In the landscape of China’s data center cooling market, precision air conditioning is experiencing an unprecedented “contrast of extremes.” On the one hand, it remains firmly in the top spot among traditional cooling solutions with an installed base share exceeding 80 percent—in 2024, the market size for precision air conditioning in China’s data centers surpassed 5 billion yuan, representing a year-over-year growth of 29 percent, a growth rate far exceeding that of many traditional HVAC categories. On the other hand, liquid cooling technology is sweeping from the periphery into the core with overwhelming force. Cities like Shanghai have explicitly mandated that liquid-cooled cabinets account for no less than 50% of new intelligent computing centers—a policy “watershed” that has sent a chill through the precision air conditioning industry. When the “fire” of market momentum collides with the “ice” of technological disruption, where exactly does the moat of precision air conditioning lie? And how will the industry redefine its value proposition?

80% “Heat” and 50% “Cold”: The Reality of a Divided Market

From a data perspective, the fundamental market base for precision air conditioning remains solid. With an annual market size exceeding 5 billion yuan and year-over-year growth nearing 30%, this growth is driven by the massive base of over 9 million data center racks in China, as well as the construction boom of western nodes spurred by the “East Data, West Computing” initiative. Traditional air-cooled precision air conditioners, with their mature technology, lower initial investment, and well-established operation and maintenance systems, continue to dominate applications such as small and medium-sized data centers, government and enterprise server rooms, and edge computing nodes. Even in large internet data centers, air-cooled precision air conditioners are often used as backup or auxiliary cooling solutions.

However, the penetration rate of liquid cooling technology has far exceeded expectations. In 2024, the market size of China’s liquid-cooled data centers surpassed 10 billion yuan. Immersion cooling and cold plate cooling have demonstrated overwhelming advantages in scenarios such as AI training clusters and high-performance computing—achieving a Power Usage Effectiveness (PUE) as low as 1.1 or below and increasing heat dissipation density to more than 10 times that of air cooling. Shanghai’s policy requirements are not an isolated case; Beijing, Shenzhen, and other cities have also successively introduced similar guidelines, and the liquid cooling penetration rate targets for new intelligent computing centers are shifting from “recommendations” to “mandatory requirements.” For the precision air conditioning industry, this is not only a competition over technological paths but also a squeeze on market space—as leading intelligent computing centers fully embrace liquid cooling, the “growth ceiling” for precision air conditioning is rapidly declining.

The “Moat” and Counterattack Strategies of Precision Air Conditioning

Despite these challenges, the precision air conditioning industry is not sitting idly by. Its 80% market share is both a historical burden and a source of confidence for transformation. The industry is building new competitive barriers across three dimensions: technological innovation, deep market penetration, and solution integration.

• Technological Upgrades: Seeking Growth Through “Extreme Energy Efficiency.” While improving the energy efficiency of traditional air-cooled precision air conditioners has entered a challenging phase, breakthroughs remain possible. The industry is accelerating the adoption of technologies such as fully variable-frequency compressors, EC fans, and intelligent group control, raising the annual energy efficiency ratio (AEER) of air-cooled systems from around 3.0 to over 3.5. At the same time, the extensive application of natural cooling technologies—such as dry coolers and ethylene glycol free cooling, which significantly reduce compressor runtime during the winter transition period—enables air-cooled systems in cold regions to achieve a PUE close to 1.2, narrowing the gap with liquid-cooled systems. Furthermore, the commercial deployment of new air-cooling technologies, such as evaporative cooling and indirect evaporative cooling, provides new technical options for precision air conditioning.

• Diversification of Scenarios: Securing the “Non-Liquid-Cooling” Core Market. Liquid cooling is not a one-size-fits-all solution; in scenarios such as small- and medium-scale facilities, low thermal density environments, and retrofits of older data centers, it faces bottlenecks including high costs, significant retrofitting challenges, and complex operations and maintenance. The precision air conditioning industry is shifting its strategic focus to these “liquid cooling blind spots”—for example, providing energy-efficient retrofit solutions for existing data centers, developing compact, low-noise precision air conditioning products for edge computing nodes, and customizing highly reliable redundant systems for government, enterprise, and financial sectors. These scenarios are sensitive to initial investment and demand high operational convenience—which are precisely the natural competitive advantages of precision air conditioning.

• Convergence and Symbiosis: From “Rivals” to “Partners.” The industry is increasingly recognizing that liquid cooling and air cooling are not mutually exclusive but can work together in a complementary manner. The current mainstream trend is a hybrid cooling architecture combining “cold plate liquid cooling” with “air-cooled backplanes”—where liquid cooling handles heat dissipation for high heat flux density at the chip level, while air cooling provides auxiliary cooling and redundancy for the remaining components. Precision air conditioning companies, with their deep expertise in both the cooling source and terminal sides, are actively transforming into “hybrid cooling solution providers.” They are integrating their own air-cooling technologies with liquid-cooling modules—whether purchased from third parties or developed in-house—to provide data centers with flexible “air-liquid hybrid” solutions. This strategy not only preserves the market share of precision air conditioning in the auxiliary cooling segment but also allows these companies to enter the cooling source supply segment of liquid-cooling systems, effectively achieving a balance between competition and cooperation.

• Value Extension: From “Equipment Supplier” to “O&M Service Provider.” The precision air conditioning industry is also expanding into full lifecycle services. By deploying smart sensors and AI-powered predictive maintenance algorithms, companies can provide data centers with dynamic optimization services for humidity, temperature, and airflow organization, thereby reducing overall cooling energy consumption. This “hardware + software + services” model enhances customer loyalty and elevates precision air conditioning from a standalone piece of equipment to a core component of data center energy efficiency management.

Future Outlook: A Dual-Track Approach, Not a Zero-Sum Game

The rise of liquid cooling technology is irreversible, but the demise of precision air conditioning is far from imminent. At least until 2030, China’s data center cooling market will feature a “dual-track approach of air and liquid cooling”: liquid cooling will dominate high-density scenarios such as new large-scale intelligent computing centers and AI clusters, with its penetration rate expected to rise from the current level of less than 20% to over 40%; meanwhile, precision air conditioning will firmly hold its ground in retrofits of existing facilities, small- and medium-scale operations, edge nodes, and as a supplementary component in hybrid cooling systems, while leveraging its own technological upgrades to meet baseline demand.

For the precision air conditioning industry, the real challenge is not the “overwhelming advantage” of liquid cooling, but whether it can complete its own value restructuring during this window of major cooling technology transformation—transitioning from a traditional equipment manufacturer reliant on air as a cooling medium to a comprehensive cooling solutions expert with a deep understanding of thermodynamics, fluid mechanics, and the characteristics of data center IT loads. An 80% market share represents past achievements, but finding a new growth strategy under policy guidelines targeting a 50% liquid cooling penetration rate is the “decisive battle” that will determine the industry’s fate over the next decade. This “ice and fire” trial will ultimately give rise to a more efficient, intelligent, and diverse data center cooling ecosystem, and whether precision air conditioning can secure a place within it will depend on the speed and depth of its self-innovation.