The FDI angle:

• Foreign direct investment (FDI) announcements are a barometer of globalisation.
• The most active FDI sectors indicate macroeconomic shifts in the world economy.
• Why does this matter? More FDI into supply chains needed for green and digital industries continue to dominate.

Capital expenditure (capex) in projects relating to decarbonisation shaped the investment matrix in 2023, while software and IT services fell out of the top 10 recipient sectors of FDI for the first time since 2013.

Global FDI activity in 2023 was driven by large, capital-intensive projects, especially in the renewable energy, batteries and metals sectors, underscoring how the energy transition is driving a large proportion of cross-border investment. 

Preliminary full-year figures from greenfield foreign investment tracker fDi Markets indicate an all-time high of 174 FDI projects valued at $1bn or more were announced worldwide, up from the previous high of 156 recorded in 2022. 

Software & IT services — fDi Markets’ label for the broadly-defined tech industry — slipped from 6th in 2022 to 11th last year in the investment matrix. This is the first time the software industry has fallen out of the top 10 sectors for FDI capex since 2013. This highlights a change of investment priorities amid lay-offs at household names and more focus on artificial intelligence (AI).

This year’s larger number of mega projects reflects a broader shift in global FDI towards fewer projects but higher levels of overall investment. The average capex committed to FDI projects globally stood at $314m in 2023, down slightly from the record $400m a year earlier, but at historic highs unmatched by any other year since records began in 2023. 

Investors in hydrogen and other emerging clean technologies were once again the most active, pledging $139bn to FDI projects last year, down from $202bn in 2022. Green hydrogen is set to play a crucial role in decarbonising hard-to-abate industries. However, many renewables projects face delays due to supply chain challenges, higher financing costs and regulatory uncertainty.

Aside from mega projects related to decarbonisation, fossil fuels companies pledged $94bn to FDI projects, with about a third going to refineries to convert crude oil into petroleum products. Many emerging markets are transitioning to renewables at a slower pace than their advanced counterparts, arguing that fossil fuels will play an important role in their development pathways.

More data trends about the new age of globalisation:

• Brics expansion dilutes G7 investment influence
• Industrial policies are mostly motivated by protectionism, not geopolitics
• Chinese outbound FDI boom signals 'new phase'

Despite weaker-than-expected demand for electric vehicles, foreign investment into battery projects topped $69bn in 2023, down only slightly from a record high of $70bn last year. Investment across other electronics supply chains remained resilient too, with $38bn-worth of FDI projects announced.

FDI into semiconductors fell from the heady heights of 2021 and 2022 as chipmakers reduced their capex after the market slowed down at the beginning of 2023. There is a bifurcation in the industry, however, as Chinese chipmakers continue to invest domestically into new production capacity. 

Other sectors crucial to the digital economy like data centres saw significant FDI activity in 2023. More than $62bn was invested in data processing, hosting and related services as developers rushed to build out capacity to satisfy massive expected demand.

Other major industries stayed in the top 10 list of FDI recipients, including automotive OEM, real estate and transportation and warehousing. Chemicals also returned to the top 10 as major companies like China’s Sinopec and UK-based Linde invested in production complexes. 

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