Market Analysis

Foreign companies announced record-breaking levels of new investment in Germany last year despite the economic downturn and high energy prices, according to an analysis published on Tuesday by the federal development agency, Germany Trade and Invest (GTAI).

In 2023, commitments for new establishments and expansions reached €34.8 billion ($37.53 billion), surpassing the previous record of €25.3 billion in 2022 by more than a third. "The level of investment has increased noticeably," Achim Hartig, managing director of GTAI, told Reuters.

Major Projects

Eight projects had investments in the billions. The largest is by the Taiwanese semiconductor group TSMC, which plans to invest €10 billion in a new plant in Dresden.

The U.S. chip company Wolfspeed intends to spend €3 billion on a plant in Saarland. Apple plans to significantly expand its European center for chip design in Munich, with a €1 billion investment.

In other sectors, the U.S. pharmaceutical company Eli Lilly is investing around €2.3 billion in a new plant in Alzey, Rhineland-Palatinate, while BP is planning to invest up to €6.8 billion in two wind farms in the North Sea.

Additionally, three data centers in Berlin, Wustermark in Brandenburg, and Hanau in Hesse are each set to exceed the €1 billion investment mark.

Increased Investment, Fewer Projects

A total of 1,759 projects were announced last year, which includes new establishments and expansions but excludes takeovers and mergers, according to GTAI statistics. This represents a 1% decrease, or 24 projects, compared to 2022.

"Globally, foreign direct investment fell by 2.6%, in Europe by 7.4%, and in Western Europe by 8.8%," said Hartig. "So we are gaining market share."

Approximately two-thirds of the projects are related to transformation technologies, such as batteries, green energy, or digitalization.

"We need these to make Germany climate-neutral by 2035," Hartig said, adding that the availability of renewable energy is a significant advantage in attracting such companies despite high taxes and electricity costs.

Top 3 Investors

The U.S. remained the largest foreign investor in Germany last year with 235 projects. However, this is a 16% decrease from 2022, attributed to the strong support provided by the multi-billion dollar Inflation Reduction Act (IRA) subsidy program, according to GTAI expert Thomas Bozoyan.

"This has made domestic investment in the U.S. more attractive," Bozoyan said.

Switzerland ranked second with 202 projects, followed closely by China. With 200 projects, China achieved its highest figure since 2017, driven by post-coronavirus catch-up effects.

($1 = €0.9272)

Paraphrasing text from "Reuters" all rights reserved by the original author.