Ep. 029 - Modular Data Centers Cut Build Time to 12 Months (Datacenter, Energy) | Nico Bontigui, Jordan Nanos, Nigel Chiang, Eric Wen

Jordan Nanos (0:05)

Hello, everyone. Welcome back to SemiAnalysis Weekly. We are here to talk about The Wild Wild West of LEGO data centers. A couple of weeks ago, we put out an article on modular data centers and construction. And so I've got Eric, Nigel, and Nico. We're going to dig into what modular means, what the benefits are, how the bottleneck has moved from construction time to labor, and all sorts of other things, the trade-offs between modular construction and traditional, what sort of risks exist, and who the big players are that are pursuing it. So guys, welcome to the show. Excited to dig in? I'm going to pass the ball to Nico for the...

Yeah, exactly, man. Nico and Nigel are returning, Eric's first time attending. And this is a nice cross-section of cross-semi analysis. We've got Eric from the consulting team, Nigel from Core Research, and Nico from the data center energy and industrials model team.

So get a little taste of everybody who touches modular data centers and contributes to newsletter articles like this on this one.

Eric Wen (1:07)

Yeah, excited to be here.

Jordan Nanos (1:09)

Awesome, guys. Okay, so let's start by passing to Nico to give us the overview of what's a modular data center, what's it mean, what makes it different from the traditional way to build data centers. Sure.

Nico Bontigui (1:22)

Yeah, let's start with that.

I mean, I think that is no single definition for like what is a modular data center. And that was the single reason why we decided to put out this article in the sense that everyone has its own definition for what modularization or prefabrication, sometimes call it like that, what it means. And so essentially, we put out that note, which a big part of that, it's a huge, a whole taxonomy into what are we actually meaning or talking about when we talk about modular. To answer that question, but just to start off with like a pretty simple idea.

Modularization or prefabrication. And the reason why we named the article Lego Data Centers is because instead of building your data center in a traditional way, where you essentially bring all the equipment to the site, and then you bring all the workforce, all the 7K workers at peak to in the middle of Abilene, Texas. And then you start building the data center. Instead of doing that, you are going to build it like your old Lego, just pieces by pieces. And of course, those pieces can vary a lot. But think of, instead of putting all that equipment and assembling, doing connections on site, you are going to do part of the work off site. You are going to do some modular sections, because you are actually using modules. Or think of metal enclosure with equipment at site. You are going to do that in the factory. And then you are going to ship that to the site. And you are going to stock different modules, different Lego pieces, Lego pieces of that data center. And then you are essentially going to connect them all. It's supposed to be plug and play. Then we can talk about why I say supposed, but essentially it's a plug and play build of a data center.

That's essentially in super simple terms, what we mean with modularization or prefabrication.

Jordan Nanos (3:21)

Yeah, and maybe there's a few different types of modular data centers. When you talked about, maybe there's a whole different group of options when it comes to describing how a construction happens with the modular data center. Like on screen, I've got this chart describing stick build versus the baseline today, MVP, heavy skids, full modular build or containerized words, like literally a shipping container and how they can range from up to two years down to as little as 12 months when it comes to getting stuff on site from site prep and ground works in gray to the yellow structure shell, and then blue mechanical and green commissioning, for those who are looking at the chart. Yeah.

Eric, maybe you can talk about some of the benefits for what you've seen of people that are going with the modular approach and how that speed up is actually helping them.

Eric Wen (4:10)

Yeah, I think there are, I guess, two biggest benefits that we have seen on the markets. The first one is probably labor.

Labor has, I mean, we have seen multiple people come to us asking about modular designs because they are at the market is super strong on labor.

And because we, the rates of labor is super high right now on the markets, and because of how people can find amount of labor to support the immense of data center build out, they're really turning to modular data center as the alternative solutions for that labor bottlenecks that we're seeing on the markets. That's the biggest one. I think the second one, I think more importantly, is just certainty and modular designs. I think that's related to financing and capital. Because when we look at a lot of data center build outs, certainty is a big thing. Even a lot of smaller kind of provider, they don't have all the necessary equipment to build an entire data center, and therefore, they turn to modular as a potential alternative solutions to build a data center to make it faster for time to power, but also have certainty to when they will get power on sites as they're about time.