China is shaping the factory of the future, India is racing ahead with digital transformation, and Europe is struggling to catch up. While established IT and OT environments, along with fragmented data structures, continue to hold back progress in Europe, China is pulling ahead especially in supply chain transparency, digital twins, automation, and AI.
India, Mexico, and the U.S. are also moving faster on modernization compared to companies in the DACH region (Germany, Austria, Switzerland) and the United Kingdom.
These insights come from the Industry 4.0 Barometer 2026, released by management and IT consultancy MHP in collaboration with Prof. Dr. Johann Kranz from Ludwig Maximilians University (LMU) Munich.
“India is driving the software and data-led transformation of industrial production with remarkable momentum at par with China and backed by a clear strategic vision,” said Bernd Otto Hörmann, CEO of MHP India Pvt Ltd – A Porsche Company, headquartered in Bengaluru. “Around 30 percent of Indian companies are already familiar with Software-Defined Manufacturing, compared with just 3 percent in the DACH region. The message is clear companies that don’t strategically integrate production control, data, and software risk losing global relevance.”
More than 1,200 industrial decision-makers participated in the study, assessing the state of Industry 4.0 in their respective markets across Germany, Austria, Switzerland, the UK, the U.S., China, India (featured for the first time), and Mexico.
The research of Industry 4.0 Barometer 2026 examined progress in key areas including supply chain transparency, digital twin technology, AI, and Software-Defined Manufacturing (SDM).
Global digitization surges to 66 percent
Worldwide, industrial digitization continues to accelerate. The global barometer score has jumped from 48 percent in 2022 to 66 percent this year.
China leads with 72 percent, followed by the U.S. at 69 percent, India at 68 percent, and Mexico at 67 percent. In contrast, the DACH region has stalled at 57 percent, and the UK has slipped to 62 percent.
“The level of digitalization is rising globally, and Europe is part of that upward trend,” said Dr. Johann Kranz, Professor of Digital Services and Sustainability at LMU Munich. “However, when we look at speed and scalability, the U.S. and China are clearly outpacing European players. Newly added countries like India and Mexico are also delivering strong performances, in some areas even surpassing Europe.”
Barriers to transformation
The biggest obstacles to digital transformation remain technical: fragmented legacy IT systems, siloed data, and poor interoperability.
In India, 68 percent of companies cite data silos as a key barrier, while 62 percent point to outdated IT infrastructure, a pattern mirrored globally. Still, some regions are overcoming these issues faster, particularly when it comes to digital twin technology, AI, and SDM.
Digital twins see fastest growth
Among emerging technologies, digital twins are gaining momentum the fastest. Their use in plants and machinery has climbed from 54 to 62 percent, and in logistics from 61 to 67 percent, more than doubling since 2022.
China dominates in this area: 84 percent of its companies now use digital twins in logistics, far ahead of Mexico (74 percent), India (68 percent), the U.S. (61 percent), and the UK (54 percent). The DACH region trails at just 42 percent.
India ranks second after China in AI adoption
China also leads in AI adoption for production, with 71 percent of companies reporting partial or full use. India follows closely at 61 percent, ahead of the U.S. (57 percent), Mexico (51 percent), and the UK (48 percent).
European companies remain more cautious as only 37 percent in the DACH region are using AI, mainly through pilot projects rather than full integration.
Despite this, optimism about AI’s future is growing. In India, 69 percent of companies expect AI to have a “significant” or “groundbreaking” impact within the next five years.
Yet the report highlights an “AI hype gap”, the promise of AI remains unfulfilled without solid data foundations, connected sensors, and digital twin infrastructure.
Software-Defined Manufacturing: India and China lead
Software-Defined Manufacturing (SDM) which decouples production control from physical equipment and introduces a centralized software layer for scalable, flexible production is still emerging but crucial.
The study shows that companies with a CIO in charge of IT/OT integration and data strategy are much more likely to be familiar with SDM and invest strategically in it.
India and China top the charts here, with 30 percent of respondents in both countries showing strong familiarity with SDM. In comparison, only 3 percent in the DACH region and 6 percent in the UK say the same. The U.S. (14 percent) and Mexico (18 percent) fall in between.
India shows the strongest investment appetite
Globally, industrial leaders expect major upheavals over the next decade fueled by digital and software-driven industrial models. In India, 44 percent of respondents firmly believe their sector will be fundamentally transformed compared to just 17 percent in the DACH region.
That conviction is reflected in investment readiness: 71 percent of Indian companies are prepared to commit significant budgets to new digital technologies. Mexico follows at 65 percent, then the U.S. at 59 percent. Europe, again, lags behind, with only 29 percent showing a similar willingness.
As Prof. Christina S. Reich from FOM University and MHP explained, “Germany, Austria, and Switzerland remain highly efficiency-focused. That mindset often limits their capacity for growth and innovation. By contrast, emerging markets like India, China, and Mexico have sharper strategic focus points, India, for example, is prioritizing quality improvements to compete globally and meet international standards.”
Across the board, the pattern is clear: Asia and the U.S. are implementing digital production technologies faster, more broadly, and with greater integration than Europe. While Europe is progressing, it risks losing the next industrial race unless it shifts from cost-optimization to innovation-driven digital transformation.
