Data Center Liquid Cooling Market

Market Overview

The global data center liquid cooling market was valued at USD 2,931.67 million in 2022. It is estimated to reach USD 25,396.94 million by 2031, growing at a CAGR of 27.11% during the forecast period (2023–2031).

A data center is a building or property that houses storage servers, networking devices, and other crucial useful connectivity hardware. These buildings are hired to replicate what an on-premise computer system can do, reducing consumers' operational costs. Data center liquid cooling is the method operators use to maintain acceptable temperatures in data centers. Data centers are designed to run 24/7, which causes the components to heat. Overheating can lead to outages, preventing a data center from running continuously. Apart from this, the servers are designed in such a way that they operate at an optimum temperature, and any change in that temperature may lead to dysfunction. Therefore, cooling becomes a crucial component of data center operations. Liquid cooling is among the most efficient cooling technology that has the potential to reduce the power consumption of cooling operations by 50-90%, depending upon which technology is deployed.

Highlights

• Indirect cooling dominates the solution type segment
• Hyperscale centers dominate the data center type segment
• IT and telecom dominate the end-user industry segment
• Europe is the highest shareholder in the global market

Market Dynamics

Market Drivers

Changing Government and International Policies on Carbon Emissions and Increased Emphasis on Energy Efficiency

Over the last decade, government and regional regulators have played a significant role in enabling environmental laws and legislatures. This has led to the formation of various international agreements and accords that dictate how multiple countries shall undergo carbon neutralization. The European Union has devised a long-term strategy to implement green and sustainable development in the region called the Green Deal. As per the Green Deal, the European Union plans to implement 100% carbon neutrality for the entire data center industry by 2030. Following this, data center operators and associations have launched a self-regulatory initiative that dictates the targets for data centers to achieve carbon neutrality. This initiative is called Climate Neutral Data Centre Pact.

Apart from this, United Nations Sustainable Development Goals (UNSDG) set by the United Nations is another crucial policy for which almost every U.N. member state works. These goals promote sustainable development in nearly every sector, wherever applicable. Some SDGs anticipated to spur innovations and advancements in liquid cooling technology adoption include efforts to reduce water scarcity, combat climate change, promote sustainable urban infrastructure, and recycle and reusability.

Increased Demand from Hyperscalers

During the early 2000s and 2010s, colocation services boomed with the increased number of startups and demand for data centers from smaller companies. Later with the growth of cloud services and online hosting services, fueled by the growing popularity of cloud infrastructure, hyperscale data centers rapidly grew and became an integral part of the IT infrastructure. Hyperscale data center operators such as Google, Microsoft, Amazon AWS, Facebook, and Alibaba also have plans and commitments toward improving cloud facilities through sustainable practices, which enabled these companies to become some of the early adopters of liquid and immersion cooling technologies. Therefore, increased demand from hyperscale data center operators is one of the significant drivers for the market.

Market Restraint

Susceptibility to Leakage

One of the biggest challenges all types of coolant and refrigerant systems face is leakage. This is the sole contributor to direct CO₂ emissions from data center operations. Traditional computer room air conditioning (CRAC) systems had the highest possible leakage rates. Leaks in refrigerant lines and storage tanks are most commonly the result of age and lack of upkeep, but this problem can affect any cooling system. This increases toxicity in the data center working environment and operator operating costs. Although the market for liquid cooling is relatively new compared to overall data center cooling, any uncertainty related to system performance may lead to lowered adoption rates.

Market Opportunities

Retrofitting Existing Infrastructure

As per industry experts, any data center has an average age of 9-10 years; after that, it gets obsolete, which is subject to upgradation. Some old data centers may need to be compatible with current liquid cooling technologies; however, retrofitting aging infrastructure can act as an opportunity for the liquid cooling market. Some of the latest trends also suggest a decrease in the number of data centers, as with the increase in cloud computing and hyperscale data centers, the size of data centers is getting bigger. Therefore, only one data center is now needed instead of several others. This also reduces the number of enterprise data centers as many organizations adopt cloud services or hire colocation services. Despite such decreasing trends, many existing infrastructures remain relevant for decades as large organizations still prefer their own on-premise data centers. This will eventually increase the demand for liquid cooling technologies from retrofitting.

Regional Analysis

Europe Dominates the Global Market

Based on region, the global data center liquid cooling market is bifurcated into North America, Europe, the U.K., China, Asia-Pacific and Japan, and Rest-of-the-World.

Europe is the most significant global market shareholder and is anticipated to exhibit a CAGR of 24.77% during the forecast period. Europe has a mature industrial and commercial ecosystem. It is a pioneer in adopting Industry 4.0 technologies, among the most critical drivers for the growing demand for data center services. In addition, the increase in the adoption of technologies such as AR/VR, IoT, and edge computing applications will directly affect the need for data centers in the region, eventually positively impacting the market. The European market also enjoys support from EU initiatives. The European Union continuously pushes for green initiatives, which include increasing the production capacity for renewable energy, increasing energy efficiency awareness, and improving standards. If Europe can achieve its climate and energy efficiency goals set for 2030, it could cut 40% of the total emissions of 1999 levels. Europe will also be able to increase by 27% energy efficiency from the same level. This will indirectly boost the region's data center liquid cooling market.

North America is estimated to exhibit a CAGR of 26.72% over the forecast period. North America is one of the largest data center markets in the world. Large industrial and commercial enterprises significantly impact this result from the region's need for data centers. Some of the biggest hyperscale operators, including Google, Microsoft, Facebook, and AWS, are based in North America. All these companies have pledged to achieve 100% carbon neutrality by the next decade. This could act as a catalyst for the region's data center liquid cooling market. In addition, North America is home to some leading telecom operators, with almost 95% of the population having an internet connection. Apart from this, the region is expected to witness a growth rate of 43% in interconnection bandwidth which is also expected to boost the demand for data centers, further influencing the market for data center liquid cooling.

The Asia-Pacific and Japan region has one of the largest economies in the world, with almost 1/3rd of the total global population living in the region. Historically, the region has always been an opportunity for new technological advancement. Due to the high population and diversified demographics, adopting any technology would mean a widespread acceptance of products amongst one-third of the world's population. The region also has some of the very high growth economies in the world. In addition, the growing purchasing power and standard of living in the region have led to the widespread adoption of smartphones, dramatically impacting the data center market. The region is placed in comparatively warmer climates, creating the need for cooling systems, a significant source of carbon emissions. This could increase the demand for liquid cooling technologies.

The Rest-of-the-World includes countries in South America and the Middle East and Africa. Since the past decade, the Middle East and Africa region has been developing as a global economic hub, especially the Middle East. In addition, the region is the leading oil and gas producer, among other mined minerals. This has helped the nations such as U.A.E., Saudi Arabia, and Qatar to flourish in oil-based economies. This has also positively affected the standard of living and increased the consumer's purchasing power, increasing the consumption of various internet and electronic devices in the region, thereby driving the market growth.

Segmental Analysis

The global data center liquid cooling market is segmented by solution type, data center type, and end-user industry.

Based on solution type, the global market is bifurcated into indirect and direct cooling. 

The indirect cooling segment dominates the global market and is expected to exhibit a CAGR of 22.88% over the forecast period. Indirect or indirect liquid cooling refers to techniques without direct contact with the cooling liquid and computing components. The heat from the components can be transferred through conduction via intermediate materials. In indirect cooling, a heat sink is put over the heat source. This heat sink is in direct contact with the forced liquid flow instead of forced airflow. The heat transfer is then much better than air cooling as the liquid has better thermal conductivity than air. In direct-chip cooling (DTC), components are immersed in cooling fluid, so this orientation is similar. The indirect cooling segment is further sub-segmented into row-based and rack-based cooling systems.

Direct cooling methods involve direct contact between the cooling fluid and the components. In order to maintain a close loop, no other material is kept between the cooling medium/fluid and the heating component. This enclosure ensures no leakage, allowing a continuous heat transfer process inside the enclosure. Some of the techniques involved in the process are pure natural convection, mixed convection, laminar forced convection, and turbulent forced convection, which can all be utilized to direct cooling. The segment is further sub-segmented based on technology into direct-to-chip and immersion cooling.

Based on data center type, the global market is divided into hyperscale centers, enterprise type, colocation data centers, and others. 

The hyperscale center segment is responsible for the largest market share and is anticipated to exhibit a CAGR of 28.02% over the forecast period. A hyperscale data center is a building that cloud service providers own and run. Companies such as Amazon AWS, Microsoft, Google LLC, Facebook, and Apple are some of the largest hyperscale operators in the world. In addition, Alibaba, Oracle, and Adobe are some of the emerging market players in the segment. These data centers provide cloud services with scalable applications and storage services for individuals and businesses. Hyperscale data centers are necessary for cloud and big data storage. These data centers are large enough to host multiple cloud consumers at once.

An enterprise data center is owned and operated by the same company. These facilities are built inside or near the company's premises they have been made for. Generally, large business entities that want to avoid sharing data center facilities hire a third-party system integrator to design and construct these facilities. After commissioning the facility, the data center is operated, owned, and serviced by the same entity. Government agencies, the telecom industry, and other mission-critical businesses own and operate their data centers.

Based on the end-user industry, the global market is segmented into IT and telecom, government and public sector, banking, financial services and insurance (BFSI), healthcare, manufacturing, retail, and others. 

The IT and telecom segment owns the highest market share and is expected to exhibit a CAGR of 27.17% during the forecast period. IT and telecom industries are the largest consumers of data centers globally. Most telecom companies own and operate their data center facilities, as telecom applications require high connectivity. These facilities drive content delivery, mobile services, and cloud services. However, leasing or renting out colocation and hyperscale services is also an option for some applications. The entire industry is data-driven, so the segment holds the largest share among all other end-user industries.

The banking, financial services, and insurance sector (BFSI) is the backbone of the modern economy. The BFSI sector includes universal banks, financial service companies, stock markets, and other financial products. This industry plays a vital role in managing revenue, money, and the economy of the entire world. It is responsible for generating and processing data, which is crucial to data center operations. The BFSI industry is expected to continue its upward trend in demand for data centers over the forecast period, as all financial information has been dematerialized or digitized for efficient storage and processing.

Recent Developments

• March 2023- Climate business Trane Technologies invested LiquidStack, a manufacturer of liquid immersion cooling solutions for data centers. The investment will promote adopting LiquidStack's solutions to minimize the carbon footprint, water usage, electronic waste, and environmental effect of data centers.

• January 2023- NTT announced the deployment of Liquid Immersion Cooling and Direct Contact Liquid Cooling in its Indian data centers, a first in sustainability. This is the first time the Liquid Immersion Cooling (LIC) and Direct Contact Liquid Cooling (DCLC) technologies have been deployed in a data center's production environment.