KPMC

Survey on Hyper-Scale Data Center Deployment in Aichi Prefecture

Published on 2025-03-26

1. Reasons for the Scarcity of Data Centers in Aichi Prefecture

Despite having a large number of companies and a significant population, Aichi Prefecture (located in the Chubu region) has far fewer data centers – especially hyper‐scale data centers – compared to the Tokyo metropolitan and Osaka regions. In fact, about 64% of the total floor space of domestic data centers is concentrated in the Kanto region (with 57% in the Tokyo area alone), about 24% in the Kansai region, and only around 4% in the Chubu region. Even when looking at the number of facilities, Kanto holds 38% and Kansai 16%, while Chubu accounts for only 15% (mostly small-scale facilities). Moreover, the concentration of communication infrastructure (IX) is extremely low in Chubu (approximately 0.3%) compared to 74% in the Tokyo metropolitan area and 24% in Kansai.

• Lack of Communication Infrastructure: Major Internet Exchanges (IX) and backbone nodes of leading telecom companies are concentrated in Tokyo and Osaka, and there are no large-scale IX facilities in Aichi Prefecture. Since data centers require high-speed, low-latency network connections, the fact that high-capacity communication from Nagoya to national or international destinations must route via Tokyo/Osaka results in disadvantages in latency and bandwidth. Consequently, cloud providers in need of hyper-scale data centers tend to prioritize the well-connected regions of Kanto and Kansai, making Aichi less attractive.

• Challenges in the Power Supply System: Hyper-scale data centers require large amounts of power (over 20MW), which necessitates a special high-voltage (tens of thousands of volts) supply infrastructure. While the metropolitan and Kansai regions are gradually reinforcing their transmission networks and establishing new substations (for example, TEPCO PG is constructing a new substation in Chiba Inzai), such power network developments can take years. In Aichi Prefecture under Chubu Electric, securing new high-capacity power also requires building new substation facilities and strengthening systems, with lead times extending over several years. Additionally, overall electricity costs in Japan are high, making it difficult for Aichi to claim an advantage.

• Geographical Conditions and Natural Disaster Risks: Aichi is not free from significant earthquake or flood risks. The probability of a major Nankai Trough earthquake occurring in the next 30 years is estimated at 70–80%, which could subject the area to strong tremors (around seismic intensity 6+) and coastal tsunamis. Inland, active fault zones – such as those responsible for the 1891 Nobi Earthquake (magnitude around 8) – mean that ground stability in Aichi is not necessarily superior to that in suburbs of the Tokyo metropolitan area, where there are few active faults. Coastal industrial areas, often reclaimed during the post-war high-growth period, have low elevations and are vulnerable to liquefaction, storm surges, and flooding (as seen during the 1959 Isewan Typhoon around Nagoya Port). Such relatively high location risks act as a deterrent for large-scale data center investments.

• Demand Scale and Accessibility: The Tokyo metropolitan area concentrates financial, IT, and content companies and is a major demand center for cloud and AI services. In contrast, Aichi’s industrial base is mainly centered on automobile manufacturing, and the local IT service industry is not as concentrated as in Tokyo. Many cloud providers and service companies have traditionally met domestic demand by establishing primary facilities in Tokyo and secondary disaster recovery sites in Kansai – leaving little need for a third major hub. Although medium-scale data centers operated by local telecom companies or SIers exist in the Nagoya area, most are small and serve only local or backup needs, rather than acting as core hubs for wide-area cloud services.

• Government Support Measures and Attraction Efforts: In the Tokyo and Kansai regions, active initiatives by local governments and related companies have successfully attracted data center investments. For example, Inzai City in Chiba Prefecture, in collaboration with businesses and electric companies, has developed flat land and new substations to attract foreign companies like Google. In contrast, Aichi has traditionally focused its support on industries like automobiles, and initiatives specifically aimed at attracting data centers have been limited. However, recent measures include participation in national subsidy projects (such as the next-generation low-CO₂ data center subsidy) and prefectural preferential systems that subsidize 10–20% of facility investment costs for the IT industry. The limited recognition and utilization of these support measures have also contributed to Aichi’s lag in this area.

• Securing Large-Scale Land: The construction of hyper-scale data centers requires several hectares of vast, stable land. Although Aichi has many industrial parks due to its strong industrial base, most available land is already occupied by existing companies, making it challenging to secure contiguous, unused land exclusively for data centers. Land near urban centers is often fragmented and expensive, leading to high acquisition and development costs. For instance, on the corporate attraction land list published by the prefecture, available lots may be as small as approximately 0.9 hectares – far too little for hyper-scale data centers. Alternatively, converting suburban farmland or redeveloping port areas requires significant time and coordination. The scarcity of immediately available, large, and low-cost land is one of the factors that hinders the concentration of data centers similar to those in Tokyo’s suburbs.

In summary, the combination of challenges related to communication and power infrastructure, geographical risks, demand scale, support measures, and land availability has resulted in fewer hyper-scale data centers in Aichi Prefecture compared to the Tokyo and Kansai regions.

2. Future Outlook for Hyper-Scale Data Center Demand in Aichi Prefecture

Looking ahead, the potential for increased hyper-scale data center construction in Aichi Prefecture is analyzed. In conclusion, while a moderate increase is expected, the pace is unlikely to be as rapid as that in the Tokyo or Kansai regions. However, shifts in domestic and international conditions and policy support might cast Aichi as an emerging data center hub. The reasons are summarized as follows:

• Expanding Digital Demand: With the spread of digital transformation (DX) and generative AI across Japan, the demand for data processing is exploding. According to the Ministry of Internal Affairs and Communications, increased cloud usage is expected to drive dramatic growth in data center demand. Forecasts suggest that the domestic data center market will grow at an annual rate of over 10% through the late 2020s, potentially more than doubling to exceed 4 trillion yen by 2027. As existing facilities in Tokyo and Osaka approach capacity limits, there is growing interest in new locations, including regional areas like Aichi.

• Capacity Constraints and the Need for Diversification in Tokyo and Kansai: Currently, data centers in the Tokyo metropolitan area are concentrated in areas such as Inzai in Chiba, central urban zones, and parts of Kanagawa, while in Kansai, they are clustered in Osaka and surrounding areas. This concentration has led to stressed power supplies, prompting companies like TEPCO to encourage diversification to regions rich in renewable energy. Additionally, from a risk diversification standpoint – such as mitigating the impact of a major Tokyo earthquake or a Nankai Trough disaster – establishing a third hub is desirable. Geographically, Aichi is located between Tokyo and Osaka, giving it the potential to serve as a backup hub or data relay point. For example, integrating a hub in the Nagoya area could enhance service continuity between Tokyo and Osaka during a major disaster.

• Changes in the Regional Economy and Industrial Structure: Manufacturing companies in Aichi are increasingly adopting IoT and big data solutions, accelerating the region’s digital transformation. Initiatives led by the Toyota Group in connected cars and smart factories are generating vast amounts of data that require advanced processing and analytics infrastructure. As local demand grows and the need for low-latency, high-reliability services increases, there may be a shift from dependency on Tokyo’s data centers to establishing local facilities in Aichi. Moreover, Nagoya’s role as a business hub in the Chubu region is further driving demand through local government digitalization and big data initiatives in academia and research.

• Geographical Advantage (Accessibility): Centrally located in Japan, Aichi Prefecture is accessible from both Tokyo and Osaka via high-speed trains within 1–2 hours. With Chubu Centrair International Airport providing domestic and international connectivity, the Nagoya area offers logistical advantages for data center operations – including easier movement of maintenance staff and technical experts. Its manageable distance compared to remote areas makes Aichi an attractive candidate for major data center providers.

• Rising Policy Support and Attraction Momentum: The government has positioned the decentralization of data centers as an important policy initiative, introducing subsidy systems to support regional hub development. Aichi Prefecture’s "Aichi DX Promotion Plan 2025" emphasizes the development of digital infrastructure alongside efforts in digital human resource development. Additionally, measures to promote environmentally friendly data centers – such as subsidies for energy-efficient equipment – are being implemented, making the conditions increasingly attractive for hyper-scale providers with strong decarbonization needs. Local governments and companies are also becoming more proactive in their attraction efforts; for instance, an IT company affiliated with the Meitetsu group in Nagoya is set to open a new data center in 2024 with a total floor area of approximately 3,678㎡. Should concrete plans for attracting major providers be unveiled, demand could surge rapidly.

In summary, while the demand for hyper-scale data center construction in Aichi is expected to increase gradually, overcoming existing challenges is essential. Aichi’s competitive edge over Tokyo and Osaka will depend on how effectively infrastructure can be developed and risks mitigated. With over 80% of domestic data center demand currently concentrated in the Tokyo–Osaka corridor – a trend likely to continue in the near future – any full-scale deployment in Aichi must be evaluated from a mid- to long-term perspective. Nonetheless, underlying tailwinds suggest that potential demand will steadily grow.

3. Challenges and Constraints When Constructing HSDCs in Aichi Prefecture

When constructing and operating hyper-scale data centers in Aichi Prefecture, several challenges and constraints must be addressed. These span from power and communication infrastructure to land acquisition, administrative procedures, disaster preparedness, and human resources.

• Securing the Power Supply Infrastructure: To reliably supply the high-voltage power needed for large-scale data centers (e.g., over 20MW), close coordination with the power provider (Chubu Electric) is essential. Installing new high-voltage transmission lines or substations can take several years from contract application to supply start. Recently, power companies’ resources for reinforcing transmission networks have been strained – a situation also observed in concentrated data center areas in the Tokyo metropolitan region. Early action is required in Aichi to secure power. Additionally, as the operational power consumption of data centers can affect regional power supply and demand, measures such as load distribution during peak times, on-site power generation, and the use of storage batteries must be considered. Securing renewable energy sources through offsite PPA agreements to meet decarbonization targets is also a challenge. Although electricity costs are high nationwide, there may be opportunities to negotiate special rates for large-scale consumers.

• Communication Network and IX Environment: As noted earlier, internet exchange points (IX) in Aichi are relatively small, with major traffic exchanges concentrated in Tokyo and Osaka. Therefore, connecting Aichi data centers to various cloud providers and ISPs often requires long-distance backhaul, leading to disadvantages in both network latency and cost. Data center operators may need to deploy high-capacity fiber-optic relay lines to Tokyo/Osaka and connect directly to major IX or transit hubs. Although solutions like wide-area L2 network services are emerging to create logical direct connections from regional data centers to Tokyo IX, physical distance still imposes latency challenges. Furthermore, should multiple hyper-scale data centers be established within Aichi, there is potential to set up a local IX for interconnection and localized breakout. For now, however, reliance on the Tokyo/Osaka network hubs remains, making redundancy and continuous backbone bandwidth expansion key challenges.

• Land Acquisition and Construction Costs: Hyper-scale data centers require vast tracts of land. In Aichi, suitable sites may include suburban industrial parks, former logistics sites, or reclaimed land; however, contiguous, sufficiently large parcels are limited. Key requirements for site selection include:

Securing such land involves high costs not only in acquisition but also in site development, including ground improvement and installation of utility lines. Consolidating land from multiple owners may also incur additional negotiation costs. If the Aichi Enterprise Agency can secure a stock of large-scale data center sites and provide a one-stop service, this challenge could be alleviated. Additionally, national subsidies (e.g., regional DC hub development grants) might partially support these costs.

• Administrative Procedures and Support Measures: Corporate attraction policies in Aichi and the relevant municipalities offer both challenges and opportunities. Large-scale developments require lengthy administrative procedures—such as urban planning approvals, environmental assessments, and building permits—that depend on close cooperation with local authorities. Fortunately, Aichi’s Corporate Attraction Division offers subsidies covering 10–20% of fixed asset acquisition costs for advanced industries, and data centers that meet IT investment criteria may also receive support. Tax incentives, such as reductions in real estate acquisition tax (e.g., a three-quarters reduction for SMEs), may also apply. The key challenge is ensuring that these support measures are well-promoted and that administrative processes are flexible and prompt. With increasing competition from other regions (such as Hokkaido or Kyushu, which may offer their own electricity or communication fee subsidies), Aichi must develop competitive attraction packages and a one-stop administrative support system for site introductions, permit coordination, and subsidy guidance.

• Preparedness for Natural Disasters: Although natural disaster risks cannot be entirely eliminated, robust measures must be implemented to ensure business continuity. In constructing a data center in Aichi, it is critical to design buildings with high seismic performance (using advanced seismic isolation and damping systems, securing server racks to prevent tipping), to install critical equipment at elevated positions to mitigate flood risks, and to ensure adequate emergency power and fuel reserves. Preparing a business continuity plan (BCP) that anticipates a major Nankai Trough earthquake and establishing failover systems with other regional data centers is indispensable. Flood mitigation measures, such as strengthening levees and drainage systems, along with site planning based on flood simulations, are necessary. Additionally, with the potential for increasingly severe typhoons due to climate change, it is essential to implement wind-resistant measures for external cooling systems and outdoor tanks. In short, designing and operating a “non-stoppable” data center capable of withstanding a variety of disaster scenarios may impose stricter conditions than those in Tokyo or Osaka. While these measures increase costs, they are essential and can serve as a competitive advantage if successfully implemented.

• Securing Human Resources and Establishing an Operational System: Building and operating a data center requires a diverse range of specialized personnel. During the design and construction phases, electrical and HVAC engineers as well as large-scale project managers are required; once operational, 24-hour staff—including facility monitors, network engineers, and server administrators—are essential. Although Aichi has a strong base of manufacturing engineers, it may lack the specialized data center talent that is more abundant in the Tokyo metropolitan area. Addressing this gap could involve collaborating with local universities and vocational schools to develop curricula for data center technicians, offering relocation incentives for out-of-prefecture hires, and expanding corporate training programs. Additionally, the shortage of skilled construction workers is becoming a nationwide issue, leading to longer construction periods and higher costs for data center projects. Strengthening partnerships with construction companies and developing robust project schedules are crucial to mitigate these risks. In summary, addressing the labor shortage is a critical challenge in operating data centers in regional areas, and comprehensive risk management plans for human resources are necessary.

In conclusion, the challenges and constraints associated with constructing hyper-scale data centers in Aichi Prefecture are multifaceted and interrelated. For example, issues of land acquisition and power infrastructure must be considered together, and ensuring robust disaster preparedness often involves cost trade-offs. Furthermore, securing specialized human resources directly impacts operational costs. Overcoming these challenges will require integrated planning and sustained cooperation between government and private sectors, paving the way for the realization of hyper-scale data centers in Aichi.

References: Government statistics (Ministry of Internal Affairs and Communications, Ministry of Economy, Trade and Industry), publications by infrastructure providers (TEPCO PG, Chubu Electric, etc.), industry association reports (Japan Data Center Association, etc.), local government announcements (disaster plans, corporate attraction measures), and news articles (Toyokeizai Online, Nikkei Cross Tech, Cloud Watch, among others). All data is based on the latest publicly available information and may require future review as conditions change.

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