Hyundai Engineering & Construction has entered Japan's construction market as demand for infrastructure such as data centers surges amid the artificial intelligence (AI) boom, while major Japanese builders have reached the limits of their construction capacity, expanding opportunities for foreign construction firms. Hyundai E&C aims to exploit this gap by winning orders not only for data centers but also for nuclear power plants and small modular reactors (SMRs) as a package.
According to the construction industry Monday, Hyundai E&C established a Global Data Center Team within its Building and Housing Business Division in March this year to fully explore overseas business opportunities. New businesses are typically approached at the task force (TF) level, but elevating it to a formal team reflects Hyundai E&C's determination to develop future growth engines, industry observers said. Earlier, at Hyundai E&C's first Investor Day held in March last year, CEO Lee Han-woo presented an energy package strategy combining data centers, large nuclear power plants and SMRs. The concept is to export not just data center construction but also power supply and energy infrastructure, since power infrastructure is essential to operate data centers.
According to local officials, Japan is considered a market that could serve as a testing ground for this package strategy. As AI investment expands, not only Japanese companies but also global big tech firms have successively announced plans to build large-scale AI data centers (AIDCs) across Japan, sharply increasing infrastructure demand. At the former Sharp factory site in Sakai, Osaka Prefecture, KDDI's latest data center began operation in January this year. Equipped with Nvidia's latest chips, the facility has a power capacity of 48 megawatts (MW). SoftBank is also building a 150 MW data center in Sakai with the goal of completing it within the year, and is pursuing a large project in Hokkaido as well. Local governments including Toyama Prefecture and Kagoshima Prefecture are also reviewing the construction of ultra-large 350–400 MW data centers in partnership with regional companies. Japan's Ministry of Internal Affairs and Communications expects Japan's AI-related market to grow to about 4.2 trillion yen by 2029, roughly triple last year's level.
However, supply bottlenecks are evident. Major Japanese construction firms (general contractors) have concentrated their workforce and equipment on the Kumamoto plant being pursued by TSMC and other semiconductor and advanced industry projects. Data center construction targets are growing from tens of MW to hundreds of MW, but there is a lack of construction capacity to build them on time, analysts said. One local Japanese official noted, "AIDC demand is surging, but there is a shortage of mid-sized or larger construction firms that can absorb it. Unlike before, domestic construction firms are aggressively targeting the Japanese market because they have judged that there is opportunity."
Hyundai E&C has already steadily accumulated construction references in the data center and nuclear power sectors. It was selected as the preferred bidder for the Pohang AIDC project, which is being pursued with a target of commercial operation in October next year, and is carrying out major projects including the data center in Hangdong, Guro-gu, Seoul, and the data centers in Seonggok-dong, Ansan, and Sihwa. Since AIDCs require high-level technical capabilities such as large-capacity power supply, cooling and seismic design, such experience will serve as a weapon for entering the Japanese market, analysts said.
Some analysts also say Hyundai E&C is not outmatched in scale compared with major Japanese construction firms that possess advanced infrastructure construction capabilities. Japan's major construction firms Kajima Corporation and Obayashi Corporation posted revenues of about 2.9 trillion yen (about 27 trillion won) and 2.6 trillion yen (about 24 trillion won) respectively last year, both lower than Hyundai E&C's revenue last year (about 31 trillion won). In addition, its combined experience in nuclear power, plant and data center construction is cited as a differentiated competitive edge in the AI infrastructure market.
Other domestic construction firms are also expanding their footholds in Japan. Samsung C&T's construction division has expanded cooperative projects with local Japanese companies after obtaining a Japanese construction license through its Tokyo corporation in 2023. It recently signed a memorandum of understanding with Japan's INFRONEER Holdings to cooperate on global public-private partnership (PPP) and concession projects, strengthening a cooperation model centered on development, investment and operation. Daewoo E&C first pioneered the Japanese market in the 1990s and carried out large projects such as Canal City Hakata in Fukuoka, but currently does not operate a separate Japan branch. Instead, it continues cooperation through joint orders in third countries, such as carrying out the Jazan Refinery project in Saudi Arabia together with Japan's JGC. An industry official said, "AIDCs are likely to become a market that moves together with energy infrastructure such as nuclear power, transmission and distribution networks, and energy storage systems (ESS) in the future. If we break through the infrastructure supply bottleneck by leveraging advanced construction capabilities, there is ample opportunity."
