Ep. 029 - Modular Data Centers Cut Build Time to 12 Months (Datacenter)

Hello everyone. Welcome back to Sim Analysis 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, and we are 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 Niko for the— Thanks for having us. Yeah, exactly, man. Niko and Nigel are returning, Eric's first time attending. And this is a nice cross-section across SemiAnalysis. We've got Eric from the consulting team, Nigel from core research, and Niko from the data center energy and industrials model team. So you get a little taste of everybody who touches modular data centers and contributes to newsletter articles like this on this.

So yeah, excited to be here.

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. 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 called 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, you know, 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 data centers. Instead of doing that, you are going to Build it like your, you know, 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 offsite. You're going to do some modular sections because you're actually using modules, or think of metal enclosure with equipment inside. You're going to do that in the factory, and then you're going to ship that to the site, and you are going to stack different modules, different Lego pieces, Lego pieces of that data center, and then you're essentially going to connect them all. It's supposed to be plug and play. Then, you know, we can talk about why I say supposed, but, you know, essentially it's a plug and play build of a data center. That's, you know, essentially in super simple terms. what we mean with modularization or prefabrication. Yeah.

And maybe there's a few different types of modular data centers when you talked about, like, 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 towards Like literally a shipping container and how they can range from up to 2 years down to as little as 12 months when it comes to getting stuff on site from site prep and groundwork 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 this speedup is actually helping them.

Yeah, I think there are, I guess, 2 kind of biggest benefits that we have seen on the markets. The first one is probably labor. Labor has, we, I mean, we have seen multiple people come to us asking about modular designs because they are, the market is super short on labor. And because we, the rates of labor is super high right now on the markets, and because of how people can't find amount of labor to support the immense of data center buildout, They're really turning to kind of modular data center as 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 in modular designs. I think that's really related to financing and capital. Because when we look at a lot of data center buildouts, certainty is a big thing. Even a lot of smaller kind of providers, they don't have all the I guess, necessary equipment to build an entire data center. And therefore, they turn to modular as a potential alternative solution to build a data center, to make it faster for time to power, but also have certainty to when they would get power on site at a certain amount of time. I mean, so we see a lot of different players trying to look for different modular solutions based off of their constraints. in both labor and kind of economic, as well as for their constraints on certainty. And by bringing kind of modular solutions, it can give both investor and themselves a quicker time to power and also more certain to when that power can come online based off the complete, I guess, bringing a complete kind of package as a whole. Yeah.

And this isn't just like random crypto miners that are doing this. Obviously this became popular when we put out the article on Meta. a few months ago and talked about their tents. And then in this article, we described how AWS is doing this as well. So maybe you guys can talk a little bit about the different players that are exploring this.

Yeah, absolutely. Yeah. No, I mean, I was just going to say that maybe before actually addressing the players, I mean, I've gone to What Eric mentioned more, he mentioned labor shortage, which of course is a huge topic. We can spend an hour just talking about labor. Also like predictability and quality. But essentially, one thing that's clear after, you know, all these conversations we've had with different DC builders, developers, is that there's no clear pecking order. You know, some folks are doing modularization because one reason, because they actually like this kind of predictability of knowing that when you are going to plug your modules, it's going to function as promised. Then some others are doing because of, you know, we cannot get enough, you know, electricians or welders coming to the site. But there's also a third reason I would say that it's the clear, I would say number one today, which is just essentially time to power, like building time. Essentially shrinking the time that it, you know, takes to build a data center since the day you get your heavy machines into the site to do the site works till the day you're, you know, ready for sale or ready to energize. And that's a common practice. And so when we think of, you know, the players that they're doing this, or the different strategies these players that we are going to talk about now, they're pursuing, essentially it all comes down to how I can build this as fast as I can. How can I shrink these, you know, 2 years, 18 to 24 months that it usually took to build a data center, sometimes like over 3 years, you know, to 1 year. Because now everything could translate to tokens and, you know, those 12 months of the opportunity cost of not being able to generate these 12 months worth of tokens. Of course, we've, you know, talked about in our newsletter recently how if before we were talking about $11 to $12, no, $11 to $15 million per megawatt. Now we're seeing compute deals at much higher than that, you know, $40 million per megawatt. Anthropic generating some configuration over $100 million per megawatt. Think of how much 12 months in, in token production time, it's worth. So with that, we can go back to the miners. Yes.

Yeah. Yeah. I mean, yeah. So just specifically maybe to, to make the point and bring this chart back on screen, when you look at site prep and groundwork on this chart, 5 months to 4.5 months doesn't really change much for a containerized build versus the baseline. But the part that compresses so much is mechanical and electrical. So you're just doing 3 months of work instead of up to 9 months of work of like electrical work on the system.

Yeah.

So can you guys talk about what this means for specifically the biggest companies in the world that are building the biggest data centers? I thought this chart at the top was just incredible where you show the rapid increase in the cost of labor at the biggest sites in the world. country or the world, which is like Stargate Abilene with Crusoe in Texas, as well as Microsoft's Fairwater site in Wisconsin.

Yeah, I would say that this chart over here really ties to one of the points, that is the labor shortage or the difficulties that, you know, finding 7K workers coming to the middle of nowhere, essentially, uh, as, as evidence in the sense that, yes, we hear stories of, oh, it's really hard to get the electricians on site. But then you actually, like, we were like, okay, how actually can get some evidence, empirical evidence of this? And, you know, we looked into, okay, let's see how are the wages of new hires, these new electricians that are being hired are trending. And we come across this chart, which is essentially that you can see that in these states, in these counties where the biggest campuses are being built, the actual campus that demand between, say, 3,000 to 4,000 workers at peak, we saw that the wages for these new hires were essentially doubling, sometimes tripling in some key states.

Nigel, what's your take on the labor shortage? I assume you hear about this from investors and maybe many different companies across the industry, modular and otherwise.

Yeah, I think, you know, it's a great question. I think the first thing to note, and one that is, you know, increasingly being appreciated across customers, you know, data center operators, investors, so on and so forth, is that of the different bottlenecks out there, you know, there's power, there's compute, there was once There was memory, it was the topic of interest, and then labor. Labor is one of the constraints that is really difficult to resolve because it's not like the supply isn't very elastic at all. So even when you talk about power, I think the economics of AI, meaning the huge premiums that are there for the taking if you can bring up a unit of compute online quicker, such that it has brought in a lot of your marginal power sources and power formats. And we, you know, again, with the energy team and here at Core Research, we talked about How we've written a lot about how reciprocating engines are one of the marginal formats that have come in, and everyone kind of knows about fuel cells as well. But if you think about labor, it's really difficult to solve that because these aren't your garden variety electricians where they can just come in and stand up a data center with all the specialized electrical wiring that is needed. These are very critical, mission-critical work that is being done, and you need to have these guys go out in the middle of nowhere. The term for this is called field labor. And as you see from that chart, the wage rates of these guys are just soaring. So because of that, I think it's It's being appreciated that one way to solve this is modular. And as, as, you know, we've kind of pointed out in, in a tweet that went out today that, you know, this, this actually kind of shows up in the share prices when you look at the entire data center industrial space and you look at how the construction slash, you know, engineering procurement and construction guys, you know, what you call the EPC guys, how they have traded this year relative to the equipment OEMs, you see the construction guys outperforming. So if you check our Twitter, I think we have a good series of tweets where we cut the data showing that. And yeah, it goes to show what my colleagues Nico and Eric has been talking about on labor.

Definitely.

Yeah.

And I think maybe just to put a finer point on this, we hear a lot about bottlenecks and the term bottlenecks get thrown around a lot. There are 2 different types of bottlenecks in my mind. There's industry-wide high-level constraints, like how much COOs can TSMC produce? How much memory can the big 3 memory vendors produce? This is a constraint on the whole industry of how many chips you can produce. And then there are local bottlenecks that would restrict a given project from coming online in a certain number of months or weeks that they care about. And these are 2 different things because In some ways, individual projects that have multiple phases, you know, they may have their allocation of chips from the global supply chain that just like can't be increased above a certain amount, but they have their allocation. It's waiting for them to come and install. And their bottleneck is things like labor that you're describing here. It is things like reset engines or whatever. But if we look at the industry as a whole, some of these individual bottlenecks that show up in individual sites are not necessarily representative of what's going on globally, worldwide, when we look at the kind of just massive amount of progress of chips being brought online over time.

Hmm.

Niko, maybe you can comment a little more on like high-level data center-wide, industry-wide tracking and differentiate between the local bottleneck of labor and the industry-wide demand that we keep seeing.

Yeah. Yeah. No, and Jordan, I think this is an extremely important point because, I mean, absolutely labor is a big challenge and one of the main constraints that, you know, when we talk to operators, they, they name, like actually getting the labor on site. But we shouldn't extract from that the message that, oh, we don't have at a, in the US enough electricians. It is just a really complex optimization problem in the sense that In the US as a whole, you probably, at least in the next 24 months with the capacity that is expected to be built, you have. But the thing is, okay, how much of that labor, it's actual, not only capable of, you know, taking place in a mission-critical and very complex project, but also how much of the labor is reachable in these areas? Like, is it— labor is more of a logistics problem than it is like an actual, you know, a structural problem because of labor being inelastic. And it's a really complex one, but what we are seeing now that other than the solutions that really contribute on a, you know, net positive basis to reduce the amount of man-hours required, like modularization and what we covered in our article. There are other strategies, which is finding the right incentives and the right, you know, solution optimization problem to this solution to this problem, which is how we actually reallocate all of the available labor in the right city, in the right locations. We're doing more work on that to actually, you know, the thing, the good thing at Timmy also is that because of the work that, you know, at the data center team, we've done 2 and 3 years is that we actually know exactly where are all of these sites going to be built. When we talked about 15 gigawatts, 30 gigawatts being built, we actually have the breakdown, you know, by a specific county. So we actually can take all that and say, okay, let's take these, this capacity, these megawatts, and convert that into labor demand. And that We can, you know, see, okay, in this specific county, we need this much amount of, this many amount of labor hours, and we don't actually have them. How do we manage to bring the people that are the electricians that are living 300 miles away? And, you know, this is our conversation that, you know, this is what is actually happening in the industry today. And of course, wages, it's a big part of this. And this is why we included these, these previous this previous chart, but we've also heard some other things, some per diems and everything, all the way from like taco trucks on a parking lot, just, you know, because demanded by the actual workers that are going to the site. So there, you know, it's absolutely a local problem and solution is not easy, but, you know, we're there.

Well, let's talk about the specifics. Eric, maybe I can pass it to you to talk a little bit about specifically what some of these people are doing and specifically what makes a modular data center different. You guys had a great taxonomy for this in the article, systems, shell, and site, like the 3 layers of the stuff that's getting built. And maybe you can break down a little bit about what these 3 components are and what, when we look at a modular site and compare it to the traditional building process, what actually makes it different across system, shell, and site.

Yeah, absolutely. Before that, I just want to comment on what Nikhil just said earlier, is that I feel like there's always an upper bound to where labor can be. You can't produce humans overnight. It's even harder for you to actually train a human to be data center proficient to get to the level of site ready. So there's kind of a mismatch to where data center wants to be powered online today and where human can come in to actually build a data center in the future. And that mismatch creates a huge, huge kind of demand for modular. So modular is not just about cost and kind of timing, it's all more about availability of things and how we get kind of power on lines the sooner the better on it. But I guess going into the specific of how modular works, Jordan, do you want to pull up that chart real quick?

Yep, got it coming.

Yeah, essentially there are kind of 3 layers of data center buildouts that we kind of seen. On the top, there's system shell, the sites shell, and system. The first layer is the sites, is more the land grading and foundations. I mean, that part is not something that can be modularized because you have to physically grade the foundations of the sites for it to be able to build the data center. And that's what we have seen as one of the biggest bottlenecks right now as well on the site constructions. The part where we do get modularization is the shell of the system. Shell is more of the upper valve. You see the roof, the structure, the skin, everything else that weatherproofs the enclosure. The biggest, I guess, one example that we give is that Meta Shell, Meta's tent, is literally thousands, Tents, uh, tents of tents, which stands up out of the ground. I think we have a picture later down, um, in the sections. Yeah, I think the— right there. Yes. So these are tents that are put on the ground for Prometheus New Albany, where MedVac just puts a high, a very soft enclosure tents on top of the foundation building. It's quick, it's fast turnaround, it's quick to process, but It doesn't stand very hard construction work, but it does the job where it can get tied to power sooner or later. And therefore, it's very, very fast to build a construction out loud. So that's kind of the shell taxonomy for it. If we go back, the second part is more of the equipment manufacturer. So if you look at a traditional versus precast, we basically see it's almost 29% faster. In terms of precast versus traditional, where that kind of savings come from is the parallel construction where the equipment is built at a factory, the site itself is being constructed, and once the equipment is built, it can essentially be shipped to sites and plug and play instead of doing it in a traditional bilateral process. The world we've seen from industry, it takes about 15 weeks to do from end to end where you have to do the basic construction first, and then you do the equipment and you plug it together. You do the parallel processing where you do both one in the factory, one's on site, and once everything's done, you put it together and plug on site for commissioning. And that's where we see the kind of savings come from in terms of modularizations.

Awesome, man. Okay, so my mind's going into a few different places right now, but specifically I think When I, when I'm working on ClusterMax, a big thing that some of the buyers think about when it comes to modular is that it may introduce some risk. So sure, you can go faster, but with a traditional data center construction, you have some guarantees around like redundant power, redundant cooling, the internet connection, the size of the system that you can get on the scale-out network. So can you talk a little bit about Let's say, who owns the risk in these, these projects? Like, is it the day 2 operations team that's like taking on the site and expecting to have the exact same uptime as a traditional site? And they're going to manage all the risk of like, you know, the changes in the design? Is it over to like the OEM to kind of change power and cooling requirements or try to keep up with the site design to keep up with the big changes as the racks get more dense? Is it up to the EPC themselves who are like getting contracted to actually do this stuff? Nico, maybe you can talk about how people are thinking about the risks and trade-offs here.

Yeah, absolutely. I mean, and, and we can go through some of the different risks and let's say challenges that we've heard, like actual stories that we've heard, uh, that happen when deploying the systems. And most, many, many of them have to do that we are a, Really early stages when it comes to the actual— this point, this product. So it's kind of understandable that we run into some problems. Yes. You know, uh, I guess some margin of failure rate, it's, it's acceptable. One of them, as I mentioned at the beginning, is just pure, you know, failure of these modules that when are supposed to be plug and play, you plug them and they don't play. And it's just, you know, something, it doesn't work as, as, as, as expected.

Yeah.

And then basically you need to bring all your service guys into the site. You need to wait then to go to the site to understand what is wrong, why the, I don't know, the UPS is not turning on, whatever. And we've heard stories like this of some MEP contractors specifically saying, you know what, these modules that are sold off the shelf, well, Now we are hearing stories that, oh, they call us in the middle of the night and we need to go there to just figure it out. What's, you know, what's happening. In my view, in that case, of course, the responsibility, it's on the OEM side. You know, these are the guys, the, you know, if we think of OEMs, think of the Vertivs, the Schnaders, Flex, all of these guys that are selling one, like this package are the ones that need to make sure that, you know, their systems actually work. Then I would, you know, go to other than, than actually quality issues, I would go to logistics and, and, you know, that's, I would, I mean, yeah, that's a risk because, you know, when we think of shipping these modules, these containers that sometimes are like, there are huge containers. It's not from a logistics point of view, it's not an, an easy task. What we are seeing actually is that for, you know, part of the value proposition from a supply chain point of view, from all of these, whether it's OEMs or it's system integrators that are assembling and shipping these modules, they are trying to be close to the sites and close and have footprint close to where the data centers are actually being built because it's going to save a lot of headaches when it comes to, oh, now I need to, I know, imagine shipped all around the world, these huge containers with all of the expensive equipment. We've heard, of course, the stories of, you know, A module that included some really precious electrical equipment, like tripping in the middle of the road. And, you know, you, there you go, some UPSs just completely, you know, that, that broke down. And so in terms of logistics, that's a huge, I would say one of the main challenges that operators are in real life finding. It seems that, you know, it's going to be just as easy as she, she ship, uh, this, this kind of modules. And in this case, again, I'd say there's, there's possibility. You ask that, it's again in the, in, in, in, in the hands of the OEM and the integrators that are, that's shipping this to the customer.

Yeah.

Like these are some pretty, I mean, these are some of the biggest companies in the world that are pursuing this right now. AWS, Meta, um, Crusoe with the Stargate sites, Hot 8, Nebula. These are the biggest Neo clouds really. And the data center operators, right? Compass, QTS, Aligned. You guys talked about all of them pursuing modular in different flavors. And, uh, Eric, you got some horror stories from this, right? Yeah.

Yeah. Um, I mean, so I can't say the vendor, but we have heard about, uh, North Virginia where they were shipping about modular, modular data center stuff. And the truck was shipping the modular, um, stuff basically flipped over on the side of the highway. because of how heavy it is and there was like how bumpy the highway is. So it caused a big issue for the provider. I think also the consequences of that is that a lot of insurance are unwilling to kind of finance these, not finance, but insure these data centers because of how expensive these, I guess, modular equipments are. And once, like for example, a truck flipped over to the side of the highway, modular is a huge mess to clean up. It's also a huge penalty for them to pay up on the insurance price. So what we see from a lot of providers that we talk to is that they have an issue trying to find an insurance company to insure them on a logistic perspective. And therefore, we're seeing more of like modular factory getting closer to the site itself to kind of remove that logistic constraints.

Yeah, I think there's all sorts of logistics, right?

Yeah.

Yeah. And further on the logistics point, I think, you know, when you talk about supply chain issues, I think if you think about where the industry's going towards modularization more broadly, you could get, you could see a world where your OEMs, you know, so again, these are your Etherns and your Schneider Electrics of the world. They become predominantly modular, or at least the modular part of the business is much bigger than before. And I think in such a scenario, like these companies are more exposed to supply chain risks because as the word suggests, right? Like there are many components that go into a skid or a modular a module, you know, that you would ship to a customer. So, you know, missing one component now means that you can't ship an entire skid out the door, which is much higher, you know, average selling price compared to the status quo where you could continue to ship the other stuff that isn't affected by supply chain issues. So that's one. I think the other thing that we've been Seeing, which makes a ton of sense given, you know, where the industry's going, is that, you know, OEMs and integrators, they're all investing quite significant sums to kind of prepare themselves for the capacity, the modular capacity that is needed to meet the demand. So from that alone, I think that introduces some level of risk. Whether it be, you know, they are able to get share at a certain important customer, whether the customer would kind of bring in second source or third source, et cetera. So I think, yeah, just the entire buildout itself, like, you know, introduces, or I guess it brings along with that some risks to Yeah.

And you guys, um, maybe have, have done a bit of analysis on these OEMs and these different companies in the supply chain that you think are more, um, you know, aggressively pursuing modular and seeing where the, where the trend is going so far.

Yeah, I think, uh, sorry, sorry, Nico, but, uh, yeah, I think, you know, as, as you kind of, um, alluded to there, I think with modular it's very important to kind of, you know, The suppliers that are, that have a strong position with the customers because it is really these guys, you know, the customers who are setting the pace, so to speak, of modular development and the modular capacity build out. So, you know, one company that everyone kind of knows is in the forefront of this is Compass Systems. And I think about 2 months ago, a little more than a month ago, we went out with a note on this. And our analysis just started with a very simple question. So we know that these guys are at the forefront, or at least one of the early movers. We know that they're in a good position with Google and Meta. Let's see where that shows up in the numbers. So if just to share our screen a little bit, We we kind of looked at we did kind of an an analysis showing okay how much have they invested in capacity that is that is capable of producing modular and to do that analysis we kind of use a peer a peer that isn't really known for their modular progress and at least today and we use that as a baseline and you can just see the scale of of CapEx that they have been engaged in for the purpose of modular. So I think this is a very good visual representation of the sums that are being invested in modular and the opportunity that is ahead of these guys and what they're really gunning to capture. Yeah.

Yeah.

And I think aside from Comfort Systems. There is also several other players that we at Semi Analysis are keeping a close watch on, but I'll let Niko and maybe Eric touch on them.

No, Nigel.

I mean, I think those are the key players in the space. I mean, my point would be that in the article, we tried to be very clear, we've been discussing what AWS, Meta, All the cobles are doing in the modular space. That's you know from a demand point of view, but also from a supply chain point of view. Like who's actually supplying these modules? It helps to have you know a taxonomy for you know for our audience also to to know because we've been talking about Verde Schneider Eaton, but then Comfort, you know Sterling Quanta. These are all EPC companies. I mean, it's just. that we can split this into, you know, 2 groups, 2 groups that are actually selling these modules to, to the customer. First of all, you have the OEMs, you know, the Vertiv originators. These guys are the guys that are already selling the UPS, the switchgear, the transformers, the rectifiers to the customers. They realize, and, and Vertiv was the, the first company to realize that, oh, we can actually put all of our stuff in our container, into our metal enclosure. And ship them, it's not only going to be useful, like be interesting for our customers because of all the reasons we've been discussing in this call, but also for us, it's much better. We have the opportunity to expand our addressable content per megawatt. And just because of, we are just including Vertiv, Originator, or Eaton content with that enclosure. That's the OEM group. But then there's also This second group, we call it EPC integrators, essentially companies that are not the companies that are selling the UPS switchgear to customers, but have the expertise into design, engineer these systems, these mechanical and electrical systems. And Nigel was talking about Confer Systems. They are one of the main MEP contractors in North America working with the biggest hyperscalers. They have that expertise. And what they are doing is they are working with these players, not supplying their own UPS, they're not supplying their own switchgear, but they are integrating, assembling, and helping their customers design and engineer the customers. So that's, you know, those are the 2 groups that are actually, let's say, integrating and selling the modules to the customers. Yeah.

Proof is in the pudding. Like, it's working, right? Like, these sites are up, there's people using them. It's not like this is theoretical that they should maybe do this in the future. They're actually building them right now. It seems to me like if you think about those 3 different approaches where the OEM is leading it versus the system integrator is leading it versus the operator is actually leading it, like the self-build operator-led, you know, AWS or Meta just says, I'm going to do this, is like obviously the way to make everybody figure it out in the supply chain.

Yeah.

But maybe the conclusion is that people who weren't considering modular last year or 2 years ago are now going to get the benefits of this whole supply chain being built out when they go to build a site in the future because, well, all the suppliers have already had to serve the biggest customers and now they're going to have to serve the new guys doing new stuff too, right? Maybe you can talk a little bit about the process in the factory. One thing I'm kind of fascinated by is how factory testing works. I mean, you tell the story about the shipping container rolling off a truck. Many racks have been in trucks all the time getting shipped to data centers. And generally what happens is you have to do a whole bunch of integration work Onsite in the data center. And as much as you try to test stuff in the factory, it's always going to have to be retested and commissioned onsite. Do you see this meaningfully changing now where there are hubs where you can produce all of this equipment that's near where a lot of these sites are being built and it is going to de-risk the quality In other words, like the time it takes to actually bring the systems online as opposed to like, meaning the IT systems as opposed to just the power and electrical equipment.

Hmm. Um, I mean, I, I, I think of course talking about commissioning and how prefabrication helps commissioning, it's a, it's also a, a big question, a complex topic in the sense that there's a lot of misunderstanding out there. In the sense that you, we, we actually, you know, hear stories that, oh, they're running commissioning fully, the, you know, the 5 levels of commissioning fully at the factory. Uh, you don't need to do anything on site. That, that's not true. Like you can, there's so much commissioning of the commissioning process that you can do at the factory, but those, you know, uh, essentially all the way to level 5 of commissioning, you need to do some level of commissioning on site. That's one. Then 2 is that The commissioning, the actual commissioning time, it's really dependent. And, you know, we try to show kind of our midpoint or our guidance of, you know, how much the construction timing can be shortened from stick-built to, you know, fully containerized data center. But bear in mind that the commissioning, it's a part of the process that's super dependent on the project, and it can run all the way from 3 months to 8 months. So it's not as easy as to give a general— it's not possible to give a general answer into, oh, by doing this, using this kind of module, you can directly avoid commissioning or squeeze the commissioning period from 5 months to 3 months. And last point I would say is that we've heard, you know, we've known about operators doing different kinds of commissioning. And I say that maybe they are just avoiding some steps or less trusting the process and, okay, I'm not going to do commissioning. I'm going to turn on my GPUs. And then if something happens, well, my bad, but we've heard of that. And that's not really a full consequence of modularization that was happening already. So whether an operator is doing the full commissioning process of just skipping some steps, and, you know, we can discuss why operators are choosing to skip some steps, but again, some, many of the, many times it all comes down to time to power again, you know? And if there's a lot, uh, if there's a long lead time for, uh, liquid load banks, there's been. in the US. I'm not going to wait for that. I will skip the commissioning of my CDUs. I'll skip that.

Makes sense.

And that has happened. The consequence of that is that, you know, quality issues then arise. But again, this is not a full consequence, a direct consequence from, you know, doing these kits or modularization.

Yeah, I think I'm going to add is that like when we talk to vendors is that it was surprising to us too that like L5 commissioning is becoming one of the biggest kind of constraints of the modular story right now. If you think of high level, right, there's 2 parts of testing. There's like the factory testing, there's the condition testing. I mean, factory testing is like the one that you do in factory where you prove each module works independently in the factory itself. But really on-site, you have to prove the entire system works together under like different workload and different failure condition, right? So let's say like, I don't know, if like utility power drops, for example, right, do the rest of the UPS kind of lines up together in the right sequence. So really something like, if you, like, what we have heard is that even like if for something that's tested like hundreds of times in factory work, it might not work on site. So the operational risk is really high and therefore like alpha conditioning has been super difficult for a lot of people. And that's one of the things that we, we, we kind of heard from, from people that like there's something that people need to overcome as a result of the entire process.

Makes sense. Okay. As we move to wrap, I just want to encourage everybody that's been listening, if you're interested in modular data centers, you should totally read this article. It came out a few weeks ago. It's not like necessarily breaking news the way we've been covering some stuff recently on the podcast, but it is like a total full review of the whole industry. And I'm sharing on screen the modular vendor map that the guys put in this article, which shows just the vast amount of players that these guys are tracking across the entire industry, 116 products according to this chart, and a lot of names that you might recognize from other businesses that are just getting into data centers now because of the great opportunity that modular data centers provide. So that's what I'd like to leave it on. Any of you guys have comments or thoughts that we can leave the audience with as we close up?

Yeah, I think the one thing that I'll leave is that a lot of people came to me asking, saying that, hey, is modular really about costs? I think the argument is that it's not just about costs. We actually see like the cost benefits not as much as what people think of. It's about like 8% on what we have seen. The bigger kind of benefits is what we talked about the whole, the whole on this podcast, right? Labor, time to power, availability, what's driving the whole modularization, it's the entire industry that's shaping it. And yeah, I mean, subscribe to our industrial models to find out more about the labor problem and such.

Good one. Yeah, I mean, my, my, my, my take on the vendor map and the whole state of the supply chain would be that one thing to look at in the next, in the coming 12 months, probably on lead times, on actual manufacturing capacity. Think that, you know, yes, this is great. We are taking all the, just, just, we are saving labor. We are taking all the construction to the factories. But that means that we actually need footprint. We need manufacturing plants. It's, we are industrializing the construction process of a data center, and that takes footprint, that takes production lines. It's completely changing the model of how, what it takes to build a data center. And what we are seeing, even if it, we are still early days of this transition, is that some of the companies that are in the leading edge of the supply of these modules are already running into supply constraints. They don't have the space, they don't have the maybe factory workers. You know, they had a lot of electricians in the construction companies, but they don't have the factory workers. So this complete transition, it's going to take some, it's going to mean some friction. And we need to closely, we are at Seminalysis, closely looking at what is the state of the supply chain. What if we run into not electrician shortages, but shortage of, you know, factory workers that are actually, you know, working in the production lines? Or, I mean, you still need electricians to assemble these modules, even if it's on-site. Yeah, it's a lot of productivity gains, but you are going to see like the The labor problem here is not fully solved just by moving everyone into a factory.

So you produce more people.

Yeah, yeah, yeah.

No, I mean, it's true. We are seeing, you know, companies, some of the leaders with lead times for these products that are, you know, over a year. If you want to just tweak a little bit of the module that they are selling off the shelf, then the lead times, it's 18 months. You know, we're talking already about— we're taking— we're talking of the lower range of the time that we were showing that it takes to build a data center in the traditional way. So, you know, if you actually are looking at 12 to 18 months lead time for these modules, then you need to actually start thinking, you know, I'm actually gaining anything from, from, from these. And, and you know, that, that is, you know, why in our vendor map we were showing 160, 160 players in the space. When the top guys, when let's say the leading companies are fully booked, well, the industry is going to go into these other new entrants, these integrators that have capacity, that have the expertise. And it is a huge opportunity for a lot of new players. public, public coming from the construction space that have the integration expertise coming into, you know, play in the modularization prefabrication space. It's a huge opportunity for them.

All right, Nigel, anything from you as we close?

Oh, just say that, just was just going to say that more to come from the industrials team here at SimuAnalysis.

Exciting times, guys. All right. Great job. Thanks for joining the pod today.

All right.

Take care, everyone.

Thanks, guys.