26 Aug 2024
Digitisation and the energy transition continued to define the top-10 recipient sectors of foreign direct investment (FDI) in the first half of 2024, according to preliminary data from greenfield investment monitor fDi Markets, but there are early signs that capital pledges in strategic industries such as batteries have tapered off.
Between January and June 2024, foreign investors announced cross-border investment projects worth more than $635bn. This was the fifth consecutive half-year period where global FDI surpassed $630bn and the fourth-highest capital expenditure tracked in a six-month period since records began in 2003.
The recent wave of mega projects — investments with at least $1bn of capital pledges — continued in the first half of 2024 with 85 such projects recorded so far by fDi Markets. Two-thirds of these capital-intensive projects were announced in just four sectors, led by the communications industry where there has been a surge of internet infrastructure projects, followed by renewable energy, semiconductors and automotive original equipment manufacturing (OEM).
Renewable energy held onto its top spot as the leading recipient sector, recording greenfield FDI pledges worth $138bn. Around half ($65.8bn) of this was pledged to green hydrogen and other emerging clean tech projects, which are still broadly unproven at commercial scale. Solar power projects took the second-largest slice, at $38.7bn, followed by wind ($27.5bn). Other renewable energy projects, such as biomass, took on a much smaller share of renewables FDI.
However, there are early signals that investment in the electronics components industry, which is also critical to the energy transition, has slipped. FDI worth $8.4bn was pledged to the highly coveted battery sub-sector, the lowest level since the first half of 2021 (1H2021), according to the latest fDi Markets data. This reflects uncertainty over making gigafactories a success and concerns about weaker-than-expected demand for the electric vehicles.
Foreign investors also committed $27.5bn worth of FDI to coal, oil and gas projects in 1H2024. While this is lower than the spike of fossil fuel FDI seen after Russia’s full-scale invasion of Ukraine, energy majors including France’s TotalEnergies set out major expansion plans in oil and gas extraction in 1H2024.
Between January and June 2024, the sought-after semiconductor sector received more than $107bn of FDI pledges, with the US attracting the majority of this investment. Major microchip makers, including Taiwan’s TSMC, South Korea’s Samsung and the UAE’s GlobalFoundries, have all announced multi-billion-dollar plans to build US fabrication plants, helped by support from the $52bn Chips and Science Act.
The communications sector received the third-largest amount of FDI pledges in 1H2024, with more than 85% going to data processing, hosting and related services. The rush to build this digital infrastructure has come amid surging demand for cloud computing and artificial intelligence (AI) services. The most active data centre investors were the world’s largest hyperscale providers — namely US big tech companies Amazon, Microsoft and Google’s parent company Alphabet — followed by Asian competitors such as Singapore’s Global Logistics Properties and China’s GDS Services.
Several other traditionally capital-intensive sectors stayed in the top 10 in 1H2024, including automotive OEM, real estate, transportation and warehousing and metals. Meanwhile, software and IT services returned to the top 10. The surge in tech FDI came as major companies including Chinese social media giant Bytedance and US chip design firm Nvidia outlined capital expenditure plans into research and development relating to AI.
