Policymakers and economists alike had high expectations for inward U.S. foreign direct investment (FDI) in 2023. Big-ticket legislation, such as the CHIPS and Science Act, the Inflation Reduction Act (IRA), and the Bipartisan Infrastructure Investment and Jobs Act were expected to renew interest in inward FDI. However, at least by the end of 2023, we have yet to see these effects. According to new data from the U.S. Bureau of Economic Analysis (BEA), FDI has been on the decline for the past decade, with the past two years representing one of the most dramatic disinvestments from the United States in years (figure 1). Since 2021, new FDI has fallen by 61 percent, from $354 billion to $136 billion. This past year alone, FDI fell by 28 percent.[1]

Figure 1: Foreign Direct Investment in U.S. businesses, 2014-2023

Most FDI is to acquire U.S. companies.  Greenfield investments (investments in the establishment or expansion of foreign business operations in the United States) continue to be the minority of FDI. Both forms can be valuable to the U.S. economy, though greenfield presents extra benefits. Building new plants and factories introduces better opportunities for U.S. competitiveness compared to simply acquiring existing companies.[2]

Nevertheless, FDI in the form of acquisitions still presents added value. Though they do not always create as many jobs as greenfield investments, acquisitions are often more immediately profitable as they involve established companies. Acquisitions also can improve operations and productivity, making for stronger, more valuable businesses.[3]

Figure 2: Share of total foreign investment in U.S. businesses, 2014-2023

Proportionally, greenfield investment fared decently in 2023, as shown in figure 2. Though greenfield investments fell by over 5 percent, or $738 million since 2022, acquisitions fell by 29 percent, significantly more. Greenfield investments now make up over eight percent of all FDI to the United States, the greatest share since 2007, when 11 percent of all FDI consisted of greenfield investment. Data from 2023 shows greenfield investments totaled $12.4 billion, down from $13.1 billion in 2022. Table 1 displays the breakup of greenfield investments over the past two years.

Table 1: Greenfield investment in U.S. businesses, 2022-2023

Over the past decade, there have been few trends in absolute greenfield investment. Since 2014, total greenfield expenditure has decreased from almost $18 billion to just $12.4 billion, with mid-decade lows hitting just $5.4 billion, or 0.03% of GDP, in 2019. As shown in figure 3, investments in new establishments are most to blame for this haphazard pattern. There have been large jumps in new establishment investments over the decade, with as much as $14.2 billion being invested in new greenfield FDI in 2014, and as little as $2.6 billion invested in 2020.

Figure 3: Greenfield expenditures, 2014-2023

Notably, in 2023 investments in new establishments increased, continuing a trend that has been apparent for the past several years. While total greenfield has fluctuated wildly, investment in new establishments has increased by 182 percent from 2020 to the present. Drawing investments for new businesses and jobs, specifically in manufacturing, has been the goal of the CHIPS Act and IRA.

For the second year in a row, the expectations for inward FDI in 2024 are high (Figure 3). The BEA is predicting $27 billion in new greenfield investment, an increase of 119 percent over one year. This lofty forecast comes after experts predicted greenfield investment to hit $24 billion in 2023, two-times the $12 billion actually invested. News of major investments by foreign companies supports the BEA’s claim of record foreign direct investments in the United States this year. In April 2024, Taiwan Semiconductor Manufacturing Company (TSMC), pledged another $6.6 billion[4] to build a third semiconductor fabrication plant in Phoenix, Arizona. This announcement brings the total pledged FDI by TSMC to $65 billion. Additionally, in May of 2024, Absolics, a subsidiary of South Korean company SKC, announced $75 million in investment to build a new semiconductor packaging facility in Covington, Georgia.[5]

The Inflation Reduction Act has also spurred new investment in the American clean energy sector. Vietnamese solar company Boviet Solar has announced the construction of a $294 million solar manufacturing plant in North Carolina, their first North American headquarters. Japanese car giant Toyota has also stated it will spend $1.4 billion on producing new, electric SUVs in an Indiana plant.[6]

Despite the disappointing year for FDI in the United States, there is reason to be hopeful. Though greenfield investments did not live up to the expectations of last year, updates surrounding business deals spurred by the CHIPS Act and the IRA give reason to believe that we will see a large increase in investments in semiconductors, clean energy, and related industries soon.  

Endnotes