The FDI shake-up: How foreign direct investment today may shape industry and trade tomorrow

At a glance

• Foreign direct investment has transformed industries from oil to electronics. Providing initial funding is just the start; cross-border deals that take root also transfer knowledge and spur ongoing domestic investment. Today’s patterns of greenfield FDI announcements signal a new shake-up.
• FDI promises to shape advanced manufacturing, AI infrastructure, and the resources that power them. Since 2022, three-quarters of cross-border announcements have gone to these types of future-shaping industries as well as energy and mining projects—up from about half pre-2020. While not all announcements proceed, historically 60 to 80 percent have.
• Pledged investment has increasingly followed geopolitical lines. Advanced economies announced more investment into one another—particularly to the United States—but decreased flows to China by nearly 70 percent. China pivoted from net investee to prominent investor in future-shaping industries, boosting announcements to Europe, Latin America, and the Middle East and North Africa by over two-thirds. Emerging economies attracted investment pledges from across the geopolitical spectrum.
• To win globally, multinationals are placing bigger bets. While megadeals over $1 billion represent only 1 percent of cross-border deals, they account for half the total value—a jump from one-third five years ago. New data centers, semiconductor fabs, and battery factories don’t come cheap.
• Stakes are high and change is afoot. If successful, FDI projects announced since 2022 could more than quadruple current battery manufacturing capacity outside China, nearly double the global data center capacity that powers AI, and draw the United States into the circle of top leading-edge semiconductor-producing nations. Patterns like these can help decision-makers anticipate the shifting geometry of global trade and the future map of international business.

Oil. Copper. Semiconductors. Foreign direct investment (FDI) has seeded and transformed these and many other global industries.

Cross-border investments in the late 19th century forged the global oil industry as money and know-how flowed from the United States and Europe to Baku (present-day Azerbaijan) and Sumatra (modern-day Indonesia), followed by investment around the globe in the 20th century.¹Daniel Yergin, The Prize: The Epic Quest for Oil, Money and Power, Simon & Schuster, 1990. Similarly, foreign investments shaped mineral-rich economies. For example, Chile’s position as a world-leading copper exporter for most of the past 140 years was catalyzed by multinational firms that developed vast open-pit mines and transferred geological, engineering, and operational expertise.²Antonio Spilimbergo, Copper and the Chilean economy, 1960–98, IMF working paper, April 1999.

Following World War II, FDI played a critical role in spurring global manufacturing.³Edward M. Graham, “Foreign direct investment in the world economy,” chapter 7 of Staff Studies for the World Economic Outlook, IMF, September 1995. South Korea’s semiconductor industry first emerged from successive waves of FDI, particularly from US and Japanese multinationals, starting in the 1970s.⁴Chris Miller, Chip War: The Fight for the World’s Most Critical Technology, Scribner, 2022. FDI fueled China’s rise to become a leading manufacturing power as multinational enterprises built factories, transferred knowledge, and nurtured labor and supplier ecosystems.⁵Yan Liu, Does foreign direct investment catalyze local structural transformation and human capital accumulation? Evidence from China, World Bank policy research working paper 9952, March 2022.

What can FDI today tell us about global industry in the future?

While tomorrow’s trade map is still being drawn, patterns may emerge from major companies’ announcements of greenfield FDI. These are cross-border investments that create fresh productive capacity such as new mines, factories, and data centers in new places.

FDI offers a window to what’s coming. Since 2017, the geometry of global trade has been shifting toward geopolitically closer partners, a trend that could accelerate, given new tariffs, security concerns, and more muscular, domestically driven industrial policies.

Our analysis of about 200,000 announced FDI projects from 2015 through May 2025 signals that geopolitics will play an increasing role in global trade (see sidebar “Methodology”). While FDI still bridges vast geographic distances, the average geopolitical distance of greenfield FDI announcements since 2017 shrank about two times faster than that of trade (Exhibit 1).⁶Previous MGI research developed a measure of geopolitical alignment based on economies’ UN General Assembly voting records between 2005 and 2022. For details and limitations, see sidebar “Defining geopolitical distance.”

What does this mean for economies? Announced projects could more than quadruple battery manufacturing capacity outside China, almost double the global data center capacity that powers AI, and draw the United States into the circle of nations that are the biggest producers of leading-edge semiconductors.⁷In this report, “China” is used as an economic term that refers to the collective economies of Mainland China, Hong Kong, and Macao, unless otherwise noted. These are examples of how FDI may mold future-shaping industries while also rewiring cross-border economic ties.

This report explores shifts underway in FDI and offers foresight for decision-makers navigating a high-stakes environment of intensifying global economic competition and shifting geopolitical dynamics.

A pair of line charts compares trends in geographic and geopolitical distance for greenfield foreign direct investment (FDI) announcements and goods trade from 2005 to May 2025. The left chart shows that the geographic distance traveled by FDI has consistently been higher than that of goods trade. The right chart illustrates the geopolitical distance traveled, measured on a 0–10 scale. FDI's distance has decreased more sharply than goods trade since 2017, with a 13 percent decline for FDI compared to a 7 percent decline for goods trade. Both charts highlight significant events, including the global financial crisis (GFC) and the COVID-19 pandemic, which are marked by shaded vertical bars.

Announced FDI flows increasingly target industries that will shape the global economy and the resources that power them. Future-shaping industries include data centers powering artificial intelligence (AI), semiconductor fabrication facilities (fabs), electric vehicle (EV) and battery manufacturing facilities, and a range of other advanced manufacturing from pharmaceuticals to robots (see sidebar “What are future-shaping industries?”).

Together, future-shaping industries and resources accounted for three-quarters of greenfield FDI announcements from 2022 through May 2025. In inflation-adjusted, 2024-dollar terms, this was up from around 55 percent during the 2015 to 2019 period—the pre-COVID-19 period we use as a baseline for comparison (Exhibit 2).⁸All figures in this report are adjusted for inflation and expressed in 2024 US dollars. Such investments could substantially expand the capacity of these industries and shift their global footprint into new locations.

A stacked bar chart compares Greenfield Foreign Direct Investment (FDI) announcements by industry for two periods: 2015–19 and 2022-May 2025. The chart is divided into three categories: conventional industries (gray) which includes operational and professional services and basic manufacturing; future-shaping industries (teal), which includes communications, and software and advanced manufacturing; and resources (navy blue), which includes metals and minerals, and energy. In 2015-19, Greenfield FDI was $1,137 billion. Resources made up 27 percent of the investment announcements, future-changing industries made up 28 percent, and regular industries made up 45 percent. By 2022-May 2025, the total value increased to $1,407 billion, with resources rising to 39 percent, future-shaping industries to 38 percent, and conventional industries dropping to 24 percent. The chart also shows the change in investment between the two periods, with energy and advanced manufacturing experiencing significant increases of $166 billion and $142 billion, respectively.

This shift reflects the structure of these sectors: They are winner-takes-most, technologically advanced, and capital intensive, so only a handful of global firms have the capabilities to compete. At the same time, governments, eager to host them and reduce reliance on geopolitically distant partners, are deploying powerful carrots and sticks. The result is a surge of announced megadeals (exceeding $1 billion) that drive most FDI growth and shape the global economy.

In contrast, annual announced investments in conventional industries have dropped by more than 30 percent. This category includes a wide range of basic manufacturing sectors—including consumer products, food and beverages, and textiles—as well as operational and professional services, a broad category that spans construction, real estate, logistics, and financial services.

This year has brought fresh uncertainty. International trade surged into the public spotlight in April 2025, when the United States unveiled large tariffs. Since then, the United States has announced trade deals with multiple countries. Some include pledges of future investment into the United States; details remain pending. Still, uncertainty persists globally, and firms may be waiting to act in hopes of more clarity down the road.

Against this backdrop, so far in 2025, the overall rate of FDI announcements has leveled off amid an even greater global focus on future-shaping industries. Announcements in these areas are on pace to reach $840 billion, versus the $490 billion average annual level between 2022 and 2024, driven entirely by increases in data centers globally and in semiconductor fabs, particularly in the United States. In other major investment areas across advanced manufacturing, resources, and conventional industries, announcements are down, and FDI announcement rates have fallen to 20-year lows across all of China, emerging Asia, Latin America, the Middle East and North Africa (MENA), and sub-Saharan Africa (see sidebar “2025 announcements have focused on data centers and semiconductors”).

Announcements are, of course, not firm commitments, and not every potential project sees the light of day. Still, past studies have found that FDI announcements reliably predicted capacity creation on the ground, with realization rates between 60 and 80 percent. Our analysis finds that, since 2022, more than half of the largest announced projects in future-shaping industries are under construction or already operational. Among those that have not yet started construction, about half were announced after the beginning of 2025.⁹Based on an analysis of the largest 60 announced investments in future-shaping industries since 2022, 20 in each of three segments: data centers, semiconductors, and electric vehicles and batteries. This is further detailed in chapter 2. As a general matter, it is too soon to gauge feasibility and progress of announcements made this year.

The biggest growth in announced investments, including in 2025, is for AI infrastructure and semiconductors

Growth in FDI announcements has not been uniform across future-shaping industries and resources. Rather, pockets of rapid growth in some subsectors have been responsible for the bulk of the expansion.

For instance, huge growth in AI and even bigger expectations for its future have accelerated cross-border investment in communications and software. Data centers—a key piece of infrastructure needed for AI—have accounted for more than 85 percent of announced greenfield FDI in this sector since 2022, or about $170 billion annually.¹⁰Includes some investment in software services, not all of which may be linked to physical data centers. Momentum escalated in 2025. If the early-2025 pace continues, data center announcements are on track to reach over $370 billion by year end.

Advanced manufacturing has accounted for one-quarter of global FDI announcements since 2022. One-third of that share, or about $115 billion annually, has been dedicated to new semiconductor fabs.¹¹Investments in the semiconductor value chain also included some equipment investments, which are limited to less than 5 percent of the total. Another third went to assembly lines for EVs and new gigafactories for batteries—which are primarily used in automotive manufacturing but increasingly relevant to broader applications. The remainder was directed to other industries, including pharmaceuticals (notably drugs to combat obesity), electronics, and smaller but fast-growing FDI-related areas such as robotics and technologies linked to defense. In the first months of 2025, announcements directed to semiconductors surged threefold, while those for EVs dropped by over three-quarters, all on an annualized basis.

As energy- and material-hungry industries expand, resource sectors also are attracting growing investment. In metals and minerals, roughly 50 percent of announced FDI since 2022 (or $50 billion annually) went to projects to extract and refine minerals critical to advanced manufacturing—for example, copper, lithium, and nickel. Most of the other half went to the steel value chain, particularly to newer, lower-emissions steelmaking processes.

Energy-related announcements also have risen, but here the evolution over the past several years is more complicated. About three-quarters of the total since 2022, or nearly $330 billion annually, focused on expanding low-emissions technologies, doubling from 2015 to 2019 levels. Within this total, announced investments in established renewable sources, like solar and wind, and in nascent electrolytic hydrogen production have attracted roughly equal shares.¹²Low-emissions hydrogen can be produced in several ways. Two of the most common are using electricity to electrolyze water and capturing carbon. Hydrogen produced by the first method is sometimes called “green” when electricity is produced from low-emissions source. Hydrogen produced by carbon capture is sometimes called “blue.” The first of these pathways accounts for over 95 percent of hydrogen greenfield FDI announcements in our data set and is included in our taxonomy as part of “energy,” while carbon capture is not. The remainder, or $105 billion annually, went to conventional fossil fuel projects, falling from more than $150 billion in the earlier period. In 2025, the landscape of FDI announcements in energy has shifted meaningfully; announcements in liquefied natural gas (LNG) and solar have remained about constant, while those going to low-emissions hydrogen, offshore wind, and oil and gas extraction have all dropped by around 70 percent. Announcements going to both nuclear and enhanced geothermal have more than doubled—but from such a low base that they hardly dent the aggregate energy FDI announcement numbers.

The shift toward future-shaping industries has occurred across all regions

Future-shaping industries and resources have gained importance, and not just for a handful of top-performing economies. This is a global trend, as increasing FDI inflows and outflows are announced across nearly all regions. Advanced economies, MENA, and China have, in aggregate, increased investment announcements in these sectors. Announced inflows have gone up everywhere, with the notable exception of China (Exhibit 3).

A scatterplot chart illustrates the change in greenfield Foreign Direct Investment (FDI) announcements, inflows, and outflows by region, comparing the annual averages from 2022 to May 2025 versus 2015–19. The chart shows future-shaping industries with color-filled circles, and conventional industries with outlined circles, for advanced and emerging economies. Circle sizes representing total annual average inflows and outflows from 2022 to May 2025. The main takeaway is that future-shaping industries drove growth in inflows and outflows almost everywhere except China. Europe (including flows within the region) and the United States and Canada show big increases in both inflows and outflows, with Europe's circle being the largest. In contrast, Mainland China and Hong Kong SAR was the only region with a decrease in inflows, while its outflows increased slightly.

Conventional industries show the converse pattern: Announcements of FDI inflows and outflows are down in nearly every region. Only companies in Latin America and MENA have increased announced outflows, and only by a little.

FDI could create new hubs for future-shaping industries

Announcements suggest that greenfield FDI is emerging as an engine for future-shaping industries. These announcements have grown much faster than total capital investment, creating the potential to boost global capacity and to expand the worldwide footprint of these industries (see sidebar “FDI may be gaining importance relative to domestic investment”).

FDI may be gaining importance relative to domestic investment

Globally, greenfield FDI announcements have grown much faster than total capital investment (exhibit).¹Greenfield FDI announcements represent planned future investments, typically disbursed over multiple years, and capital expenditure reflects actual in-year investment activity. While not directly comparable, the ratio of the two provides a view of the potential role of greenfield FDI in future capital formation. Estimated ratios are based on annual average greenfield FDI announcements from 2022 through May 2025, relative to capital expenditure from 2022 to 2024.

A series of three line charts illustrates the ratio of Greenfield FDI announcements to total capital expenditure across three industry categories: future-shaping industries, resources, and conventional industries. The charts compare emerging economies, advanced economies, and mainland China and Hong Kong SAR over three time periods: 2010–14, 2015–19, and 2022-May 2025. FDI is an increasingly important source of capital for future-shaping industries and their critical resource inputs. The circle size, representing total capital expenditure, varies across the charts. The largest circles appear in the conventional industries chart.

Across advanced economies, greenfield FDI announcements flowing to future-shaping industries averaged roughly 15 cents for every dollar of capital expenditure since 2022, nearly double the value of the previous period. For resources, a similar pattern played out, since investment in low-emissions hydrogen, low-emissions steel, and unconventional oil and gas projects often requires expertise and capital from globally relevant firms.

These proportions run even higher for emerging economies, many of which currently do not host an industry’s leading firms and, therefore, are less able to domestically mobilize the financial and intangible capital they need. For example, in the communications and software sector, the ratio of greenfield FDI announcements to capital expenditure was more than ten times higher in countries outside the United States and China—which are home to the world’s leading technology firms—than it was within those two countries.

China has been the major exception to the growing role of incoming FDI for its future-shaping industries and resources. For every dollar decrease in greenfield announcements in future-shaping industries and resources, total investment in China actually grew by more than $10. While the decline of capital inflows from greenfield FDI is somewhat immaterial, the reduced access to know-how and human capital could be more relevant in future-shaping sectors where China still lags some economies.

Greenfield FDI announcements in conventional industries in emerging markets have dropped to about four cents on the dollar, down from seven cents. In some regions, the shift has been more pronounced. For example, in consumer and basic manufacturing industries in sub-Saharan Africa, the ratio reached 15 cents on the dollar during the period from 2015 to 2019 but has recently dropped to about four cents.

In the case of data centers and EV batteries, announced FDI projects could add roughly as much capacity as existed in 2022. For leading-edge semiconductors, FDI projects could add about 60 percent to 2022 global capacity (Exhibit 4).¹³All estimates of incremental capacity are based on an analysis of the 20 largest megadeals, extrapolated to total.

A series of three dot plots illustrates the potential increase in production capacities from announced greenfield Foreign Direct Investment (FDI) projects in future-shaping industries. The plots show the 2022 capacity with and without the announced projects added, and 2030 estimates for data centers, leading-edge semiconductors, and electric vehicle batteries. Data is shown globally and by specific locations. For data centers, announced FDI projects could increase the 2022 global capacity by 0.8 times, driven by a 2.1 times increase in the rest of the world, while the United States and Mainland China will see an increase of 0.1 times their 2022 capacity. For leading-edge semiconductors, announced FDI projects are expected to increase global capacity 0.6 times its 2022 level, driven by a 4.7 times increase in the rest of the world. For EV batteries, the global capacity is expected to increase 1.0 times its 2022 level, driven by a 3.7 times increase in the rest of the world, while Mainland China's capacity will remain unchanged from its 2022 level. The status of the 20 biggest projects in each industry is also shown. 50 percent of data center projects, 60 percent of cutting-edge semiconductor projects, and 65 percent of electric vehicle battery projects are either complete or under construction.

The impact could be many times higher outside the core hubs where these industries are concentrated today. If all announced projects come to fruition, new FDI-driven data center capacity outside the United States and Mainland China would be nearly twice the total 2022 capacity. For battery manufacturing outside Mainland China, it could be almost four times. And for leading-edge semiconductor capacity outside of South Korea and Taiwan, the FDI-driven increment could be nearly five times the total 2022 capacity. In all these cases, FDI-driven projects could account for the majority of total capacity growth outside core hubs up to 2030.

It remains uncertain how many of these announced investments will be fully realized, but the direction of travel is clear. The pipeline is progressing in a healthy way: Between one-half and two-thirds of the projects announced in these industries since 2022 are well underway, and many are already live. It remains to be seen what share will succeed; three of the top 20 EV projects have been put on hold, including a project in Canada worth about $10.5 billion and one in Mexico worth about $5 billion.¹⁴“Will Elon Musk scrap his plan to invest in a gigafactory in Mexico?” The Economist, January 16, 2025; “Honda Canada postpones multibillion EV investment project in Ontario,” Associated Press (AP), May 13, 2025. Additionally, a $6 billion project in Saudi Arabia involved a company that filed for bankruptcy. “China's Changan in talks to take over struggling EV maker Human Horizons, report says,” Reuters, February 28, 2024; “Chinese EV maker HiPhi enters bankruptcy process in death knell,” Bloomberg, August 9, 2024.

FDI’s potential near-term impact on resources industries is limited to specific segments

Greenfield FDI announcements in resources are small compared with total current production capacity, contributing at most an incremental increase of less than 10 percent over 2022 levels. After all, energy and mining are massive, well-established industries. Within specific segments, however, the FDI pipeline could still play a meaningful role.

In the case of fossil fuels, approximately 80 percent of conventional energy projects are already under construction or operational (Exhibit 5). Oil and gas firms have over a century of experience in announcing and developing cross-border energy projects, so it is perhaps not surprising that such a substantial percentage are already underway. However, even if all projects came online, their impact on the overall extraction of oil and gas would be modest and add, at most, less than 5 percent to total 2022 extraction capacity. But for LNG capacity, this number could be as high as 25 percent, potentially creating new energy corridors to replace geopolitically sensitive gas pipelines.

If announcements come to fruition, FDI also has the potential to play a substantial role in low-emissions projects that are big and generally more complex, including offshore wind and low-emissions primary steel.¹⁵Primary steel is made using iron ore as a source of iron, rather than recycled scrap. Today, the vast majority of primary steel is made using coking coal, generating about two tons of CO₂ emissions per ton of steel created. See “The hard stuff: Navigating the physical realities of the energy transition,” McKinsey Global Institute, August 2024. Most strikingly, announced low-emissions hydrogen projects would increase capacity over 100-fold above current, almost negligible, levels. However, none of the largest 20 electrolytic hydrogen projects announced since 2022 have reached the construction stage.¹⁶Outside of the top 20 projects, a few announced greenfield FDI electrolytic hydrogen projects have begun construction, including a project to produce low-emissions ammonia in Egypt and export it to Germany. Carbon-capture-based hydrogen projects are not included in this tally.

A series of three dot plots illustrates the potential increase in production capacities from announced greenfield FDI projects across three resource segments: conventional fuels (oil and gas), renewable power, and low-emissions hydrogen. The plots show the 2022 capacity with and without the announced projects added, and the 2030 estimates. For conventional fuels, the capacity added by announced FDI projects is roughly the same as 2022, at around 370 EJ. Offshore wind drives the growth in renewable power, with announced FDI projects increasing its 2022 capacity by 1.6 times. Low-emissions hydrogen could see a more than 100-fold increase from its 2022 capacity with the added FDI projects. The chart also shows the status of the 20 biggest projects in each segment. Conventional fuels have 80 percent of projects complete or under construction, renewable power has 30 percent, and low-emissions hydrogen has 0 percent.

Multinational corporations are making bigger bets on future-shaping industries, driven by competitive urgency and a need to establish themselves as global players in key sectors. These bets are reshuffling geopolitical ties, with multinationals—especially from advanced economies—bringing investment closer to home.

Megadeals are increasingly important for firms in future-shaping industries

Megadeals, which are greenfield FDI projects valued at over $1 billion in inflation-adjusted terms, are growing in importance as firms race to compete globally in future-shaping industries.

About 200 megadeals annually—representing 1 percent of all deal announcements—now account for approximately half of announced greenfield FDI, a significant increase relative to the previous period, when they accounted for under one-third (Exhibit 6). In fact, this category of big deals drove almost all of the growth in announced FDI in future-shaping industries, as well as about 75 percent of the growth in resources.

A chart illustrates the value of greenfield Foreign Direct Investment (FDI) announcements from 2015 to 2019 and 2022 to May 2025, highlighting the shift toward capital-intensive industries driven by megadeals. The chart is divided into two sections: the left side shows the average annual value of megadeals and other deals, while the right side displays the change in average annual value by sector. On the left, the average annual value of FDI announcements went up from $1,137 billion in 2015-19 to $1,407 billion in 2022-May 2025. Megadeals increased from 30 percent to 47 percent of all deals. On the right, a bar chart shows the change in average annual value by sector. Future-shaping industries and resources, such as energy, advanced manufacturing, communications and software, and metals and minerals, experienced significant increases, resulting in a net total increase of $270 billion across all industries.

Megadeals have grown in size and frequency, particularly in future-shaping industries, where average deal size has doubled. Megadeals now account for about 60 percent of total announced FDI in resources and advanced manufacturing, as well as 40 percent for communications and software (Exhibit 7).

An exhibit illustrates the growth of megadeals in future-shaping industries and resources, both in size and number in 2015–19 and 2022–May 2025. The first part of the exhibit is divided into two parts. It compares the average number of megadeals each year and the average value of megadeals. The number of megadeals increased across all future-shaping industries and resources, but not in conventional industries. The average value of megadeals also rose across most industries, especially future-shaping industries and resources. The second part of the exhibits shows megadeals as a share of all greenfield FDI announcements in 2022-May 2025. Energy, and metals and minerals, had a high share of around 62 percent, while conventional industries such as operational and professional services, and basic manufacturing, saw lower shares, at 21 percent and 15 percent, respectively.

At the same time, the importance of cross-border megadeals is rising, as they reflect the complex, capital-intensive, and highly competitive nature of future-shaping industries. Advanced manufacturing and digital infrastructure require specialized know-how, intellectual property, and highly skilled workforces to build out the infrastructure necessary to translate complex technologies into production. This raises the price tag of these projects, meaning only a few multinationals have the capabilities, financial strength, and risk appetite to develop them. For example, leading-edge semiconductor manufacturing is arguably the most precise production process ever conducted, and a single fab may require an investment of at least $10 billion.¹⁷Ondrej Burkacky, Marc de Jong, and Julia Dragon, “Strategies to lead in the semiconductor world,” McKinsey, April 15, 2022. Similarly, each gigafactory or multi-hundred-megawatt data center costs upward of $1 billion.¹⁸Brian Ungles et al., Data center development cost guide 2025, Cushman & Wakefield, December 10, 2024; McKinsey Battery Insights.

Winner-takes-most dynamics in rapidly evolving markets further push multinational organizations toward megadeals. Companies compete to establish global relevance, leading to an escalation in investment sizes. For instance, hyperscalers have engaged in an accelerating global investment race in the communications and software industry for over a decade.¹⁹Hyperscalers are technology platform companies, such as major cloud service providers, that operate data centers at the largest scales. Data center announcements have expanded in size by one and sometimes even two orders of magnitude over the past decade; the largest recent announcements are for gigawatt facilities, compared with the previous decade’s data centers, built to consume dozens of megawatts.²⁰“AI power: Expanding data center capacity to meet growing demand,” McKinsey, October 29, 2024. And as data centers got bigger, so did deal sizes in the sector, which roughly doubled in average value.

Resource-related megadeals tend to be more complex projects with higher price tags. Oil and gas, including LNG projects, require significant capital and specialized expertise; for example, the announced LNG terminal in Calcasieu Parish, Louisiana, has a $17.5 billion sticker price.²¹Christine Chen and Curtis Williams, “Woodside approves $17.5 billion US LNG project, 2029 start,” Reuters, April 29, 2025. New, low-emissions projects for hydrogen or steel also require considerable investment and risk, as evidenced by the fact that nearly all announced hydrogen projects are megadeals, but none of the largest projects are yet under construction.

Public policy may play a role in the growth of megadeals across industries—or at least in the way they are announced. As economies compete to attract projects, stated incentives offered to firms have multiplied. For example, analysts found that announced FDI incentives reached record highs in 2023, particularly in advanced manufacturing, such as EVs and semiconductors.²²Joshua Crawford, “Incentives-backed FDI reaches record high in 2023,” fDi Intelligence, updated October 1, 2024

Of course, not all FDI announcements involve the largest firms. About half of them are not megadeals, and in conventional sectors, roughly 80 percent of all deals are for less than $1 billion. Firms with ambitions to seize opportunities but lacking some of the financial muscle of their large peers can find space to invest. For instance, as megadeals grow, so will the size of their support ecosystems, including component manufacture, infrastructure, logistics, business services, financing, and more.

Multinational firms took different paths in response to geopolitical pressures

The rapid evolution of new technologies is not the only change afoot. Geopolitical tensions are higher than they have been in decades, and firms looking to expand abroad are taking note.

Greenfield FDI announcements have increasingly tracked geopolitical alignments. Indeed, the geopolitical distance of FDI announcements has dropped by more than 20 percent since just after the global financial crisis—from 3.6 in 2010 to below 3.0 as of 2025 on our ten-point scale.²³Figures refer to three-year rolling averages in the geopolitical distance of FDI announcements. (For more on how we measure geopolitical distance, see sidebar “Defining geopolitical distance.”) Advanced economies’ investment in China fell from 10 percent to 2 percent of total FDI announcements by value, while flows among advanced economies increased from 35 percent to 45 percent.

Defining geopolitical distance

Previous MGI research developed a measure of geopolitical alignment analogous to geographic distance. It is based on UN General Assembly voting records of economies between 2005 and 2022.¹Overall, the analysis includes 201 votes, or about 15 percent of all UN General Assembly votes from 2005 to 2022. Since many votes were procedural or repeated, we included only votes designated as “important” by the US Department of State. We used principal component analysis to map each voting country on a one-dimensional voting spectrum ranging from zero to ten (exhibit). Explicitly, we did not define this spectrum based on any specific country or pair of economies. We then took the geopolitical distance between any two economies to be their difference on this scale.²Economies that do not vote at the UN General Assembly are excluded from the analysis. We conducted robustness checks over different time windows between 2005 and 2022 and found that for many economies—including China, European economies, Japan, South Korea, and the United States—their geopolitical position by our measure did not vary significantly. However, the position of some economies, such as Brazil and Mexico, was more variable, although always toward the center of the spectrum.

A bubble chart shows the geopolitical position of various countries based on their UN General Assembly voting patterns from 2005 to 2022, with the positions scaled from 0 to 10. The chart is color-coded by region, including Advanced Asia; Europe; United States and Canada; Emerging Asia; Middle East and North Africa; Latin America and Caribbean; Sub-Saharan Africa; and Mainland China and Hong Kong SAR. The size of each bubble represents the country's total trade in 2022, measured in trillions of dollars. The United States is positioned at the far left, while China is at the far right, with other countries distributed along the scale, such as Germany, Japan, and South Korea clustering near the United States, and India, Russia, and Iran aligning more closely with China. The United States and China also have the largest trade values.

The geopolitical distance of greenfield FDI announcements is the difference between the announcement’s investor and investee on the zero-to-ten scale. This distance is assumed to be fixed over the period considered in this report. In other words, changes in the average geopolitical distance of announced investment reflect different mixes of investment across partners, rather than a change in the geopolitical distance between any two economies.

Of course, relations between countries are dynamic. The United States and countries that, by our definition, are close have diverged over some high-profile UN General Assembly votes in 2025. But this has happened before; UN votes are a noisy measure of geopolitical alignment, with countries’ voting practices varying from session to session. Time will tell if recent voting patterns signal a more permanent shift in geopolitical relations.

These trends reflect the aggregate effect of investment decisions. Among the largest companies, 35 percent decreased the average geopolitical distance of their announced FDI between the 2015 to 2019 period and the 2022 to 2025 window, while only 20 percent increased geopolitical distance (Exhibit 8).

About 35 percent of the largest companies reduced the geopolitical distance of their announced investments. These were mostly multinationals headquartered in advanced economies.

In emerging economies, 56 percent of the largest companies maintained stable geopolitical distance of their announced investments, 10 percentage points higher than the global average of 46 percent.

Among the largest companies based in Mainland China and Hong Kong, 37 percent increased the geopolitical distance of their investments. The global average figure was only 20 percent.

Exhibit 8

A scatterplot bubble illustrates the geopolitical distance of announced greenfield foreign direct investment (FDI) for the top 50 companies by group of economies from 2015 to May 2025. The chart's x axis represents the average geopolitical distance of announced greenfield FDI from 2015 to 2019, while the y-axis represents the same metric from 2022 to May 2025, both on a 0–10 scale. Circle size corresponds to the total announced greenfield FDI from 2015 to May 2025, with larger circles indicating greater investment. Overall, 35 percent of the top 500 companies globally decreased their geopolitical distance, while 20 percent increased it, and 46 percent maintained a stable distance, defined as a change within ±1 point on the scale. The exhibit is shown in three panels. The first panel shows advanced economies. Most circles, are concentrated below the diagonal line, indicating a decrease in geopolitical distance over time.

The second panel shows emerging economies. Most companies decreased in geopolitical distance of announced investments, or remained stable, but some increased in geopolitical distance.

The third and last panel Mainland China and Hing Kong. Companies show smaller announced investments than advanced economies, with no significant trend in the change in the geopolitical distance of announced investments.

Beneath the summary statistics lurks tremendous variability across the investment decisions of thousands of individual multinational corporations (MNCs). Each MNC faces its own set of considerations, depending on sector, geographic footprint, competitive position, cost of capital, and so on. Some firms meaningfully increased the geopolitical distance of their announced FDI. Of the 500 firms with the largest announced greenfield FDI since 2015, about 30 increased the geopolitical distance of these announcements by at least three notches on our scale. (To give a sense of scale, this is equivalent to a US company shifting investments from Japan to Mexico or from Nigeria to Mainland China.)

While there was variability among firms in every country, multinationals from advanced economies tended to shift investment announcements closer to home. MNCs from emerging economies and China did not (Exhibit 9). Within advanced economies, Japanese and South Korean firms reduced the geopolitical distance of their investments the most, followed by companies based in Europe (the United Kingdom and the EU countries).²⁴This analysis includes a subset of 30 economies, including all EU member states, and the three non-EU economies in the region: the United Kingdom, Norway, and Switzerland. The declines were driven primarily by advanced manufacturing firms, especially automotive and semiconductors. Firms in these sectors had previously expanded extensively into distant locations, particularly China, and have now shifted investment announcements to more closely aligned partners, mostly the United States and Europe.

A bubble chart and a set of horizontal stacked bar charts illustrate the shifts in geopolitical distance of companies' announced greenfield foreign direct investments (FDI) by company headquarters location. The bubble chart on the left shows the change in average geopolitical distance of announced greenfield FDI from 2015-19 to 2022-May 2025, with circle size representing the total value of announced greenfield FDI. The chart indicates that countries such as the United States, Europe, Japan, and South Korea have shifted toward geopolitically closer economies. Brazil, United Arab Emirates, Singapore, and especially China shifted toward geopolitically more distant economies. India remained stable. The stacked bar charts on the right provide a more detailed breakdown of the changes in average geopolitical distance of investment for selected economies, with most companies in most economies, such as 62 percent in Brazil and 67 percent in United Arab Emirates, showing very small increases or decreases (between 1 and -1 on a 0–10 scale).

Some advanced-economy firms bucked the trend. Major US technology firms investing heavily in data centers globally kept the geopolitical distance of their investments relatively stable on average, and some expanded their footprints into more geopolitically distant emerging markets. Even in Europe, Japan, and South Korea, multiple resource companies—steelmakers and energy firms—invested further afield than before.

A further counterweight to the global drop in geopolitical distance came from outside advanced economies. Chinese firms have, on average, increased the geopolitical distance of their announced investments. This occurred as companies announced proportionately more investment in Europe—notably by EV and battery manufacturers—as well as in Mexico and the Middle East. To be sure, some Chinese firms have also focused announcements on geopolitically closer places. Over 30 percent of firms have seen decreased geopolitical distance of FDI announcements, similar to the trend in the United States. For example, a Chinese automotive player shifted announced investments from the United States to Malaysia and Brazil, while a Chinese pharmaceutical company redirected investments from the United States to Singapore.

Major emerging-economy MNCs tended to hold the geopolitical range of their FDI announcements more constant. In each of Brazil, Singapore, and the United Arab Emirates, roughly 65 percent of companies maintained the geopolitical distance of FDI announcements—in contrast to about 35 percent in the United States, Japan and South Korea, and China. Firms from these economies tended to invest disproportionately in conventional industries and had since 2015 already invested in comparatively closer partners, so their shift was less pronounced. India’s pattern was slightly different: More companies made larger moves, but because some increased while others decreased geopolitical distance, they canceled out such that India maintained investment ties across the geopolitical spectrum.

These patterns echo previous McKinsey Global Institute work that found economies in Europe and the United States have shifted their goods trade toward geopolitically closer partners since 2017, while emerging economies have typically continued to trade across the geopolitical spectrum.

Patterns of FDI differ among industries

The combination of company-level moves is leading to differing trajectories for global economic ties across industries, in terms of aggregate announcement values and geopolitical distances. Three distinct patterns—expansion, reconfiguration, and retreat—emerge from the shifts in investment levels and geopolitical distances in FDI announcements by MNCs (Exhibit 10). Two patterns characterize future-shaping industries and resources, which are increasingly powered by megadeals, while the third applies to conventional industries.

A set of four scatter plots illustrates changes in geopolitical distance and greenfield FDI announcement value across various sectors, categorized into "Expansion," "Retreat," and "Reconfiguration." The "Expansion" plot shows that metals and minerals, as well as communications and software, experienced an increase in both geopolitical distance and greenfield FDI announcements. The "Retreat" plot indicates that basic manufacturing and operational and professional services saw a decline in both greenfield FDI announcements and geopolitical distance. The "Reconfiguration" plot reveals that the advanced manufacturing and energy sectors showed an increase in greenfield FDI announcements but a decrease in geopolitical distance traveled. The size of the circles represents FDI inflows, with larger circles indicating higher inflows.

Expansion of FDI in data centers and in metals and minerals

FDI announcements related to communications and software—particularly data centers—and metals and minerals increased in value, even across geopolitically distant partners. As economies rushed to secure connections to tangible resources like minerals and intangible ones like data, new linkages formed across geopolitical divides. Examples include Chinese mining companies starting new projects in Serbia and US technology companies investing in Malaysia. This shift slightly increased geopolitical distance in these two industries.

Reconfiguration of FDI in advanced manufacturing and energy

Announced FDI in advanced manufacturing and energy projects increased in value and decreased in average geopolitical distance. Companies aimed to manage geopolitically sensitive dependencies by setting up new production hubs and potential trade corridors.

MNCs in advanced economies sought alternatives to advanced manufacturing supply chains by setting up new production hubs. For example, companies from Japan, South Korea, and Taiwan in the semiconductor and EV value chains announced investments in the United States while all but stopping new investments in China.

In energy, FDI has historically spanned wide geopolitical distances, as firms invested in conventional energy projects around the world. Since 2022, geopolitical distance of announced energy investments decreased, driven by a shift to lower-emissions projects, which tend to link geopolitically closer partners, including companies within Europe and within MENA. While conventional energy deals continued to span large geopolitical distances, they aimed to create alternatives to sensitive trade routes, such as shipments through the Strait of Hormuz and gas pipelines from Russia to Europe.

Retreat of FDI in conventional industries

Greenfield FDI announcements in conventional industries, such as basic manufacturing and operational and professional services, have declined in recent years relative to the 2015-to-2019 period.

This trend was most pronounced in the corridors between geopolitically distant partners, especially flows from advanced economies into China—declines not offset by significant growth elsewhere. As just one example, greenfield FDI announcements in China’s plastics sector since 2022 have been under $500 million per year, 80 percent less than levels from 2015 to 2019. At the same time, investment in plastics in the rest of the world also fell by roughly 50 percent.

New announced projects were largely between geopolitically aligned partners. Around 45 percent of investment in conventional sectors flowed between advanced economies, for example, to strengthen infrastructure and logistics networks. These included intra-European flows, such as German retailers expanding across continental neighbors and the United Kingdom and EU logistics firms developing regional warehouses and distribution centers. American MNCs announced increased investment in Europe in similar sectors.

FDI announcements for future-shaping industries could transform the global economy and reshuffle geopolitical ties for years to come. The next section explores how these investments may affect key industries across economies.

FDI is shifting the global footprint of future-shaping industries and the cross-border ties that connect countries and regions. Some economies that have long relied on imports for key products like semiconductors or batteries may instead see large boosts in their domestic capacity, a development that could have a cascading impact on trade flows.

This section examines the dynamics of FDI announcements in data centers, critical minerals, semiconductors, EVs and batteries, and energy. The dynamics in data centers and critical minerals show an expansion pattern, with investment value and geopolitical distance both increasing. The dynamics of the three remaining sectors show reconfiguration, corresponding to increased value but decreased geopolitical distances.

Expanding AI infrastructure globally

As interest in AI surges, greenfield FDI announcements in data centers have expanded, increasing in value and spanning wider geopolitical distances. These shifts promise to change future flows of technology, digital services, and data.

Growing AI adoption and related workloads are fueling demand for data centers to host and process data across the world. Since 2022, FDI announcements dedicated to data centers have totaled about $170 billion annually, doubling the average level of investment announced in the 2015-to-2019 period.

At the same time, announced investments have stretched across increased geopolitical distances. Localizing data centers in the places they serve is often important for both commercial and regulatory reasons. The rapid deployment of AI means economies are demanding new capacity, and global MNCs and investors are racing to build it.

Today, China and the United States together account for over half—and perhaps as much as two-thirds—of global data center capacity.²⁵“Energy and AI,” International Energy Agency, April 2025; McKinsey Data Center Supply and Demand Model. In these economies, domestic investment drives most of the capacity expansion.

But in other regions, FDI could become the main engine of data center capacity growth. Announced projects could add about twice the capacity that existed outside of China and the United States in 2022, supporting more than half of total capacity growth out to 2030.²⁶For estimates of data center demand growth, see, for example, “The cost of compute: A $7 trillion race to scale data centers,” McKinsey Quarterly, April 28, 2025; “Energy and AI,” International Energy Agency, April 2025. Supply estimates are typically derived from a bottom-up assessment of announced projects.

US firms, including hyperscalers such as Amazon Web Services and Microsoft, were the biggest sources of this announced FDI. In addition to ongoing large investments in Europe and other advanced economies, such firms have announced increased investment across emerging markets. Destinations included India and Southeast Asia, as well as Saudi Arabia (Exhibit 11).

US firms are not the only ones stepping up investment abroad. In early 2025, for example, investors from Middle Eastern economies announced some of the largest data center projects ever in France and the United States, contributing to the expanding geopolitical distances of recent FDI announcements.

The impact of recent FDI announcements could soon become apparent, as roughly half of the 20 largest projects announced since 2022 are under construction; a wave of FDI-driven data centers is planned to come online in 2025 and 2026. Most of the remaining projects, often even larger, were announced in the first half of 2025. These could bring multi-gigawatt campuses online by 2030.

As these projects move toward execution, uncertainties remain. For example, rolling them out depends on ongoing growth in demand for enormous capacities, which in turn relies on the continued evolution of AI use cases and compute-intensive workloads. It also depends on supporting regulatory frameworks and agreements that facilitate transfer of intellectual property, chips, and data.

These projects also require massive amounts of power. At a global level, data centers are a small but increasing power draw: By 2030, their electricity demand could represent up to roughly 5 percent of the global total.²⁷Estimates vary because the pace of data center scale-up is uncertain, with some estimates over 5 percent. For some recent estimates, see, for example, Singer et al., “Generational growth—AI/data centers’ global power surge and the sustainability impact,” Goldman Sachs Research, April 30, 2024; “Energy and AI,” International Energy Agency, April 2025. The impact locally could be more substantial. An FDI megadeal announced in 2025 to develop a 1.4-gigawatt data center in Paris would require 10 to 15 percent of the city’s current electricity consumption to operate.²⁸This assumes a power usage effectiveness of 1.1 and a load factor of 51 percent, which are the base 2030 assumptions for a hyperscale data center in “Energy and AI,” International Energy Agency, April 2025. Electricity consumption is for the Île-de-France region for 2024, as reported by RTE France.

If successful, data center investments could transform cross-border flows in many economies. Demand for advanced chips in locations where new data centers are built, for example, could shift trade routes for high-tech electronic components. FDI projects also could create new opportunities to offer digital services and could unleash larger absolute flows of data, enabling more localization of sensitive data.

Expanding critical minerals production to support future-shaping industries

Lithium powers batteries, germanium accelerates chip speed, neodymium drives efficient electric motors, and copper wires our world. These and other critical minerals are essential to future-shaping industries, so demand for them has been rising.²⁹While there is no globally agreed set of critical minerals, some economies—including, for example, China, the European Union, India, and the United States—maintain distinct lists of strategic or critical minerals. These often overlap to include aluminum, copper, and battery metals such as cobalt, lithium, and nickel, as well as rare earth elements. But lists differ too: China and India list potash as a critical or strategic mineral, for example, while at the time of writing, the European Union and United States do not. The mining and refining of critical minerals is highly geographically concentrated, with refining for most occurring predominantly in China.³⁰“Global Materials Perspective 2024,” McKinsey, September 2024. FDI projects are a mechanism for China and other economies to secure supply of these minerals in future. Correspondingly, associated FDI announcements across the critical minerals value chain are expanding.

Critical minerals may account for nearly 50 percent of FDI announcements in the metals and minerals category, while most of the rest goes toward the steel value chain.³¹This and following estimates in this section are generated by analyzing the 120 largest FDI announcements (covering all megadeals) in the metals and minerals category and identifying which of these are associated with critical minerals. We defined critical minerals as all the nonfuel critical minerals in either the US Geological Survey Critical Mineral List or the European Union’s list of Critical Raw Materials. Smaller deals in the data set are treated as critical minerals if they are classified, according to the fDi Markets’ taxonomy, by a category that may contain at least some critical minerals (for example, “alumina and aluminum production and processing,” “copper, nickel, lead, and zinc mining,” or “nonferrous metal production and processing”). Note that this approach to smaller deals provides an upper-bound estimate, since some categories may also include noncritical mineral deals, such as projects to manufacture glass. In addition to critical minerals, iron, and steel, the remaining (roughly 10 percent) of greenfield FDI announcements in the metals and minerals category have been for projects including gold mining, quartz and gypsum quarrying and processing, and fertilizer manufacturing. Steel has long been a backbone of manufacturing, since the invention of the Bessemer process in the 1850s enabled its mass production. Today it remains important for advanced applications, from spaceships to scalpels, and also basic manufacturing, such as rebar and railway track. (While we do not focus on the steel sector as part of this chapter, see sidebar “FDI could help forge lower-emissions steel, amid uncertainty,” for more on the specific role FDI could play in the low-emissions segment.)

In the realm of critical minerals, announced greenfield FDI has reached around $50 billion annually since 2022, roughly doubling relative to the period from 2015 to 2019. FDI outflows from China drove the largest share of this increase (over 40 percent), followed by flows among advanced economies (about 30 percent), and those from advanced economies to emerging markets (about 20 percent).

China has held a preeminent position in refining critical minerals for the past two decades. Its firms own the facilities responsible for refining over 90 percent of the world’s rare earth elements, roughly 80 percent of cobalt, 70 percent of lithium, 60 percent of nickel, and 40 percent of copper.³²“Global Critical Minerals Outlook 2025,” International Energy Agency, May 2025. Correspondingly, Chinese enterprises have long been the largest foreign investors in critical minerals, accounting for about one-quarter of the total of announced FDI over the past decade.

Since 2022, FDI investments in critical minerals announced by Chinese firms have increased and broadened both geographically and geopolitically. Deals have averaged $16 billion annually—three times the average for 2015 to 2019.³³Greenfield FDI only gives a partial picture of Chinese firms’ activities abroad. Chinese players have also used acquisitions and loans to develop projects and accompanying infrastructure. Examples include buying and financing lithium projects in Zimbabwe and infrastructure loans to support a copper and cobalt project in the Democratic Republic of Congo (DRC). Chinese investment announcements across Latin America, sub-Saharan Africa, and emerging Asia have remained robust. For example, during the past three years, companies have announced roughly $15 billion for mineral-linked projects in Indonesia, mostly related to nickel. The somewhat newer development is that Chinese firms have expanded announced investments into both Europe and North Africa. These include a copper mine in Serbia and battery-related refining and manufacturing projects in Morocco.

At the same time, companies headquartered in advanced economies have stepped up their announced investments. Since 2022, deals averaged about $30 billion a year, up from closer to $15 billion in the prepandemic period. A growing fraction of these has gone toward other advanced economies—35 percent since 2022, compared with only 20 percent between 2015 and 2019. Most such projects targeted Canada and the United States. Some of the largest of these investment announcements relate to processing battery materials, while others span mining lithium to rare-earth processing. These investments were complemented by several notable announced inflows to the United States from emerging economies, including a Middle Eastern investor’s 2025 megadeal that proposes to nearly double US capacity to smelt new aluminum.

At the time of writing, announced critical-minerals projects appear to be progressing. Looking at the largest critical-mineral FDI deals announced since 2022, about half are complete or under construction. Most of the remainder are progressing through feasibility studies or permitting.³⁴Based on a sample of the 20 largest deals in the sector.

The potential impact of FDI projects on global supply is meaningful for some minerals. For example, announced greenfield FDI in copper mining since 2022, if deployed, could represent a production increase of about 10 percent compared with 2022. For lithium, additional production from announced FDI could exceed 30 percent.

Beyond increases in absolute production, some of these projects could signal the first steps of trade flow rewiring. For example, FDI announcements directed at North America suggest some potential for localizing critical-mineral value chains. Domestic capital is complementing such investment in the case of, for example, rare-earth processing.³⁵Jon Emont, “Pentagon to take stake in rare-earth company, challenging China’s control,” The Wall Street Journal, July 10, 2025.

Moreover, FDI announced by advanced Asian, European, and US companies destined for mineral-rich countries may shift trade toward more exports of processed minerals directly to end markets, especially as mineral-rich countries seek to expand domestic value-addition through refining activities. For example, some FDI copper and lithium projects in Latin America explicitly include refining.³⁶See, for example, “BHP to advance $2 billion concentrator optimization at Escondida Mine in Chile,” Reuters, February 25, 2025; Leslie Hook, “Rio Tinto to invest $2.5bn in latest commitment to lithium,” Financial Times, December 12, 2024.

However, the contours of this potential shift remain fuzzy, given uncertainties around the extent to which new refining capacity will materialize, how it will integrate into global value chains, and how it may interact with the evolution of China’s own refining capacities. Chinese companies have, for instance, announced their own substantial investments in lithium projects in Latin America.

Reconfiguring leading-edge semiconductor production, especially by boosting US capacity

The future global economy will run on leading-edge semiconductors, the most advanced chips produced today.³⁷Leading-edge semiconductors include logic chips with process nodes seven nanometers or smaller, as defined by industry-standard naming conventions. These chips first entered mass production in 2018. Potential applications range across generative AI, robotics, defense, and many other sectors. A large language model can require hundreds of thousands of these chips.³⁸Christiaan Hetzner, “Elon Musk’s just fired up Colossus,” Fortune, September 3, 2024.

Amid escalating geopolitical tension, companies and countries are seeking to diversify production away from Taiwan and South Korea and build capability closer to home. Correspondingly, associated greenfield FDI announcements have been reconfiguring—that is, increasing in value but decreasing in geopolitical distance. Since 2022, FDI announcements into semiconductors have reached $115 billion per year, a fivefold increase from the 2015-to-2019 period. Strikingly, half of this amount was focused on building new leading-edge facilities, which didn’t feature in the previous round of foreign investments.³⁹The specific estimate for the value directed at leading-edge nodes is based on analysis of FDI announcements by manufacturers of leading-edge semiconductors.

Until recently, production of leading-edge chips was heavily concentrated in Taiwan and South Korea. In 2022, these economies were home to about 65 and 25 percent, respectively, of global leading-edge capacity.⁴⁰Leading-edge semiconductor production capacities and forecasts are from the McKinsey Semiconductor Supply and Demand Model. Geographic concentration can create significant vulnerabilities. For instance, export controls have recently been applied to semiconductor-related raw materials and manufacturing machinery, as well as the chips themselves, especially those at the leading edge. In fact, some researchers have found that export controls target the semiconductor value chain most.⁴¹Christopher Clayton, Antonio Coppola, Matteo Maggiori, and Jesse Schreger, “Geoeconomic pressure,” National Bureau of Economic Research (NBER) working paper 34020, July 2025

However, building capacity for the production of leading-edge semiconductors at scale is, to put it mildly, neither easy nor cheap. A single fab can cost $10 billion or more. They are incredibly complex and precise; less than a handful of companies globally have the capabilities to develop them.

Against this backdrop, FDI has emerged as an engine that could expand capacity globally. In fact, if all announced FDI projects were realized, they could add the equivalent of almost 60 percent of total global leading-edge capacity in 2022. FDI could add five times the existing capacity outside Taiwan and South Korea, dramatically expanding the footprint of the industry. Europe, Japan, and the United States’ combined share of global leading-edge semiconductor production capacity could increase from about 10 percent in 2022 to more than 30 percent in 2030, with more than half of that increase driven by FDI projects.

By some estimates, the United States could become the second-largest producer of leading-edge chips by the early 2030s, home to more than 20 percent of global capacity, thanks to investments from TSMC and Samsung, the leading players from Taiwan and South Korea (Exhibit 12).⁴²Leading-edge semiconductor production capacities and forecasts are from the McKinsey Semiconductor Supply and Demand Model. Estimates for 2030 are based on public announcements regarding new and existing manufacturing facilities, and others have made similar estimates. For more, see “US to hold over 20% of advanced semiconductor capacity by 2030,” TrendForce, March 5, 2025; “The CHIPS Program Office vision for success: Two years later,” National Institute of Standards and Technology, January 10, 2025. This additional capacity could reduce US reliance on foreign sources for leading-edge chips. However, absent major shifts in other steps of the semiconductor value chain, overseas dependencies could persist. These include, for example, US reliance on imports for some semiconductor manufacturing equipment and for many raw materials and chemicals used in manufacturing, as well as dependence on overseas capacity to assemble, package, and test semiconductors.⁴³See, for example, “Semiconductors have a big opportunity—but barriers to scale remain,” McKinsey, April 21, 2025; Chris Musso, Guttorm Aase, Mark Patel, and Lige Sun, “Creating a thriving chemical semiconductor supply chain in America,” McKinsey, March 25, 2025.

Europe’s (primarily Ireland’s) and Japan’s shares may grow too but would likely remain in the single digits, as only a few projects have been announced.

As announced FDI in advanced economies increased, the value of announced semiconductor-related investment in China dropped about 80 percent during the period since 2022, compared with 2015 to 2019, when China was the destination of most flows. This loss of FDI could lead to difficulty or delay in scaling leading-edge chip production, due in part to reduced inflows of know-how from leading global players combined with more limited access to advanced semiconductor manufacturing equipment.

Early signs of FDI’s impact in advanced economies are already visible. At TSMC’s site in Arizona, one facility started high-volume production of leading-edge chips in late 2024. A second has completed structural building, and a third is under construction. In Europe, FDI-driven projects have already led to leading-edge chip production in Ireland, with additional FDI announced to scale production, including even more advanced nodes. Of the 20 largest megadeals announced globally since 2022, two are already online, and a further ten are under construction. Of the eight remaining megadeals that have not yet broken ground, five were announced in 2025.⁴⁴These five megadeals relate to TSMC’s ongoing investments in Arizona, which are recorded as distinct projects.

In addition to leading-edge semiconductors, FDI also plays a role in the production of mature and advanced chips. These chips have important applications in, for example, cars, appliances, and industrial equipment. In Japan and Germany, FDI has helped scale their production. Construction is also underway on megadeal-driven projects in India; one of these could be the first to develop semiconductor production capacity in the country.

The success of FDI-driven projects in building leading-edge semiconductor capabilities is not guaranteed. Developing new and competitive leading-edge manufacturing centers outside Taiwan and South Korea is a formidable endeavor, especially without the same ecosystem of value chain partners and talent. Moreover, projects in newly seeded hubs may face different regulatory or environmental requirements, as well as potential challenges in accessing utilities and infrastructure. Accessing low-cost electricity may be difficult, especially in Europe. Indeed, economic concerns loom large: Operating expenses of semiconductor manufacturing facilities may be 30 percent higher in Europe and the United States than in Taiwan.⁴⁵“Semiconductors have a big opportunity—but barriers to scale remain,” McKinsey, April 21, 2025.

Reconfiguring EV and battery production networks beyond China

China currently is by far the largest manufacturer of batteries, which are fast becoming critical components of the global economy—powering not only EVs but also consumer electronics, robotics, drones, and energy storage for homes and electric grids. Greenfield FDI announcements are reconfiguring as multinationals in advanced economies boost investment and redirect attention away from China to geopolitically closer partners and as MNCs from China expand into other economies.

Today, China accounts for more than 80 percent of active material processing and global battery manufacturing capacity and an even larger share, about 90 percent, of lithium-iron-phosphate (LFP) cells, a newer, rapidly growing battery technology. EV assembly is only marginally more dispersed, with China home to roughly 70 percent of global capacity.⁴⁶McKinsey Battery Insights.

Now FDI is beginning to drive reconfiguration to a more geographically diverse battery production footprint. Annual announced greenfield FDI in EVs and battery production since 2022 has totaled $110 billion per year, corresponding to a 40 percent increase in annual investment versus the 2015-to-2019 period. Nearly all of this has flowed to economies outside China. If fully realized, these projects could more than quadruple capacity outside of China, almost doubling global battery capacity (all compared with 2022 levels).

European economies and the United States are the primary recipients of announced investments in automotive and batteries, attracting about 50 percent of total FDI announcements since 2022. While these regions have homegrown businesses attempting to scale domestically, FDI projects may provide important capabilities and could account for most of the capacity growth in these regions.

In the case of the United States, which accounted for roughly 30 percent of total announced inflows, about half of investment has come from leading Japanese and South Korean players in automotive assembly and batteries, with the remainder mostly coming from Europe. Leading Chinese companies made up less than 10 percent of the total.

Europe has a distinct dynamic. Chinese firms, including EV producers and battery makers, have emerged as the largest prospective investors, accounting for about $10 billion in yearly announcements since 2022, with about 55 percent of announced FDI coming into the region from partners outside of Europe. Projects by leading Chinese battery manufacturers in Germany, Hungary, Portugal, and Spain include some of Europe’s largest planned gigafactories, most of which could produce LFP cells, while projects by EV makers include new assembly lines in Slovakia and Spain. Announced investment from non-European advanced economies was limited, accounting for about 30 percent of the total. At the same time, European companies have intensified cross-border investments within the region, representing roughly $12 billion in yearly announcements since 2022.

China’s investment footprint goes beyond Europe. In fact, Chinese players are set to become the biggest investors in emerging economies around the globe. In Morocco and Vietnam, they have announced battery projects, and in Malaysia, Mexico, Saudi Arabia, and Türkiye, they have announced large EV assembly projects (Exhibit 13).

As Chinese players continue to invest abroad, their ownership of global capacity could remain at around 75 to 80 percent.⁴⁷McKinsey Battery Insights; Teo Lombardo, Leonardo Paoli, Araceli Fernandez Pales, and Timur Gül, “The battery industry has entered a new phase,” IEA, March 5, 2025. Since China also continues to invest heavily domestically to preserve its industry leadership, the majority of this capacity is expected to remain domestic, equivalent to roughly two-thirds of the global total.⁴⁸McKinsey Battery Insights.

Some emerging economies have also attracted investments from MNCs based in advanced Asia. India has secured battery and EV assembly investments from Japanese and South Korean firms, and Indonesia also has drawn South Korean investment, primarily for battery production.

About half of the projects announced since 2022 are currently under construction. A first wave of FDI-driven gigafactories is now operational in Europe and the United States, with more expected online by 2026. For example, a leading Chinese manufacturer is developing two gigafactories, one in Hungary slated to begin production in 2025 and one in Spain with a targeted opening in 2026. Together, just these two projects could add 150 gigawatt-hours of battery manufacturing capacity, roughly the amount of capacity Europe had in 2022. In the United States, two gigafactories, one developed by Panasonic and the other by a Hyundai–SK On joint venture, are scheduled to open by the end of 2025 and could add more than 60 gigawatt-hours of capacity, increasing the country’s total from approximately 100 gigawatt-hours in 2022.

Nonetheless, some FDI announcements face a bumpy road. Recent shifts in US trade and energy policy have affected planned investments in Mexico and Canada, placing several projects on hold. Furthermore, ongoing restrictions on trade with China pose supply chain challenges for advanced Asian battery makers establishing US facilities, because Chinese suppliers provide key inputs. Elsewhere, questions remain about the ability of other countries to compete effectively with China’s battery production scale and cost efficiency advantages.

Energy investments may reconfigure LNG corridors

Energy, one of the biggest and most global industries, has been shaped by FDI projects since its inception. Today, major trade arteries crisscross the world, running from fossil fuel exporters like Russia and Saudi Arabia to major importers, especially advanced Asian economies, China, India, and Europe. The United States has the distinction of being both a large importer and exporter.

Today the energy system is being reevaluated. Concerns about energy security have intensified, following disruptions to historically important flows, from Russia’s invasion of Ukraine and other geopolitical events.⁴⁹“An affordable, reliable, competitive path to net zero,” McKinsey, November 30, 2023; “War in Ukraine: Twelve disruptions changing the world—update,” McKinsey, July 28, 2023. At the same time, many companies and countries have been attempting to transition to lower-emissions energy. And increasingly countries are focusing on energy as a driver of national competitiveness, from powering AI to ensuring low-cost energy for manufacturing.

Large-scale readjustment will take money and time, and the exact contours of the end state are far from clear. To give a sense of scale, existing global capacity for fossil fuel extraction is more than seven times larger than what the current trajectory of investment might add, and 20 times bigger than what FDI since 2022 could. In the case of renewables, energy generation capacity has been growing quickly, but more than 95 percent of expected growth up to 2030 could come from domestic projects.

That said, today’s announced FDI has potential to play a decisive role in a few areas. It might lead to meaningful capacity increase in the fast-growing LNG segment. This is the most flexible way of trading natural gas across large distances, thus enabling countries without their own supplies to buy from more geopolitically aligned partners. Second, some see low-emissions hydrogen as a potential energy carrier, and announced FDI could increase its production 100-fold from today’s negligible base, but these projects are the most uncertain of any industry we examined. In this context, greenfield FDI announcements are reconfiguring: Amounts are growing while at the same time shifting to more geopolitically aligned partners. Overall, total values have grown by 60 percent to about $430 billion since 2022.

Limited overall impact on upstream extraction of oil and gas

The aggregate impact on global oil and gas volumes of all FDI projects since 2022 could be no more than 5 percent of current production. That said, announced new upstream extraction projects, accounting for about $50 billion per year since 2022, could open up new routes for fossil fuel trade, leading to a relatively bigger change for a few producing countries. Since 2022, almost half of oil and gas extraction greenfield FDI (excluding LNG projects) targeted Latin America, mostly driven by new offshore projects in Brazil and Guyana. That’s up from less than 15 percent on average since the 2010s. Countries buying from these exporters might see diversification benefits with the potential to reduce reliance on corridors running from MENA countries, which generally have to traverse the Strait of Hormuz or the Suez Canal.

These projects look likely to happen. Despite long lead times, roughly 80 percent of the largest oil and gas projects announced since 2022 are under construction—the highest rate among sectors we examined—and many are slated to come online within two to three years.

Potential for meaningful growth of liquefied natural gas

Announced FDI does have the potential to reshape one subsector of fossil fuels: liquefied natural gas. Historically, pipelines have accounted for most cross-border movements of gas, but with increased demand in new markets, LNG’s role grew to become the main form of interregional trade since the turn of the decade. Russia’s invasion of Ukraine and subsequent severing of most pipeline flows to Europe further raised the strategic importance of and demand for LNG since 2022.⁵⁰Eric Heymann and Lennart Zwingenberger, Structural changes in global gas markets in 20 charts, Deutsche Bank, July 3, 2024.

Since then, LNG-related FDI projects, which totaled over $35 billion per year, could add as much as 25 percent additional capacity relative to what existed, equivalent to more than half of all the projected expansion by 2030.⁵¹The total value of LNG announcements includes both liquefaction projects and combined extraction and liquefaction projects. Projects have scaled up capacity at existing exporters, including Qatar’s North Field and a liquefaction hub in Louisiana, but they could also seed a whole new source of supply from Latin America, including projects in Argentina’s Vaca Muerta basin and on Mexico’s Pacific coast (Exhibit 14). These projects could help to diversify Europe’s imports away from Russian gas and open additional Pacific routes from the Americas to Japan and South Korea, reducing exposure to shipping bottlenecks and other sensitive chokepoints, as well as serving demand from new markets.

Limited impact on renewables

FDI in renewable power generation has reached about $170 billion per year since 2022—similar to the amount flowing into data centers. However, the potential impact on already-large existing capacity would be negligible; in this domain, capacity continues to be developed domestically.

Offshore wind, with its larger and more complex projects, is the potential exception.⁵²World energy investment 2018, International Energy Agency, 2018; Angel McCoy et al., Offshore wind market report: 2024 edition, National Renewable Energy Laboratory, August 2024. If realized, announcements since 2022, making up about $50 billion per year, could as much as triple current capacity. The majority of such projects have been announced for the North Sea, in Europe, mostly by European investors.⁵³Assuming two-thirds of wind projects are offshore, based on an analysis of the top 50 projects representing 60 percent of announced wind investment. However, while about 30 percent have started, many face delays or cancellations.

Potential for growth in hydrogen but with high uncertainty

Low-emissions hydrogen holds potential as a fuel (or input) for industry, transport, and power. Still, it faces important physical challenges, and associated FDI projects are attempting to essentially build a new industry from scratch.⁵⁴Hydrogen and its derivatives, including ammonia and methanol, are mature industries. However, today they rely on fossil-fuel-intensive processes of production. The discussion of this section refers to projects that aim to create hydrogen without resorting to fossil fuels, instead using water electrolysis, and then using that hydrogen for the production of ammonia, methanol, or other derivatives. This section does not cover other low-emissions processes of producing hydrogen, including those using carbon capture combined with existing steam methane reforming (SMR) facilities. See “The hard stuff: Navigating the physical realities of the energy transition,” McKinsey Global Institute, August 2024. The track record is limited, and price tags run into billions (and sometimes tens of billions) of dollars, since projects generally require building large solar or wind projects in addition to the actual electrolytic hydrogen production. Still, appetite has been high. For exporters in MENA and Australia, hydrogen could be a future export if the fossil fuel trade declines; for importers pursuing decarbonization (especially European ones), it could act as a new, lower-emissions supply option.

Announced greenfield FDI in hydrogen has surged from negligible levels during the period from 2015 to 2019 to roughly $160 billion per year since 2022—strikingly, about 50 percent more than all conventional-energy FDI. Most deals tended to be struck between closer partners, including within Europe, within MENA, or within advanced Asia (Exhibit 15).

If fully realized, these projects could increase global low-emissions hydrogen capacity by multiple orders of magnitude compared to its currently very limited base, opening new low-emissions fuel trade routes from MENA to Europe or from Australia to East Asia. However, hydrogen projects face substantial uncertainties regarding scalability and economic viability. In fact, hydrogen stands out as the only subsector examined in which none of the largest 20 announced projects have begun construction. Globally, only about 10 percent of announced hydrogen projects in the European Union and United States have reached a final investment decision, raising doubts about the likelihood that many announced plans will fully materialize.⁵⁵“The energy transition: Where are we, really?,” McKinsey, August 27, 2024.

Trends in FDI will have a major impact on future-shaping industries setting the course for the global economy. In the next section we examine how these trends will affect key economic regions.

For more than a century, FDI has spurred economic growth and export competitiveness—from foreign investment in copper in Chile in the early 1900s to manufacturing in China in the 2000s (see sidebar “Greenfield FDI can unlock export growth under the right conditions”).⁵⁶James R. Markusen and Anthony J. Venables, “Foreign direct investment as a catalyst for industrial development,” European Economic Review, February 1999, Volume 43, Number 2; Yan Liu, “Does foreign direct investment catalyze local structural transformation and human capital accumulation? Evidence from China,” World Bank policy research working paper 9952, March 2022.

Greenfield FDI can unlock export growth under the right conditions

FDI announcements represent company plans to build new or expand existing facilities—for example, constructing new semiconductor fabs or expanding existing mines. In principle, FDI can be an important engine of growth, both directly and via spillover effects that make domestic firms more competitive.¹Christine Zhenwei Qiang, Yan Liu, and Victor Steenbergen, An Investment Perspective on Global Value Chains, World Bank, May 2021; Holger Görg and David Greenaway, “Much ado about nothing? Do domestic firms really benefit from foreign direct investment?” World Bank Research Observer, September 2004.

Do the countries that receive more FDI manage to boost their exports? The short answer is a qualified yes. FDI can help, but other conditions need to be in place, too. Those conditions include sufficient human capital and infrastructure, a way to integrate into global value chains, and meaningful subsequent domestic investment.

Our analysis looked at more than 900 country–sector pairings over a 20-year period, starting in 2003. In about 65 percent of cases, an economy’s share of global exports in a sector increased when it received an outsize share of greenfield FDI announcements relative to its share of global GDP (exhibit).²Our analysis looks at more than 900 economy–sector pairings over the 2003 to 2023 period. We conducted a parallel analysis using greenfield FDI announcements and production rather than exports, based on gross output data. While this approach yielded a smaller sample, the pattern held: In about 65 percent of cases, an economy’s share of global production in a sector increased when its share of greenfield FDI announcements in that sector exceeded its share of global GDP. An example illustrates the calculation: If, within a sector, an economy received 10 percent of greenfield FDI announcements by value while its GDP accounted for just 1 percent of global GDP, it got more than its proportional share of FDI.

Looking at case studies across our sample, we find that the three conditions mentioned above are typically in place for the 65 percent of cases where an economy grows export share after receiving outsize FDI—consistent with the broad existing literature on this topic. First, an economy receiving FDI becomes integrated into global value chains by making upstream or downstream linkages with other countries.³Joshua Aizenman, “FDI and trade—two-way linkages?” The Quarterly Review of Economics and Finance, July 2006, Volume 46, Number 3; World investment report 2001: Promoting linkages, UN Conference on Trade and Development, 2001. Second, an economy has adequate human capital, infrastructure, and regulatory frameworks to absorb incoming technology, skills, and knowledge generated by spillover effects.⁴Christine Zhenwei Qiang, Yan Liu, and Victor Steenbergen, An Investment Perspective on Global Value Chains, World Bank, May 2021. Finally, FDI spurs domestic investment. In economies that see export growth on the back of FDI, domestic investment also surges after FDI provides the initial seeds.⁵E. Borensztein, J. De Gregorio, and J.-W. Lee, “How does foreign direct investment affect economic growth?” Journal of International Economics, June 1998, Volume 45, Number 1.

For instance, the Czech Republic, Hungary, Poland, and Slovakia benefited from an initial wave of FDI that seeded further sustained domestic investment, together translating into a boost in the countries’ productive capacity and export share during the early 2000s.⁶Petr Pavlínek, Bolesław Domański, and Robert Guzik, “Industrial upgrading through foreign direct investment in Central European automotive manufacturing,” European Urban and Regional Studies, January 2009, Volume 16, Number 1. These economies capitalized on their accessibility to EU markets, competitive labor costs, and improved infrastructure.

Similarly, FDI in Vietnam’s textile sector spiked during the mid-2000s, attracted by the country’s proximity to major regional Asian supply chains, competitive labor costs, and a range of new trade agreements. That FDI resulted in modernized production techniques, increased productivity, and integration into multinational supply chains, which encouraged substantial domestic investment and significantly increased Vietnam’s share of global textile exports.⁷Chapter 12 of Fukunari Kimura, ed., Viet Nam 2045: Development issues and challenges, Economic Research Institute for ASEAN and East Asia (ERIA), November 2023.

A scatterplot bubble chart illustrates the relationship between the prevalence of greenfield FDI announcements and changes in export share from 2003 to 2023. The chart is divided into four quadrants, with the x axis representing the ratio of announced greenfield FDI share relative to GDP share, and the y axis representing the change in export share relative to GDP share. The size of each bubble corresponds to the export share of the economy in a particular sector. The chart reveals that 65 percent of cases with outsized FDI experienced export share growth. Notably, sectors with more than a fair share of FDI tend to have higher export share growth, as indicated by the blue bubbles concentrated in the top-right quadrant. Examples of such sectors include Vietnam's textiles and electronics industries, Qatar’s energy resources and Slovakia's transport equipment sector.

Will the new wave of greenfield FDI projects provide fresh opportunities? Since 2022, advanced economies attracted more investment—mostly from one another. China’s share has plunged. Emerging economies present a nuanced picture. The absolute value of announcements has gone up in recent years, but the share of the total has declined (Exhibit 16). Moreover, about half of these economies’ total population lives in countries where greenfield FDI announcements since 2022 have been lower on average, relative to GDP, than they were in 2015 to 2019.

The year 2025 brought more uncertainty. In the first five months of the year, new FDI announcements in emerging economies dropped by half, in annualized terms, versus the 2022-to-2024 period, with this trend playing out similarly across these types of economies.

An area chart and two accompanying donut charts illustrate the growth of greenfield Foreign Direct Investment (FDI) announcements (inflows) from 2015 to May 2025, categorized by economic development stage. The area chart shows the distribution of FDI inflows across advanced economies, emerging economies, and Mainland China and Hong Kong SAR. The trends were clearly different before and after COVID. Pre-COVID (2015–19), advanced economies received 42 percent of FDI; emerging economies 49 percent, and Mainland China and Hong Kong SAR 9 percent, totaling $1.1 trillion. Post-COVID (2022-May 2025), advanced economies' share increased to 53 percent, emerging economies decreased to 44 percent, and Mainland China and Hong Kong SAR further declined to 3 percent, with a total of $1.4 trillion. The bar charts on the right highlight the dollar value changes, showing advanced economies' FDI rising from $477 billion pre-COVID to $752 billion post-COVID, while Mainland China and Hong Kong SAR's FDI dropped from $108 billion to $38 billion.

The US is attracting more FDI than Europe or advanced Asia

While most advanced economies have experienced growing inflows of announced FDI, the United States stands out. Its announced annual inflows have roughly doubled compared with the prepandemic period, and amounts going to future-shaping industries have increased by even more (Exhibit 17). Japan, South Korea, and Taiwan were the primary contributors, announcing many investments aimed at semiconductors and EVs—the bedrock of advanced Asia’s existing technological strength and the target of incentives in the United States’ CHIPS Act and Inflation Reduction Act.⁵⁷“The CHIPS and Science Act: Here’s what’s in it,” McKinsey, October 4, 2022; “The Inflation Reduction Act: Here’s what’s in it,” McKinsey, October 24, 2022.

Europe experienced more modest growth through the two periods studied—around 40 percent across the United Kingdom and European Union. Not counting in-region flows, Europe’s FDI attraction relative to the United States has dropped to just 70 percent since 2022 after being roughly equal in 2015 to 2019.⁵⁸About half of intra-European flows since 2022 were energy related. About 30 percent of total intra-European flows since 2022 corresponded to flows between the EU and the United Kingdom (in either direction). Note that for the United Kingdom alone, FDI attraction relative to the United States dropped to 18 percent since 2022, down from roughly 37 percent in the 2015 to 2019 period. For the European Union, corresponding numbers were 58 percent and 75 percent. The only major European economy for which these ratios went up was France, where the ratio grew to 14 percent from 9 percent, largely due to a significant data center FDI announcement. A big reason was that, unlike North American economies, Europe did not attract substantial investment from firms in advanced Asia. Nonetheless, Europe did see some growth engines, particularly data centers. Investments from Chinese companies were another. Since 2022, such investments have totaled about $20 billion per year—60 percent higher than during the prepandemic period and more than double the amount that Chinese firms directed to the United States. This growth was driven by EV and battery projects in Hungary, Slovakia, Spain, and Portugal.

Advanced Asia’s announced inflows grew at roughly the same pace as Europe’s, so the region also lost ground to the United States. Since 2022, announcements were about half of US totals, down from 75 percent in the previous period. Resource projects made up about 70 percent of the growth, primarily from advanced economies looking to tap into Australia’s renewable energy potential and mineral endowments.⁵⁹Two-thirds of the remainder came from in-region semiconductor manufacturing projects, running from Taiwan to Japan and Singapore. Announced data center build-outs in South Korea and Japan also contributed.

Over the past decade, European and advanced Asian firms have announced about double the outbound FDI that their respective regions have received.⁶⁰Europe’s figure excludes intra-European flows. In advanced Asia, this asymmetry is particularly strong in advanced manufacturing, which makes up about half of all the region’s outbound flows: For every dollar of FDI inflows announced for advanced Asia, the region’s companies have announced around $6 flowing abroad.

The United States and Canada were boosted most by advanced Asian partners’ FDI announcements.

Drilling down by sector, announced FDI into data center projects—the largest component of the communications and software category—drove many regions’ inflow gains. Meanwhile, FDI into advanced manufacturing favored the United States and Canada as a regional destination.

Exhibit 17

A two-step stacked bar chart compares greenfield FDI announcement of inflows by region for various economies in 2015–19 and 2022-May 2025. The chart is divided into advanced economies and emerging economies. The first part shows the inflow by region source. For advanced economies, the United States and Canada saw an 89 percent increase in FDI inflows, from $141 billion to $267 billion. A large part of the growth came from Advanced Asia. Europe also experienced a 43 percent increase (45 percent excluding intra-Europe announcements). Advanced Asia saw a 46 percent increase. For emerging economies, Emerging Asia saw an 11 percent decline, while Middle East and North Africa experienced a 49 percent increase. Latin America saw a 25 percent rise, and Sub-Saharan Africa had a 19 percent increase. Mainland China and Hong Kong SAR, however, saw a significant 65 percent decline, from $108 billion to $38 billion.

The second part of the exhibit shows inflows to each economy by sector. In the United States and Canada, advanced manufacturing drove most FDI growth.

In the first five months of 2025, the disparity between the United States and other advanced economies widened further. Announced FDI into the United States more than doubled, in annualized terms, relative to the 2022-to-2024 period, with gains in all sectors except EVs and basic manufacturing. With this surge, the United States received more than twice as much announced FDI as it was investing across borders—in other words, its announced FDI inflows-to-outflows ratio was more than 2:1, compared with approximately 1:1 between 2022 and 2024 and about 1:2 during the prepandemic period. Strikingly, about half of this early-2025 surge in FDI to the United States reflects $100 billion worth of announcements from a single company, TSMC. If similarly significant announcements are not made in the second half of the year, annualized projections based on the first half of this year would be overstated.

Europe saw a 65 percent increase (excluding intraregional flows)—small only by comparison to the jump in the United States. But this growth was entirely for data center projects, while almost every other sector declined. FDI flows into advanced Asia stayed roughly flat, again with broad-based declines and just a few significant increases, notably for data centers in South Korea and semiconductors in Singapore.⁶¹Basic manufacturing, the exception, remained flat.

China has pivoted in future-shaping industries from net investee to net investor

Geopolitical tensions and heightened domestic competition have dramatically reduced announcements of foreign investment in China. Compared with 2015 to 2019, announced greenfield FDI inflows have declined about two-thirds across nearly all sectors and partners since 2022, a decline that has continued in 2025. Advanced Asian economies in particular have shifted investment away from China and toward the United States.

Yet China has not vanished from the FDI landscape. As in the past decade, China has continued to be the leading investor in metals and minerals. What’s new is that, since 2022, it has pivoted from being the largest investee to the largest investor in automotive and electronics, making up about 25 percent of total outbound announced investments for both.

Emerging Asia has remained the main destination for announced Chinese investment over the past decade, largely aimed at integrating those economies into Chinese value chains. However, most of the recent increase in outbound Chinese investment announcements was destined for two regions, Europe and MENA, both of which experienced announced inflows rising by about 70 percent for the period since 2022 versus 2015 to 2019. Chinese investment in Europe was primarily driven by EV-related projects aimed at accessing the market, followed by mineral and metals deals. Chinese FDI announced for MENA, particularly Saudi Arabia and Egypt, was diversified across multiple industries, including batteries, semiconductors, steelmaking, and energy.

FDI is expanding emerging Asia’s presence in future-shaping industries

Historically, emerging Asia has attracted roughly half of all FDI announcements flowing into emerging economies. In the period since 2022, announced FDI inflows into emerging Asia have fallen 10 percent from the elevated baseline of the 2015-to-2019 period.

Two distinct patterns emerge beneath the slight decline. First, greenfield FDI announced for fossil fuels and conventional industries, especially real estate and construction, fell by more than half. As a result, some FDI mainstays, most notably Vietnam and Indonesia, have seen FDI announcements fall as a portion of GDP since 2022 (Exhibit 18).

At the same time, inflows destined for future-shaping industries nearly doubled as MNCs looked to diversify the base of their supply chains. India and Malaysia have been noteworthy beneficiaries. Together, they account for over 60 percent of announced inflows in future-shaping industries across emerging Asia. Notable examples include FDI projects aimed at kickstarting India’s semiconductor ecosystem and boosting Malaysia’s EV supply chain. Vietnam and Indonesia also attracted some meaningful inflows, including solar panel production in Vietnam and critical metals processing in Indonesia.

Amid the uncertainty of 2025, this pattern stalled in its first five months. Total FDI announcements are on track to drop to their lowest levels in more than two decades, a 40 percent decline from the annual average between 2022 and 2024. Nearly all sectors have been hit; even advanced manufacturing fell by one-third, returning to the pre-COVID-19 baseline. Data centers and semiconductors are points of light. In annualized terms, FDI announcements into data centers are still growing slightly and are on pace to surpass $40 billion by year-end, twice the level of 2015 to 2019. Semiconductor-related FDI announcements are up tenfold since the prepandemic period, at $17 billion annualized.

A bubble chart illustrates the change in announced greenfield Foreign Direct Investment (FDI) inflows as a share of each economy's GDP from 2022 to May 2025 compared to 2015–19. The size of the bubbles represents the annual average value of announced greenfield FDI inflows from 2022 to May 2025. The chart is divided into advanced economies and emerging economies, with the latter showing larger swings in greenfield FDI, often driven by energy. Advanced economies generally have diversified gains, with the United States has the largest bubble, indicating a significant annual average value of FDI inflows. In contrast, emerging economies such as Vietnam, and Malaysia display notable changes. Some experienced substantial increases or decreases in FDI inflows as a share of GDP.

Latin America, the Middle East, and Africa attracted primarily energy-related FDI

Latin America, the Middle East, and Africa have historically attracted disproportionate cross-border investment in energy, compared with other regions. This has intensified since 2022. In each region, energy projects accounted for more than 80 percent of the growth in announced FDI relative to the level for 2015 to 2019. In Latin America, FDI announcements in fossil fuels drove the step up, while in MENA and sub-Saharan Africa, the increase came overwhelmingly from announcements of investment in low-emissions hydrogen.

Across both low-emissions and conventional energy, announced investment came mostly from European and Middle Eastern firms, often with an eye to creating more energy security for European and Asian markets. As examples, some strategically positioned conventional energy projects in Argentina, Guyana, and Mexico could bypass vulnerable shipping routes like the Suez Canal and Strait of Hormuz. Substantial LNG projects in Qatar could provide Europe with additional alternatives to Russian gas and may supply some Asian markets, including China. Finally, some of the largest project announcements (none yet under construction) are low-emissions hydrogen in Egypt, Jordan, Mauritania, Morocco, and Tunisia that aim in part to supply European energy needs.

While energy was the major driver of FDI announcement growth for MENA and Latin America, a wider swath of sectors also received growing inflow between 2022 and 2024 in both regions. For example, annual announcements of inflows into communications and software and advanced manufacturing grew by 74 percent in MENA and 23 percent in Latin America, compared with their pre-COVID-19 baseline.

Increases were even more pronounced in some countries. For example, Saudi Arabia and the United Arab Emirates attracted substantial and more diversified FDI by tapping investors across the geopolitical spectrum. These countries secured pledges for resources and data centers from investors in advanced and emerging economies and from Chinese MNCs in steel, semiconductors, and other advanced manufacturing industries. To give a sense of the scale, increases in announced FDI into future-shaping industries rose 562 percent in Saudi Arabia and 124 percent in the UAE between the 2015-to-2019 and 2022-to-2024 periods. However, fewer than five of the 20 largest projects announced in the region had broken ground at the time of writing.

In the first five months of 2025, FDI announcements declined substantially in Latin America, the Middle East, and Africa. On an annualized basis, almost 40 percent of the reduction is due to lower hydrogen-related investments. Nonetheless, given the inherent volatility of FDI and the particular uncertainty of 2025, it remains to be seen whether this drop will persist.

The transformative potential of FDI can hinge on a few key investors

Many emerging economies rely on just a small number of MNCs for their inward investment. Specifically, in about 100 predominantly small economies, three or fewer investors accounted for more than half of announced FDI inflows since 2022. In about 65 economies, they accounted for more than 80 percent (Exhibit 19).

In other words, while just a few large greenfield FDI announcements may transform an economy when things are going well, growth could just as easily be hindered if the project runs into problems or if the MNC isn’t fully committed to it.

Nor is this dynamic limited to small economies. Even in many large and midsize economies, three MNCs accounted for between 20 and 50 percent of the total annual value across FDI announcements since 2022. In the United States, for instance, TSMC and Samsung accounted for about 20 percent and 4 percent, respectively, of total announced investment. Similarly, France’s two largest foreign investors, both focused on data centers, represented roughly 40 percent of the country’s total announced greenfield FDI.

A world map illustrates the largest three investing companies' share of total announced greenfield FDI inflows from 2022 to May 2025. The countries are shown in different colors according to the percentage share: light blue for less than 20 percent, blue for 20–50 percent, dark blue for 50–80 percent, and navy blue for more than 80 percent. The map highlights that many countries, particularly in Central and South America, Africa, Middle East and South Asia, have a significant share of FDI inflows concentrated among the top three investing companies, with some countries having more than 80 percent of their FDI inflows from just three companies. The map also notes that about 100 mainly small economies have over half of their investment coming from three companies or fewer.

The stakes have rarely been higher for decision-makers. Heightened geopolitical tensions, fast growth of a new set of future-shaping industries, and evolving industrial policies are fundamentally changing the environment for cross-border investment. Companies need to move fast enough to retain a stake in the industries of the future while maintaining flexibility, engage in ever-growing deal sizes without breaking the bank, and navigate a fresh set of incentives brought about by new “nonmarket” factors.⁶²“Restricted: How export controls are reshaping markets,” McKinsey, April 3, 2025; Christopher Clayton, Antonio Coppola, Matteo Maggiori, and Jesse Schreger, “Geoeconomic pressure,” NBER working paper 34020, July 2025.

In this rapidly shifting environment, announced FDI can offer strategic foresight, indicating how industries, trade routes, and national competitiveness factors may evolve. In weighing their next moves, executives and policymakers can take note of the clues that FDI yields—both cross-industry patterns and data at the granular deal level.

Anticipating and cultivating the ecosystem of new projects

As the aphorism goes, when others dig for gold, sell shovels. Greenfield FDI announcements spotlight the places where new capacity will come online, reshaping supply-and-demand dynamics across multiple industries.

Consider semiconductor manufacturing. Announcements of major projects in locations like Arizona or Leixlip, Ireland, signal opportunities for adjacent companies such as toolmakers and chemical suppliers. It doesn’t stop there but continues through the value chain, reaching the suppliers of suppliers, and so on. Indeed, the success of such megaprojects hinges on a broad ecosystem.

The impact of new hubs extends beyond sectoral boundaries, influencing infrastructure, logistics, and business services. This can be seen, for example, in the knock-on economic and employment effects of new data centers in the United States, which have been found to spur growth in a host of other industries.⁶³“The data center balance: How US states can navigate the opportunities and challenges,” McKinsey, August 8, 2025. Companies can anticipate needs that include grid access, connections with shipping hubs, maintenance, and servicing support for the new facilities themselves and their suppliers. Redrawn industrial footprints also increase demand for housing, hospitality, and food services. Of course, some of this may be part of preplanning in original deals, but opportunities will remain.

While FDI expands the frontier of new industries, history teaches that growth needs nurturing and cultivation. Targeted policies can help. Areas of attention include accelerating complementary domestic investment, upgrading infrastructure, enhancing workforce skills, and strengthening local industry ecosystems.

Preparing for shifting trade corridors

The global flows of goods and services that connect countries may be shifting. McKinsey Global Institute’s analysis suggests that more than 30 percent of global trade in 2035 could swing from one trade corridor to another, depending on the scenario.⁶⁴“A new trade paradigm: How shifts in trade corridors could affect business,” McKinsey, June 18, 2025.

FDI announcements provide important early signals. Tracking investment-driven trends can help companies plan infrastructure and capacity ahead of shifts in trade volume, offering a valuable early advantage.

At a macro level, investment patterns point to the strengthening or weakening of economic relationships between specific regions or countries, helping companies and policymakers anticipate which scenarios are becoming more probable. For instance, recent increased FDI flows from advanced Asian economies to the United States, together with their concurrent retreat from investing in China, align with scenarios of fragmentation in which advanced economies and China reduce their mutual economic exposure.

At a more granular level, FDI announcements also highlight specific corridors that may experience accelerated growth, making them proportionately safer bets for stakeholders such as logistics providers and shipping companies or for firms providing payments and trade finance. For example, companies in Japan and South Korea have announced new, large projects in India’s automotive sector for EV assembly and battery manufacturing. This could further integrate India into value chains in advanced Asia, increasing flows of goods such as components between India and its trading partners in Japan and South Korea.

Responding to the new map of competition

FDI announcements offer a detailed, strategic map of how and where different players plan to invest, allowing decision-makers to anticipate changes in the competitive landscape. FDI today can indicate where future capacity might outstrip future demand, depending on a company’s beliefs about the latter. Even today, some industries such as steel manufacturing are grappling with overcapacity, and some observers are warning of future EV manufacturing overcapacity.⁶⁵“Surging excess capacity threatens steel market stability, employment, and decarbonisation plans,” OECD press release, May 27, 2025; “China says solar sector needs to curb overcapacity,” Reuters, August 19, 2025; Colin McKerracher, “China already makes as many batteries as the entire world wants,” Bloomberg, April 12, 2024; Anthony Potter, Jesse Tijerina, and Melissa Manning, Top five petrochemical trends for 2024, S&P Global Commodity Insights, 2023.

Many companies already track their direct competitors. For example, think of incumbent automakers tracking manufacturing expansion plans of upstarts, or consider hyperscalers analyzing where competitors are expanding their data center footprint. But beyond gaining a competitive edge, this map is also important for potential partners. For instance, renewable energy developers in emerging markets can identify global firms actively seeking local collaborations, while European automakers may spot battery manufacturers that haven’t yet entered their region, representing possible joint venture opportunities.

For financial-sector players, mapping which companies are investing and where may reveal a range of opportunities. Examples include new assets needing project finance and derisking, fresh prospects for banks and insurers, new sources for commodities traders, and even broader asset-class, boom-and-slowdown dynamics for principal investors. Finally, policymakers can also leverage these maps to pinpoint companies that may be scouting for a new location in their region, potentially leading to economic partnerships.

Anticipating which economies will see new waves of growth

FDI announcements provide a powerful early signal about which economies may become more competitive directly from the investments themselves and indirectly via potential spillovers that stimulate upstream or downstream development. In the most pronounced examples, a handful of large FDI projects could shape the fortunes of smaller economies. For example, large energy deals in Guyana and Mauritania, if successfully realized, could fundamentally alter their economic prospects by serving as anchor projects for their economies. Of course, such success is not guaranteed, and FDI signals need to be calibrated with important preconditions to catalyze growth.

FDI can also signal change even in larger economies. For example, Saudi Arabia and Thailand have recently attracted projects across a diversified set of industries, from data centers to electronics and automotive. This inflow of FDI could spur significant new activity among local suppliers of components, tools, and materials. Similarly, economies drawing substantial power generation investments, such as Brazil or Morocco, could experience downstream competitiveness gains through cheaper and more reliable energy supplies.

Foreign direct investment has a long history of identifying, nurturing, and propelling leading-edge industries. The global firms of today are already responding to geopolitical changes and technological advancements, potentially shifting future trade patterns. Greenfield FDI announcements serve as a bellwether of where global economic ties may form or fray and how the geometry of global trade may evolve. Business leaders and policymakers can incorporate such insight to better navigate an uncertain time.

This report, The FDI shake-up: How foreign direct investment today may shape industry and trade tomorrow, is the latest publication in MGI’s ongoing research on global interconnections.