DATA CENTER COOLING MARKET SIZE AND SHARE ANALYSIS - GROWTH TRENDS AND FORECASTS (2024-2031)

Market Size and Trends

The data center cooling market is estimated to be valued at US$ 14.27 billion in 2024 and is expected to reach US$ 32.91 billion by 2031, exhibiting a compound annual growth rate (CAGR) of 12.7% from 2024 to 2031.

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The data center cooling market is witnessing significant growth due the rising need to manage increasing heat load from servers. With greater number of organizations migrating to cloud-based infrastructure and utilizing advanced technologies like big data analytics, AI, and edge computing, the requirement for efficient cooling of data centers has increased. Traditionally air-cooled systems were widely used. However, with growing power densities, vendors are focusing on developing innovative liquid cooling solutions to manage thermal loads effectively. The adoption of high performance computing and increasing construction of hyper-scale data center facilities are also driving the demand for specialized cooling systems. Moreover, stringent regulations regarding energy efficiency and the growing need to reduce the carbon footprint will further contribute to the data center cooling market growth during the forecast period.

Growing Demand for Cloud Computing Services

The increasing adoption of cloud computing services around the world is driving the need for advanced data center cooling solutions. As more organizations migrate their infrastructure and applications to the cloud, it is putting more servers and workload into large scale cloud data centers. Processing all this data in the cloud generates a massive amount of heat that needs to be removed efficiently to ensure optimal performance of servers and avoid any downtime. Legacy air cooling techniques are struggling to keep pace with rising heat loads. According to a recent survey, majority of cloud service providers cited cooling as one of their biggest operational challenges. They need innovative liquid cooling technologies that can cope with today's high density infrastructures. Leading cloud players like Amazon, Microsoft, and Google are investing heavily in liquid immersion cooling which provides up to 3 times higher cooling capacity compared to traditional air-based methods. They have also started deploying direct-to-chip liquid cooling solutions for their millions of servers in mega data centers spread across the world. Considering cloud services are still in the early growth phase in many parts of the world, expansion of existing cloud data centers as well as setting up of new large facilities will further stimulate the demand for thermally efficient data center cooling products in the coming years.

For instance, in May 2022, Alibaba Cloud launched its third data center in Germany, offering a wide range of cloud services, including storage, networking, and databases. The new data center features an air conditioning system with dry dryers that utilize low ambient temperatures instead of mechanical refrigeration, providing over 6,500 hours of free cooling annually.

Market Concentration and Competitive Landscape

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The rise of Artificial Intelligence (AI), Internet of Things (IoT), 5G networks, and edge computing is propelling the need for more powerful data center infrastructure located closer to the end users. Processing huge volumes of data generated at the edge using AI and IoT sensors requires cutting edge servers with high performance GPUs and CPUs. However, these dense systems dissipate significantly higher heat loads which needs to be removed quickly to prevent thermal throttling. Traditional air cooling designs struggle to keep pace with thermal requirements of such advanced edge data centers. Also, with edge facilities being deployed in various environmental conditions at customer premises and cell towers, cooling systems must be resilient enough to function reliably without disruptions. Leading AI technology companies have started investing in direct-to-chip immersion cooling that provides up to 10 times higher cooling density for their AI training clusters compared to air. Major telecom operators and cloud giants are also deploying hybrid cooling solutions combining liquid cooling with outdoor economizers to handle heat loads at their micro data center pods located at cell sites. Rising adoption of AI, IoT, and edge services will compel more data center operators to implement next-gen liquid cooling methods for reliable thermal management of their future.

For instance, in April 2023, Meta announced changes to its liquid cooling techniques for AI-centric data center design, focusing on optimizing new facility usage to better support artificial intelligence.

Key Takeaways of Analyst:

The data center cooling market is being driven by the increasing demand for efficient cooling solutions across industries. The rise in construction of mega-sized hyper-scale data centers is pushing demand significantly as these facilities require massive cooling capabilities. Another key factor is the growing adoption of liquid cooling techniques over traditional air-based cooling due to their higher efficiency. Edge computing is also bringing more workload closer to users, proliferating the need for the cooling of small modular data centers.

However, high initial costs remain a major restraint to the data center cooling market. Selecting the right cooling technique involves heavy capital investment. Moreover, designing efficient solutions requires deep technical know-how which adds to expenses. Lack of standardized product offerings further challenges procurement decisions.

Going forward, North America will continue dominating the data center cooling market owing to the proliferation of cloud computing. The region is also witnessing a massive rise in the construction of hyperscale data center parks. The APEJ region is expected to offer most attractive growth prospects during the forecast period supported by the increasing digitization of industries in countries like China and India. Adoption of advanced liquid cooling systems is opening new avenues and helping organizations achieve higher power usage effectiveness. The growing adoption of high-performance computing also creates opportunities for innovations in immersion cooling. Overall, the data center cooling market prospects remain strongly tied to the boom in cloud usage.

Market Challenges: Rising Demands, Legacy Systems, and Regulatory Pressures

As data centers process increasing amounts of data daily, cooling demands rise drastically, straining existing infrastructure. Meeting higher power requirements of next-gen servers and cloud services is also challenging with legacy cooling solutions. With server virtualization allowing multiple virtual machines to run on single physical boxes, managing localized hot spots becomes difficult. Tightening regulations on energy usage present another hurdle, as operators aim to curb PUE ratios while maintaining capacity.

Market Opportunities: Advancements in Liquid Cooling Techniques Enhance Efficiency and Facility Management

Innovations in liquid cooling techniques promise gains in efficiency. Embedded and direct chip cooling solutions address urgent needs around localized hotspots. Increased acceptance of free cooling methods viable in certain climates can significantly reduce energy consumption. Growth in hyperconverged infrastructure also opens new avenues as unified solutions facilitate optimized facility management delivering an enhanced user experience.

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In terms of component, solution is expected to contribute the highest share of 76.1% in 2024, owing to the growing demand for efficient and effective cooling systems from data center operators. Data centers house a large number of servers and equipment that generate significant heat. This has increased the need for robust cooling solutions that can carefully regulate the temperature within data centers. The solution segment offers various products like CRAC/CRAH units, chillers, cooling towers, condensers, and heat exchangers that help remove excess heat and maintain optimal thermal conditions. Among these, CRAC/CRAH units have become quite popular as they can be easily installed in individual server racks or rows for localized hot/cold aisle containment. Their compact designs deliver targeted cooling with high efficiency. Chillers are another integral part that work with CRAC/CRAH units to condition and circulate chilled water or DX coolants. Advancements in cooling technology have led to the development of new efficient solutions like immersion cooling and liquid cooling that leverage phase change materials, thereby boosting the solution segment growth.

For Instance, In April 2023, Asetek, Inc. announced that ASUS launched its third generation of ROG RYUJIN all-in-one CPU coolers, the RYUJIN III 240/360 and RYUJIN III 240/360 ARGB. These coolers offer extreme overclocking capability, silent operation, and advanced aesthetics, enhancing gaming performance and experiences.

By Type of Cooling- Growing hyperscale data centers augment room-based cooling needs

In terms of type of cooling, room-based cooling is expected to contribute the highest share of 60.7% in 2024, owing to its widespread adoption in traditional data centers. Room-based systems involve dispersing cool air from CRAC/CRAH units mounted on the perimeter walls/ceiling of data hall/server room. This conventional approach is well-suited for large hyperscale facilities with open floor layouts housing thousands of racks. Hyperscale operators are rapidly building such mega data centers to support their cloud, content delivery and internet services. Room-based cooling offers them flexibility to easily reconfigure hot/cold aisle spaces and expand capacities. It also enables hot/cold containment through effective control of airflows. These factors are boosting large deployments of room-based cooling infrastructure to cater growing computing densities in hyperscale environments.

For Instance, In October 2022, Aligned Data Centers acquired two new sites in Phoenix, Arizona, to develop significant campuses with over 400 megawatts of IT space totaling 2 million square feet. The new data centers will utilize Aligned's patented Delta cooling technology, which absorbs and filters thermal energy, reducing water consumption by 85% and enabling operation without water as needed.

By Industry Vertical- Rising digital transformation drives the IT and telecom sector demand

In terms of industry vertical, IT and telecom is expected to contribute the highest share of 26.6% in 2024 as it seeks extensive data center capabilities. Rising mobile data consumption, 5G rollout, and digital services are significantly raising computing workloads for telecom and internet firms. This is driving large-scale deployments of IT infrastructure housed in scalable data centers. IT companies are also transforming into cloud and digital service providers, rapidly scaling their hosting capacities. Efficient data center cooling is crucial for their mission-critical systems and services. Thus, telecom operators and internet/cloud giants are aggressively investing in advanced cooling solutions to support these expansion plans. Further, outsourcing of IT infrastructure to colocation/managed hosting facilities as well as migration to edge/hyperlocal infrastructure are spurring the data center demand from the IT/telecom industry. Such digital transformation trends are sustaining lucrative opportunities for cooling vendors in this high growth vertical. For Instance, In May 2022, Intel launched a Data Center Sustainability Initiative with a USD 700 million investment to establish a new research center dedicated to liquid and immersion cooling. Intel also introduced the first market reference design for immersion cooling technology to promote its adoption in data centers.

Regional Insights

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North America has established itself as the dominant region in the data center cooling market with a market share of 37.8% in 2024. The presence of technology giants such as Google, Microsoft, Amazon, and Facebook with their massive data center operations has propelled the market growth. It is estimated that these companies collectively spend billions annually on data center cooling infrastructure to efficiently manage heat loads from their servers and IT equipment. With stringent government regulations around energy efficiency, most data centers in the U.S. and Canada are designed to be highly power-intelligent with latest cooling technologies.

Organizations are rapidly moving their IT infrastructure and services to the cloud to leverage the benefits of scalability, flexibility, and cost savings. This has increased the demand for advanced cooling systems to support new data center builds as well as the expansion of existing facilities. Leading cooling system providers like Vertiv, Schneider Electric, and Stulz enjoy stronghold in this region due to proximity to their large customer base.

The Asia Pacific region, on the other hand, has emerged as the fastest growing market for data center cooling globally, exhibiting a CAGR of 14.28% in 2024. Countries like China, India, and Australia are witnessing a surge in the deployment of edge and hyperscale data centers to power their digital economies. This has opened up huge opportunities for cooling solution vendors. While North America still attracts maximum investments in this sector, Asia Pacific is steadily gaining ground.

China especially stands out as a lucrative market with aggressive investments by Alibaba, Tencent, and Baidu to expand their cloud footprints. Government initiatives to modernize infrastructure and growing demand for services like AI and IoT across industries are some factors driving demand. Further, manufacturing hubs in countries like India offer cost competitive cooling system installation and services. With low initial setup costs coupled with policy support for digital innovation, Asia Pacific has emerged as an attractive destination for global data center operators and cooling companies to expand their Asia Pacific presence.

Market Report Scope

Key Developments

• In December 2023, Vertiv, a global provider of critical digital infrastructure and continuity solutions, announced the acquisition of CoolTera Ltd., a specialist in coolant distribution infrastructure for data center liquid cooling technology. This acquisition aims to bolster Vertiv's capacity to support large-scale AI deployment and better serve global data center customers. CoolTera designs and manufactures liquid cooling infrastructure, including coolant distribution units (CDUs), secondary fluid networks (SFNs), and manifolds.
• In November 2023, Schneider Electric and Compass Datacenters expanded their partnership with a USD 3 billion multi-year agreement to produce and deliver prefabricated modular data center solutions. This collaboration seeks to integrate their supply chains, ensuring quicker, more predictable, and cost-effective delivery of finished goods.
• In May 2023, Fujitsu and Microsoft announced a global partnership focused on "sustainability transformation" to help businesses migrate their workloads to the cloud. Fujitsu will contribute its expertise in data center infrastructure, while Microsoft will provide its Azure cloud platform, offering businesses a comprehensive solution to modernize their IT infrastructure.
• In March 2023, Asetek announced that OEM partner, TEAMGROUP, introduced the T-FORCE SIREN GA360 CPU Cooler, featuring Asetek's 7th-generation liquid cooling technology. This high-performance cooler is designed for extreme CPU overclocking and stable gaming, featuring a crystal-clear infinity mirror design with multi-layer RGB lighting.
• In March 2023, Daikin acquired Alliance Air Products, a San Diego-based leader in custom air-handling equipment design and manufacturing. This acquisition enhanced Daikin's capabilities in providing chiller-to-computer room air-handler (CRAH) systems, optimizing energy and water savings in data centers.
• In March 2023, Castrol joined GRC's ElectroSafe Fluid Partner Program, offering advanced immersion cooling fluids to help data center operators reduce water and energy consumption.
• In March 2023, LiquidStack secured funding from Trane Technologies PLC to enhance its fluid immersion cooling solutions, aiming to reduce electronic waste, water usage, carbon footprint, and other environmental impacts in data centers
• In August 2022, One Asian Network Limited announced the installation of a cold water absorption solution in its Hong Kong data center. This innovative solution is designed to reduce energy consumption and enhance reliability, representing a shift toward sustainability and green technology practices in high-energy-consuming industries.

*Definition: The data center cooling market consists of various infrastructure solutions and technologies that help efficiently cool down data centers and the servers stored in them. As data centers house hundreds and thousands of power-hungry servers in enclosed spaces, cooling becomes a major challenge. The data center cooling market provides solutions like chilled water systems, direct expansion systems, cooling towers, condenser units, CRAC & CRAH units, heat exchangers, and others that help remove the excessive heat generated by servers and related IT equipment, ensuring optimal performance.

Market Segmentation

• Component Insights (Revenue, USD Bn, 2019 - 2031)
  • Solution
    • Air Conditioners
    • Chillers
    • Air Handling Units
    • Liquid Cooling Systems
    • Others
  • Services
    • Installation & Deployment
    • Support & Consulting
    • Maintenance Services
•  Type of Cooling Insights (Revenue, USD Bn, 2019 - 2031)
  • Room-Based Cooling
  • Row/Rack-Based Cooling
•  Industry Vertical Insights (Revenue, USD Bn, 2019 - 2031)
  • BFSI
  • IT and Telecom
  • Manufacturing
  • Retail
  • Healthcare
  • Energy and Utilities
  • Others (Government & Defense, Education)
• Regional Insights (Revenue, USD Bn, 2019 - 2031)
  • North America
    • U.S.
    • Canada
  • Latin America
    • Brazil
    • Argentina
    • Mexico
    • Rest of Latin America
  • Europe
    • Germany
    • U.K.
    • Spain
    • France
    • Italy
    • Russia
    • Rest of Europe
  • Asia Pacific
    • China
    • India
    • Japan
    • Australia
    • South Korea
    • ASEAN
    • Rest of Asia Pacific
  • Middle East & Africa
    • South Africa
    • GCC Countries
    • Israel
    • Rest of Middle East & Africa
• Key Players Insights
  • Air Enterprises
  • Asetek, Inc.
  • Climaveneta
  • Coolcentric
  • Daikin Industries Ltd
  • Dell Technologies Inc.
  • Fujitsu
  • Hitachi, Ltd.
  • Johnson Controls
  • Liquid Cool Solutions Inc.
  • Mitsubishi Electric Corp.
  • Munters Group AB
  • Nortek Air Solutions, LLC
  • NTT Ltd.
  • Rittal GmBH & Co. KG
  • Schneider Electric SE
  • STULZ GMBH
  • Telx Inc.
  • Vertiv Co.