Data centers and 'nearshoring' will grow at double digits in 2023

Data centers and ‘nearshoring’ will grow at double digits in 2023

In recent years, Latin America has experienced significant growth in technology infrastructure, driven by the construction of data centers. In part, this is explained by the phenomenon of ‘nearshoring’.

Technology companies from the United States, Europe and Asia are increasingly turning to countries of the region to establish their centers.

(See: Excess regulations are crossed in the advance of ‘nearshoring’).

According to Marc Nease, Panduit’s Chief Commercial Officer, This has led the markets of this region to grow at a higher rate than the world average.
With the adoption of new technologies, such as 5G connectivity and the constant increase in the volume of data, infrastructure requirements of this type have increased.

Carlos Ariochi, director of Panduit for Latin America, explained in the framework of the GSIC Summit, that thanks to this, in recent years there has been a growing trend in the market. Especially the company which has more than half of the market in the region, has seen growth even at double digits.

During 2022, sales in the region grew 23.4%, nearly four times the overall market dynamics.

Nearshoring has been one of the main drivers of this growth. Companies seek to establish their data centers in countries close to your home base to ensure a better connection and lower latency.

In the case of the infrastructure company, this translates into having, on the one hand, two factories in the region, one in Costa Rica and one in Mexico, and also in the proliferation of data centers.

(See: Caribbean coast, the golden gate of ‘nearshoring’).

Juan Pablo Borray, Business Development Manager of the company in the region, pointed out that close to 90% of the products used in the region are produced in one of the two factories. This allowed them to overcome the crisis in the supply chain without generating such marked effects on equipment waiting times.

However, what has generated an impact is the rise in the cost of raw materials such as copper. However, Nease points out that although there is a correlation in the transfer to the final prices, this occurs in a small percentage.

This since in the total cost of the products there are also other important elements that play relevant roles. With this, the high cost of copper affects the final price of the products by 20%.

(See: Colombia would add more than US$2 billion for nearshoring: IDB):

Added to this is a complex economic context, with high inflation, high interest rates and volatility in exchange rates. These factors mean that although growth will be experienced, it will be more moderate.

For all its markets, Panduit estimates that this year the percentage change will be around 2%. However, Latin America will continue to be one of the fastest growing regions. In fact, Nease estimates that it can reach double digits, being the market with the greatest expansion, followed by Asia.

At the moment the company bills about US$1,000 million annually and by 2030 the goal is to double this number.

Arochi calculates that 30% of the growth contributed by the region is due to new product developments.

Geopolitical and economic factors will play a leading role in the performance of companies. At the local level, Arochi points out that at the moment, most governments in the region are left-leaning. While this is not a risk per se, it does create a pause in some investments and is a factor to consider.

We knew the economy was going to be challenging and difficult and our focus was really where we see market transitions and the opportunities to take advantage of those transitions and especially post covid which honestly changed the world especially with regards to infrastructureNease said.

Borray adds that an additional challenge is given by the lag that the region has historically had with respect to new technologies. In part, this is explained by the investment capacity that companies are able to make, which means that the newest and most expensive technologies are initially discarded.

However, the executives highlighted that the growth in the region It will also mean the adoption of more efficient and state-of-the-art technologies.

(See: Nearshoring projects also reach Free Zones).

Additionally, thanks to local facilities such as factories, warehouses, and sales and administration offices, both production and transportation costs are more competitive, with which customers can obtain these technologies in better terms of time and prices.

The novelties that launched to the market

Within the framework of the GSIC Summit, the infrastructure company presented a series of innovations in several of its business lines. Among these technologies, VeriSafe 2.0, to improve security conditions within data centers. Likewise, there is a series of printers for marking cables in extreme weather conditions, such as for solar park installations. These were launched thanks to a collaboration with Epson.

In the case of the connectivity line, the company presented in its Innovation Showcase a series of improvements and updates for its video wall installations.

In the case of data centers, Panduit presented improvements and novelties in terms of optimization of space and energy, as well as security.


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