86 M C K I N S EY Q UA RT E R LY FDI Shake-Up - - - - - - - This additional capacity could reduce US reli ance on foreign sources for leading-edge chips. However, some overseas dependencies will remain in place until the United States also boosts domes tic capabilities for semiconductor-manufacturing equipment and other raw material and chemical inputs. The United States also retains some depen dence on foreign capacity to assemble, package, and test semiconductors. At a global level, if all announced leading-edge- fab FDI projects were realized, they could add five times the existing capacity outside Taiwan and South Korea. That would dramatically expand the footprint of the industry. Together with the United States, Europe’s (primarily Ireland’s) and Japan’s shares would grow, too. That said, their shares will likely remain in the single digits, as only a few proj ects have been announced. This is a massive change from the pre-COVID-19 years when China was the destination for most semiconductor-related FDI announcements. Announcement value has dropped about 80 per cent during the period since 2022, compared with the 2015-to-2019 period. While China has more than commensurately ramped up domestic investment in the industry, it has so far trailed in leading-edge capabilities. The loss of FDI could lead to difficulty or delay in scaling leading-edge chip production. This is due in part to reduced inflows of know-how from leading global players combined with limited access to advanced semi conductor-manufacturing equipment. Building capacity to produce 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. Fewer than a handful of companies globally have the capabilities to develop them. Developing new and cost-competitive leading-edge manufactur ing centers outside Taiwan and South Korea is a formidable endeavor, especially without their ecosystems of value chain partners and talent. - - - - - - - AI INFRASTRUCTURE: INVESTMENT SURGED GLOBALLY Growing AI adoption and related workloads are fuel ing demand for data centers to host and process data across the world. And this build-out influences trade routes for chips and high-tech electronic compo nents as well as affecting other sectors. FDI projects also could create new opportunities to offer digital services and could unleash larger flows of data while enabling more localization of sensitive data. Addi tionally, data centers’ massive power needs have prompted new energy projects nearby. Today, China and the United States together account for more than half of global data center capacity. In these economies, domestic investment drives most of the capacity expansion. But FDI could become the main engine of data center capacity everywhere else in the world. 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. Shifts are occur ring since localizing data centers in the places they serve is often important for various commercial and regulatory reasons. All told, since 2022, FDI announcements dedicated to data centers have totaled more than $170 billion annually, doubling the average level of investment announced in the 2015-to-2019 period, with about 90 percent of that total headed to economies other than the United States and China. US firms, including hyperscalers such as Ama zon 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. In addition, investors from Middle Eastern economies announced some of the largest data center projects ever in France and the United States in early 2025, contributing to the expanding geopolitical distances of recent FDI announcements (Exhibit 3). The impact of recent FDI announcements could soon become apparent, as the majority of the 20 largest projects announced since 2022 are already under construction. Most of the remaining projects, often even larger, were announced in the first half of 2025. These could bring multigigawatt cam puses 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. Execution also depends on supporting regulatory frameworks and agree ments that facilitate transfer of intellectual property, chips, and data. These projects will also require massive amounts of power. At a global