top of page

FDI: The 2021 Investment Matrix - Chip Crunch Reshapes FDI Landscape

Chip crunch reshapes FDI landscape as the sun sets on oil and gas

Unprecedented levels of investment in new chip-production capacity redrew the investment matrix in 2021, with oil and gas dropping from the top 10 recipient sectors of foreign direct investment (FDI) for the first time since record-keeping began in 2003.

Semiconductor producers set their most ambitious investment plans ever in motion last year, chasing the once-in-a-lifetime opportunity that is the global chip crunch. This crunch has affected industries across the board, figures from foreign investment monitor fDi Markets show.

After months of speculation, Samsung Electronics announced the biggest FDI project of 2021 in November when it unveiled a $17bn investment into a new fabrication plant (fab) in Taylor, Texas. Taiwanese TSMC and US Intel also had a busy year as they announced a $7.05bn project in Japan and a $7bn project in Malaysia, respectively. Overall, greenfield FDI into the semiconductor sector reached $56.6bn in 2021 — its highest level ever and a 271.3% spike from 2020, according to fDi Markets figures.

Data from the first weeks of 2022 have suggested the investment wave in the sector is still mounting. Intel has committed $20bn to building a fab in Ohio — the biggest single investment project the US state has ever attracted — and TSMC has earmarked $44bn to boost manufacturing capacity in 2022 alone.

Only the renewable energy sector and the communications sector attracted more FDI than semiconductors in 2021, fDi Markets figures show. The renewable energy sector confirmed itself as the biggest recipient sector of FDI for the third year in a row as the pandemic accelerated the energy transition. Overall, the sector attracted $80bn in FDI last year, marking an 8% decrease from 2020, but still consistent with the supercycle that started in 2019.

While solar and wind remain the most sought-after green power technologies, 2021 was the year of hydrogen. Foreign investors announced more than 100 projects worth $29.7bn in the production of green hydrogen and other related activities. Currently, however, there are no commercial green hydrogen plants up and running, and it will take several years for most of these projects to come to fruition.

The communications sectors racked up $64.4bn of FDI in 2021, according to fDi Markets. The digital boom paved the way for Amazon, Huawei, Cloudfare and Alphabet, among others, to announce major investment projects in cloud infrastructure throughout the year.

Investment figures outlined a mixed picture for the automotive industry in 2021, confirming that the transition to electric vehicles (EVs) is a delicate zero-sum game. On one hand, investment into new capacity for EV batteries stood at $8.9bn in 2021, which was down from $12bn a year earlier, but still on very high levels historically. On the other hand, investment by automotive original equipment producers fell from $20.2bn in 2020 to a new record low of $19.4bn in 2021.

Investment flows in the oil and gas industry have dried up further as energy and transport move away from fossil fuel usage. The sector mobilised just $16.2bn in FDI in 2021, plummeting further from the already record low of $47.6bn in 2020. For the first time since fDi Markets started collecting data, the sector does not feature among the top 10 largest recipient sectors of FDI. Investment in liquified natural gas capacity was no exception, despite the market bottlenecks that led to the gap price hikes of the past months.

The investment cycle has remained grim for the hotels and tourism sector too, which mobilised a new record low of $8bn in FDI in 2021, down from $14.6bn in 2020, fDi Markets figures show.

23 views0 comments


bottom of page