Industry Insights

Will the cable through the Arctic and the decentralisation of the digital infrastructure boost the data centre industry in Hokkaido?

Juha Saunavaara
By Juha Saunavaara
Associate Professor, Hokkaido University Arctic Research Center, Japan
Published Jun. 28, 2023 

When Sakura Internet built one of Japan’s largest data centres in Ishikari in 2011, the future of data centre industry in Hokkaido looked bright. Hokkaido’s cold climate, affordable land prices, and lower risk of natural disasters compared to other Japanese regions made it an ideal location for data centres. Furthermore, the Great Tohoku Earthquake and tsunami that followed in 2011 reminded the Japanese of the risks that people and infrastructure face and strengthened the vision of developing the northernmost island as a backup for Tokyo. However, approximately 60 percent of Japanese data centre capacity remains in the greater Tokyo area, with 80 percent in this and the greater Osaka area. While the unforeseen flow of investments in local renewable energy production has sparked the growth of the local data centre market in Hokkaido, its future development is also bound to the Japanese government’s recent policy initiatives and an international project involving a submarine fibre-optic cable connecting Japan, North America and northern Europe through the Arctic.

In mid-June 2023, the Japanese government announced its intention to invest in the development of generative artificial intelligence, particularly in Hokkaido. As part of this initiative, the government decided to contribute half of the US$100 million cost of a supercomputer to be hosted in Sakura Internet’s facilities in Ishikari. In return, Japan’s Ministry of Economy, Trade and Industry has stipulated that local startups gain affordable access to the supercomputer’s processing capabilities. Even greater changes may follow when policies concerning the decentralization of digital infrastructure are implemented.

The overconcentration of the data centre industry in a few geographically small areas is not a new concern, nor is it one limited to Japan. The Japanese government’s Interim Report of the Expert Meeting on Digital Infrastructure, published in June 2023, provides the most recent information concerning the government’s attempts to resolve the challenges related to the decentralization of critical infrastructure. The report identifies Hokkaido and Kyushu as areas where new data centres should be built and introduces a subsidy programme to support such development. In addition to being sufficiently distant from Tokyo (safe, even if a large-scale natural disaster were to hit the capital region), these areas can supply abundant renewable energy. Furthermore, the installation costs of high-capacity fibre-optic cables are estimated to be approximately 100 times cheaper than those of HVDC power cables in Japan, which supports the argument of shifting computational loads to regions where electricity is produced.

The report also mentions the potential for fibre-optic connectivity through the Arctic, highlighting Hokkaido’s geographically advantageous position. Hokkaido was mentioned as a potential landing site for trans-Arctic submarine cables in both the Arctic Fibre and Arctic Connect projects. While these projects did not materialize, Hokkaido is tightly connected to the planning of the Far North Fiber project, which envisions a cable system through the Northwest Passage that would be ready for service in 2026. If executed successfully, the new route would improve the diversity and robustness of the global submarine fibre-optic cable network and significantly reduce latency in traffic between Europe and East Asia. The landing in Hokkaido (expected to be in the Tomakomai area) would also diversify Japan’s network topology and improve Hokkaido’s international connectivity. Currently, international traffic to and from Hokkaido goes through hubs located in central and southern Japan. The coming years will show whether cold, spacious, green and energy-rich Hokkaido can develop into the “Nordics” of the East Asian data centre market.


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