basis and use to provide colocation and managed services to its customers. The company also had an aggregate net floor area of 182,746 sqm under construction. In total, the company has 105 self-developed data centers in service and under construction. The company had an estimated aggregate developable net floor area of approximately 458,330 sqm held for potential future development. The company’s net revenue and results of operations are largely determined by the degree to which its data center capacity is committed or pre-committed, as well as its utilization.
Business Model
The company’s core business operations entail the planning and sourcing of new data centers, developing such facilities, securing customer commitments, providing its colocation and managed services to customers, and maintaining high levels of service and customer satisfaction to develop and maintain long-term relationships with its customers. The company focuses on developing and operating what it refers to as high-performance data centers. These are data centers that feature large net floor area and power capacity, high power density and efficiency, and multiple redundancy across all critical systems.
Marketing
The company usually commences marketing new data center facilities before it commences construction by seeking strong indications of interest from customers. Once construction is complete, and the data center enters service, the company re-categorizes area pre-committed as area committed.
Data Centers
The company’s data centers are largescale, highly reliable and highly efficient facilities that provide a flexible, modular and secure operating environment in which its customers can house, power and cool the computer systems and networking equipment that support their mission-critical IT infrastructure. The company installs large power capacity, together with engineering technologies to optimize PUE, enabling its customers to deploy their IT infrastructure.
Self-Developed Data Centers
Approximately 90% of the company’s self-developed data center capacity in service and under construction is equipped with 2N redundant and the remaining is equipped with distributed redundant N+1 delivery paths for power system. Either 2N or distributed N+1 redundancy entails significant additional up-front investment and decreases the yield of net floor area in a building of a given size.
The company’s self-developed data center capacity in service and under construction has an average power density of approximately 2.2 kW/sqm. By installing high power density, the company enable its customers to deploy their IT infrastructure more efficiently and to optimize their IT infrastructure performance. This is of particular importance to hyperscale cloud service provider and large internet customers.
The company’s self-developed data centers are designed to achieve high power efficiency, which is expressed conversely by a low PUE ratio. In 2023, the company’s self-developed data centers with IT power usage of 30% or above had an average PUE of around 1.28. High power efficiency reduces operating costs, for the benefit of its customers and itself, and reduces its carbon footprint. A low PUE ratio is of particular importance to hyperscale cloud service provider and large internet customers who have the most demanding performance targets.
In addition to the high-performance features described above, the company’s data centers provide flexible fit-out, sufficient floor load bearing strength and clear slab-to-slab height to support dense deployment of IT hardware, multiple layers of physical security, early fire detection monitoring and fire suppression systems, diverse connectivity, and other amenities.
Data Center Tenure
The company holds its self-developed data center buildings either through direct ownership or lease. In mainland China, land cannot be owned outright, but is secured through land use rights. For data center buildings which the company owns, it has the right to use the underlying land for up to 50 years, which is the longest permissible period, plus ownership of the buildings and other fixed assets comprising the data center. In Hong Kong, almost all the land is leasehold land leased from the Hong Kong government. The tenure of the relevant government leases for the two parcels of brownfield land where HK1 and HK2 are located that were purchased by the company in 2018 and 2019 respectively will expire in June 2047 and the residue of the term of years of the relevant government leases is approximately 23 years. In Malaysia, the land parcels where NTP1, NTP2, NTP3, and NTP4 are all freehold land. In the ‘free trade zone’ of Batam, Indonesia, where the land parcel acquired in Nongsa, or Nongsa Land, is located, land is technically leased from the governing authority. The company’s ownership of Nongsa Land is represented by ‘right to build’ and ‘license to use’ permits from the relevant authorities. The residue of the term of these permits is around 20 years as they expire in January 2044. For data centers that the company leases in mainland China, it enter into long-term leases with the owners of the building generally for periods of 15 to 20 years, which is the longest permitted lease period under PRC law. However, in the case of the build-operate-transfer projects which it has undertaken to date, where the owner of the building shell is the company’s customer, the lease term is usually ten years.
The company’s owned facilities and leased facilities (including B-O-T projects) represented approximately 44.2% and 55.8% respectively by aggregate net floor area of its self-developed data centers in service and under construction as of December 31, 2023.
As of December 31, 2023, 33.7% of the company’s self-developed area in service was in data center buildings which it owns and 66.3% was in data center buildings which it leases (including B-O-T projects).
As of December 31, 2023, 76.6% of the company’s self-developed area under construction was in data center buildings which it owns and 23.4% was in data center buildings which it leases (including B-O-T projects).
B-O-T Data Centers (including B-O-T Joint Venture Data Centers)
As of December 31, 2023, the company had 68,910 sqm net floor area relating to 15 B-O-T data centers in service, 100% of which were committed, and 3,440 sqm net floor area relating to second phase of one existing B-O-T data center under construction, 100% of which was pre-committed. Apart from HL1 Phase 1 and UL1, two BO-T joint venture data centers of which it currently own 51% and GIC owns 49%, it still hold 100% of the equity interests in the project companies holding all the other B-O-T data centers as of December 31, 2023.
In August 2019, the company entered into a strategic cooperation framework agreement with GIC Private Limited (GIC), Singapore’s sovereign wealth fund, to develop and operate hyperscale B-O-T data centers for a strategic customer on a joint venture basis. According to the agreement, the company will own 10% equity interest in the joint venture asset companies and GIC will own 90%. In parallel with the framework agreement, the company also signed a memorandum of understanding with the same strategic customer to develop and operate seven B-O-T data centers.
In September 2021, the company entered into a new master joint venture investment agreement with GIC, pursuant to which the two parties will form joint ventures for the investment and development of hyperscale B-O-T data centers for several customers. According to the new agreement, the company will own 51% equity interests in the joint venture asset companies and GIC will own 49%. The company will continue to provide management and operation services to the joint ventures and earn recurring service fees. As of December 31, 2023, the company completed the sale of a 49% equity interests of the project company of HL1 Phase 1 data center and UL1 data center to GIC, as the first two B-O-T joint venture data centers pursuant to the new master joint venture investment agreement.
Third-Party Data Centers
In addition to operating and providing services in its self-developed data centers, the company also provides data center services with respect to net floor area that it leases from third-party data center providers on a wholesale basis and use to provide colocation and managed services to its customers. For this kind of facility, the company typically enters into leases for fixed terms of three to ten years. As of December 31, 2023, the company operated capacity at approximately 19 third-party data centers with an aggregate net floor area of 7,493 sqm in service. The third-party data centers where the company leases capacity on a wholesale basis were not purpose-built or converted according to its design and technical specification.
Lease Agreements Relating to Data Centers
The company enters into leases in connection with its self-developed data centers. In addition, certain third-party data centers in which the company leases capacity on a wholesale basis are subject to property lease agreements. Under relevant PRC laws and regulations, lease agreements are required to be registered or filed with the relevant housing authorities. Among the data centers that the company lease, including those under construction, the majority of the lease agreements have not been filed with relevant authorities in accordance with the applicable PRC laws and regulations.
Services
The company offers a broad range of services, including colocation services and managed services, which includes managed hosting services and managed cloud services. The company also provides certain other services, including consulting services. The company primarily provides colocation services to cloud service providers while it provides both colocation services and managed services to all other customers.
Colocation Services
The company offers its customers a highly secure, reliable, and fault-tolerant environment in which to house their servers and related IT equipment. The company’s core colocation services primarily comprise the provision of critical facilities space, customer-available power, racks, and cooling. The company’s customers have several choices for hosting their servers, networking, and storage equipment. They can place their equipment in a shared or private space that can be customized to their requirements. The company offers a variety of power options to suit individual customer requirements, including high power density racks. In some instances, colocation customers will request that the company provides IT equipment for their use in its data centers. In such cases, the company will sell such IT equipment to the colocation customer.
The company’s data centers are high-performance, with high availability, high power density and high power efficiency, which combination is critical to satisfying the most demanding needs of hyperscale customers. The company’s IT infrastructure platform of interconnected data centers is located strategically in and around Tier 1 markets, enabling high performance while lowering network latency and connectivity costs. The company’s ecosystem has attracted all leading public cloud service providers to its platform and thereby offers value to enterprises that have hybrid clouds or need to connect to cloud service providers.
The company designs and builds its facilities using a modular approach, which involves an innovative construction method using pre-fabrication technology to shorten development time, improve quality control, and achieve costs savings.
Managed Services
Managed Hosting Services: The company’s managed hosting services comprise a broad range of value-added services, covering each layer of the data center IT value chain. The company’s suite of managed hosting services includes business continuity and disaster recovery, or BCDR, solutions, network management services, data storage services, system security services, operating system services, database services, and server middleware services. The company’s managed hosting services are tailored to meet the specific objectives of individual customers.
The company’s network management services help its customers to design and maintain their private network systems. The company’s data storage services provide storage architecture design and customization for specific requirements. The company’s system security services include identity and access control, firewall management, intrusion protection and vulnerability protection services. The company’s operating system services provide pro-active administration, management, monitoring and reporting across a wide range of operating systems. The company’s database services provide database customization and performance tuning operation, administration, and monitoring services across a range of database platforms. The company’s server middleware services provide customization and performance tuning services across a range of platforms. The company also offers consulting services for customers who request additional know-how and guidance relating to disaster recovery and other aspects of its managed hosting services. The company’s managed hosting services are provided on a continuous basis over the term of the agreement.
Managed Cloud Services: The adoption of cloud computing continues to rise and has become a key element of IT strategy for enterprises globally. The company’s data centers are well-suited for the hosting of cloud platforms. As a result, the company has succeeded in attracting most of the largest cloud service providers in mainland China to collocate their public cloud platforms in its data centers.
The presence of major public cloud platforms in the company’s data centers enables it to offer its enterprise customers direct private connection to high capacity cloud resources of their choosing across its network infrastructure. The company also assists its enterprise customers to access cloud resources by providing and reselling public cloud services offered by major cloud service providers, including certain of its major customers. This has the added benefit of assisting the company’s cloud service provider customers with their route to market.
Leveraging the company’s long track record as a provider of IT managed services, it is developing an innovative service platform to assist its enterprise customers to integrate and control every aspect of their hybrid cloud computing environment across their private servers and one or more public cloud service providers. In addition, the company offers consulting services for customers who request additional know-how and assistance concerning the implementation of cloud-based solutions, such as migration from physical to cloud-based hosting. As part of the offering, the company also provides its customers with cloud resources.
Operations
The company has separate teams for data center operations and service delivery. The company’s data center operations team is responsible for directing, coordinating, and monitoring the daily operation of its data center facilities. The company’s service delivery team is responsible for delivery of the services which it provides to customers on a 24/7 basis. The company’s teams are deployed in regional operations centers, as well as on site, in order to provide two layers of management and support. The company outsources part of the above operations and service delivery, primarily on-site security, cleaning and greening service, part of the 24/7 on duty operations and IT and customer service delivery to reputable third-party service providers.
The company undertakes in-house all technical functions which impact data center performance, including floor planning, equipment lifecycle management, optimizing data center efficiency, surveillance of the critical facilities environment and network performance, incident response management and rectification. The company also undertakes in-house substantially all activities which have a direct bearing on customers, including support for setting up customer IT equipment, remote hands services, outsourced IT operations, incident and compliance reporting, and response to customer requests.
The company has developed a proprietary Data Center Operation Management Platform which provides real-time information on many aspects of data center operating performance and enables it to streamline its data center management processes. The company has also developed robust operating procedures, protocols, and standards, which enable it to meet or exceed the performance and quality levels specified in its service level agreements, or SLAs, with the most sophisticated customers.
Customers
The company has long-standing relationships with all the major PRC telecommunications carriers who are both intermediate contracting parties for the sale of its services to its customers, as well as partners providing network services to its customers and to a significantly lesser extent, end users of its services.
As of December 31, 2023, the company served 864 customers, including hyperscale cloud service providers and large internet companies, a diverse community of PRC and foreign financial institutions, as well as telecommunications carriers and IT service providers and large domestic private sector and multinational corporations, many of which are leaders in their respective industry verticals. The company hosts the largest PRC and global public cloud platforms operating in mainland China, some of which are present in multiple GDS data centers.
The company’s cloud service provider, large internet, financial institution, and enterprise customers accounted for 56.2%, 32.5%, and 11.3% of its total area committed as of December 31, 2023, respectively. The company’s two largest customers accounted for 34.0% and 13.7%, respectively, of its total area committed as of December 31, 2023.
Sales and Marketing
Sales: The company’s sales activities are mainly conducted through its direct sales force. The company organizes its direct sales force into four geographic regions, Northern China, Southern China, Eastern China, and South-western China. The company incentivizes its sales force to meet their annual targets through performance-based bonuses. For new customers, the company’s sales cycle typically begins with creating a sales plan for a particular region or industry and then identifying new customers in these regions or industries. The company also receives referrals from its vendors and other relationships, and often its reputation attracts customers to its services without any directed sales efforts. For its existing customers, the company’s sales team focuses on identifying upsell opportunities.
Many of the company’s customer agreements are won through a competitive bidding process. For new customers, the bidding process begins with evaluation of the potential customer’s requirements.
Marketing: To support its sales effort and to actively promote its brand, the company conducts wide-ranging marketing programs. The company’s marketing strategies include active public relations and ongoing customer communications programs. The company participates in a variety of IT industry and financial services industry conferences and workshops to raise awareness about the value of data center services. The company also builds its brand recognition by participating in industry and government workshops and industry standard-setting bodies, such as the China National Institute of Standardization Committee on Disaster Recovery for Information Systems.
Intellectual Property
As of December 31, 2023, the company had 203 registered computer software copyrights and 223 trademark registrations in mainland China, 37 trademark registrations outside mainland China and 50 pending trademark applications in mainland China, 70 pending trademark applications outside mainland China, including registered trademarks for ‘GDS’ and, its figure trademark. As of December 31, 2023, the company had 138 patents granted and 83 patent applications in mainland China, 7 patent applications outside mainland China and had registered 17 domain names, including gds-services.com.
The company has registered the figure trademark in mainland China in several categories that cover its service areas and it plans to register the figure trademark in mainland China in certain additional categories. The company has also registered the pure text of ‘GDS’ as a trademark in several categories that cover its services areas, however, a third party has also registered the pure text of ‘GDS’, as a trademark in certain IT-related services.
Research and Development Expenses
The company’s research and development expenses included RMB38.2 million (US$5.4 million) in 2023.
Competition
The company faces competition from the state-owned telecommunications carriers, namely China Telecom, China Unicom, and China Mobile.
History
GDS Holdings Limited was founded in 2001. The company was incorporated under the laws of the Cayman Islands in 2006.
