The FDI angle

• Incentives for FDI projects reached $60.3bn globally in 2023, up from $58.1bn in 2022.
• Automotive and semiconductor sectors led, with $16.9bn and $14.1bn in support, respectively.

Why it matters: The rise in FDI incentives underscores governments’ growing competition to secure strategic industries. This trend, especially in automotive and semiconductors, highlights key sectors for potential foreign investors.

The value of incentives to foreign direct investment (FDI) projects reached new highs in 2023, as governments around the world put billions of dollars on the table to secure strategic industries, from electric mobility to semiconductors.

The top 10 most-subsidised FDI sectors from 2019 to September 2024 received $60.3bn of incentives during 2023, slightly up from the $58.1bn recorded in 2022, according to fDi Intelligence’s new Global Incentives Report 2024. The report is based on data from IncentivesFlow, which tracks most countries in the Americas, Europe and Asia, as well as a handful of states in the Middle East and Africa. 

The lead sector was automotive original equipment manufacturers (OEM), where foreign investors received support packages of $16.9bn in 2023. This is up from the $6bn of automotive OEM incentives put together in 2022, a year that also represented a significant moment of growth, as the report shows. Another $13bn was handed to producers of electronics components, mostly electric vehicle batteries.

Incentives are a key tool used to spur FDI, as governments offer tax exemptions, subsidies and other inducements to attract overseas companies to their countries.

The US was the top country for providing incentives in 2023, with federal and state authorities handing out $26.8bn in support of international and interstate projects. This figure has already been bettered by the $33.4bn distributed between January and September 2024, though it is a drop off from the $41.3bn announced in 2022.

Canada followed the US in the 2023 country rankings, supporting FDI projects with $17bn in total incentives, an increase of roughly $15bn compared to the incentives offered in 2022. 

The automotive sector largely drove the rise of Canadian incentives. German Volkswagen received $11.34bn for its battery cell gigafactory in St Thomas, Ontario. Northvolt and Dow Chemical were the other companies to receive more than $1bn in incentives from the Canadian government in 2023.

Greig Mordue, formerly a general manager at Toyota Motor Manufacturing Canada and now an associate professor at McMaster University, tells fDi that while “Canada was able to mimic [the US’s Inflation Reduction Act] and secure investments … the emergence of a more knowledge-intensive profile for the Canadian automotive industry is an improbable outcome of these investments.”

Beyond automotives, the sector that attracted the most incentives in 2023 was semiconductors, with microchip companies receiving incentives worth $14.1bn in 2023 for their FDI projects, down from $27.5bn in 2022.

Germany handed out the most incentives to semiconductor companies during 2023, with the average incentive value per semiconductor project between 2010 and 2024 sitting at $1.53bn, compared to $146.64m in the US.

In 2023, the German government approved a €5bn state aid package to support a new fabrication plant by TSMC in Dresden, which ultimately received EU approval in August 2024. The incentives offered will cover roughly half of the $10bn project.

The TSMC package follows on from the $11.4bn designated for Intel in 2022 for a site in Magdeburg. This project has now entered serious difficulties, with the company postponing groundbreaking until at least 2026.

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