Three Technology Trends CXOs Need To Know About For Global Expansion In 2024

Vice President, Technology Portfolio at IDA Ireland . A domestic backdrop of export controls, workforce shortages, economic ambiguity and a tighter domestic monetary policy to combat inflation has created a less than ideal operating environment for international expansion heading into 2024. Reflecting the impact of these ongoing and overlapping crises, UNCTAD, in its World Investment Report 2023 , indicated a drop of 12% in global foreign direct investment (FDI) in 2022 compared with 2021.

However, overseas markets remain a critical source of revenue for U.S. multinationals. The FactSet Earnings Report of October 2023 puts the level of international revenue (pg. 30) within S&P 500 companies at 41%. For the technology industry, international exposure is greater still at 59% of aggregate revenue.

In September 2023, Bain & Company analysts cited this challenging time as one in which the technology industry is entering its post globalization era. They also called upon technology companies to invest in their resilience by considering their 10 year horizons now when it comes to their global technology value chain and future operational structure.

Nowhere has this been more evident in recent years than within the semiconductor industry. At the same time, governments have sought to encourage semiconductor investment with incentives to generate FDI jobs and shore up their regional economic security in response to shifting geopolitics, as well as to negate potential supply chain disruptions.

As such, Japan, India, the EU and others have followed the U.S. lead on funding mechanisms for this critical technology industry, such as the U.S. CHIPS and Science Act , which was designed to strengthen American semiconductor, R&D, manufacturing and workforce development. Together with the implementation of the Chips Act and other collaborative measures, the EU is broadening its alliances with Asia, including Japan.

This strategic alliance is designed to promote autonomy by bolstering the EU's domestic capabilities and safeguarding against supply chain disruptions. Around the world, chip companies have responded. For example, in July 2023, our client Analog Devices Inc. made significant progress in diversifying its European manufacturing and R&D capabilities investment at their European headquarters in Ireland.

Another client, Intel’s Fab 34 —also in Ireland—began production in September 2023 and, along with existing and planned investment in Germany and Poland, will create a first of its kind, end to end semiconductor value chain in Europe. In another example, Micron is building the largest U.S. semiconductor manufacturing facility at $15 billion.

This effort underscores the ongoing efforts of U.S. based manufacturing companies putting increased focus on advanced chip production. Three Technology Trends To Follow As additional technology sectors seek to follow in 2024, here are three global investment trends technology CXOs should consider when assessing their operations overseas.

The future economy is expected to be underpinned by companies that can make green transitions in today’s operating environment. Technology leaders must be enablers and trailblazers when it comes to this future economic state. Although the call to action from society is clear, the route carries a certain degree of commercial ambiguity and economic risk for companies.

To minimize that risk, governments are introducing new incentives and mobilizing investment capital with greater urgency to promote digital transformation and green transition investments through legislation such as the U.S. Inflation Reduction Act in 2022 and the European Green Deal in 2023. In Europe, the aim is to become the world's first carbon neutral continent by 2050, with the added benefit of localizing supply chains and creating jobs in the EU.

Importantly, the EU intends to support companies' digital first strategies and ensure environmentally sustainable practices are to the fore. It expects this to incent investors to continue to mitigate global risk by redeploying large scale manufacturing capability into locations more geopolitically aligned with the source country.

When assessing strategic manufacturing investment locations in 2024, technology executives should seek to understand a country's appetite to unlock these financing opportunities to drive end to end manufacturing transformation. Human capital above all else is central to any global project in technology.

In the face of major change, the flexibility of a country's labor pool to grow, adapt, reskill and retrain is key to the long term success of a multinational seeking to enhance opportunities for investment and innovation overseas. Although talent availability, attrition rates and labor costs will change over time, stable international talent hubs typically have a high degree of "reinvention" within their talent pool.

They also tend to be supported by investment promotion agencies (IPAs) and economic development organizations that work with national training centers to ensure the latest technology skills—such as in artificial intelligence (AI), cybersecurity and software engineering—are being introduced early to address skill deficits and meet future employer demand.

In 2024, technology leaders are advised to evaluate stable labor markets, not merely based on costs but also by considering established immigration policies. They should aim to identify high levels of cooperation between multinationals in the country and public sector agencies in producing talent pipelines, from STEM graduates to knowledge experts.

Innovation mandates in foreign subsidiaries can be influenced by their trade openness, corporation tax and IP policies, levels of education, access to capital, degrees of partnership and scientific funding opportunities. In 2024, technology leaders assessing new locations should go beyond the evaluation spreadsheet.

Visiting countries displaying a joint approach to innovation with multinationals through stable innovation policy can draw out tacit knowledge and learnings. Conclusion In recent years, the semiconductor sector has been diversifying its geographic footprint and creating more flexibility in talent pools.

And while that continues to evolve, other technology sectors are adopting new location strategies for their own global operations. By taking advantage of new FDI transformation incentives in locations with sophisticated talent hubs that have demonstrated track records for change, and where innovation is a core tenant of public policy, technology leaders can create resiliency and longer term value for their organizations, future proofing their businesses beyond 2024.

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