Unless India Quickly Scales Foundational Models And Middleware, Even Diversified ‘Hybrid’ Factories Will Drift Into Chinese Software Ecosystems.

December 2025: As Indian producers rely heavily on Chinese technology, the omnipotent question is not whether China will lead Industry 4.0, which it already does, but how this leadership will shape India’s own development, industrial capacity and digital sovereignty. It is noteworthy that China has convincingly taken the lead in Industry 4.0, the next wave of technology that integrates industrial systems like factory automation, robotics, cyber-physical systems, sensors, the internet of things (IoT), 5G and logistics.

While China’s lead seems insurmountable, India has its own strengths in areas such as software, public policy and its experimental “learn first, regulate later” posture. It also leverages open systems, with an assumption to integrate Chinese, Western and domestic technologies. Meanwhile, Industry 4.0 is no longer a forecast; it is a live competition to define the architecture of global manufacturing. At its core lies the convergence of operational technology (OT) with information technology (IT): industrial robots that learn, factories that self-optimise and supply chains orchestrated in real time by industrial internet platforms.

China is pioneering smart and “dark” factories in the production of electronics and electric vehicles. Fully automated plants operate 24/7, using AI-driven precision to manufacture goods without human intervention. Having taken the lead in Industry 4.0 technologies, China is now trying for a giant leap from the “factory of the world” to the “platform architect” of global industry. It aims to define standards for how machines communicate, how data flow, how security operates and how factories interconnect.

The contours of the brave new world are already visible. Mobile phone maker Xiaomi built a fully autonomous smartphone factory capable of producing a smartphone every three seconds. The entire manufacturing process, from assembly to testing, is handled by AI-driven machines.

The tech giant Foxconn, known for producing Apple devices, has implemented dark factory production lines that operate without human intervention, significantly boosting efficiency and cutting costs.

Similarly, China’s electric vehicle and semiconductor manufacturers are investing billions in fully automated factories to meet the growing global demand for high-tech products.

While the investments are massive, labour cost savings in true dark factories are 80-to-92% regarding direct production labour. Xiaomi’s Changping plant publicly claims 91% reduction. These reductions will gradually eliminate the cost advantage of so-called low-labour countries.

Setting standards for Industry 4.0 technologies is a key battleground. In 2024-25, Chinese entities submitted nearly 34% of the top global standards proposals at international standards bodies. Standards are not merely technical conventions. They determine who controls the architecture of an entire industrial ecosystem.

On the other side; India cannot industrialise without automation. Labour productivity in critical sectors is estimated at one-fifth of China’s level, and only about 15% of Indian companies have adopted basic automation, compared with around 60% in China. Without robotics and digital production systems, India’s labour intensive export model will not remain competitive.

Despite the “decoupling” attempt, India’s electronics system design and manufacturing (ESDM) ecosystem remains critically reliant on Chinese components. The Foxconn’s Sri City and Chennai plants, which assemble iPhones under the PLI (production-linked incentive) scheme, source most of their bill-of-materials from the same mainland supply chain that serves factories in Zhengzhou.

The picture is not simply rivalry. Even during geopolitical tensions, collaboration flows continue. BYD, now the world’s largest maker of electric cars, partners with India’s Olectra Greentech (Electric Buses) using BYD’s technology.

India’s top electric bus maker Tata Motors is among the major Indian EV players that rely heavily on Chinese technology, especially for key components like lithium-ion battery cells, power electronics, motors and software. China dominates the global EV supply chain.

Similarly, Indian factories often use the “Made in India” label, but the “brains” of the machines are usually Chinese. Indian mobile phone manufacturers heavily rely on importing components, displays, processors, camera modules and semiconductors from China. Roughly 70% of electronics imported into India in 2024 originated from China. There are also hidden software interdependencies: Indian AI firms quietly integrate Chinese computer-vision modules. Pharmaceutical automation hubs in Hyderabad and Pune import Chinese machine-tool components via Singapore. Rivalry between the two countries sits atop deep industrial interdependence.

Both China and India have identified Industry 4.0 as essential to future economic growth. But the two countries pursue fundamentally different policy philosophies. When, China treats Industry 4.0 as a national strategic project tied to industrial upgrading; India treats it primarily as a development opportunity aimed at productivity, inclusion and participation in global value chains.

India’s strategy is more decentralised, incentive-driven and openness-oriented. Instead of picking national champions, the government uses fiscal incentives to lure domestic and foreign companies into local manufacturing and R&D. The governance style is deliberately light-touch: regulatory sandboxes, voluntary rather than mandatory standards and heavy emphasis on digital public goods.

The underlying bet is that India’s software talent and iterative, market-friendly regulation will eventually let it dominate the intelligence layer of Industry 4.0 (AI optimisation, predictive maintenance, cybersecurity) even as it continues to import much of the hardware. Moreover, India is leveraging its existing open public platforms for Industry 4.0 applications. Aadhaar, India’s national digital identity system, behaves like a digital infrastructure that anyone can build on. Aadhaar provides instant authentication for everything from verifying suppliers to securing access to industrial platforms.

UPI, India’s real-time mobile payment system, is being extended beyond retail payments into supply-chain payments, machine-to-machine transactions, and even IoT-linked billing. UPI enables companies to integrate real-time financial flows into manufacturing systems, rather than relying on slow banking processes. Both, Aadhaar and UPI are open public platforms, not proprietary systems. Because they are interoperable building blocks rather than closed commercial products, they behave like “digital infrastructure” to be built upon by anyone, startups, state agencies, manufacturers, logistics entities, global suppliers.

Since Artificial Intelligence (AI) will be the “operating system” of Industry 4.0. China is aggressively developing proprietary foundational models such as Baidu’s ERNIE and Alibaba’s Qwen. These models are integrated directly into the industrial ecosystems. Chinese traits remain in vertical integration: sensors + hardware + industrial software + foundational models, all controlled domestically. This creates a unified “closed loop” that scales across manufacturing. Its industrial AI packages are cheaper, more tightly integrated, and battle-tested at a scale no other country can match.

Chinese sensors, controllers, and machine-vision modules still power the majority of low- to mid-range automation projects in Indian factories. When cost and speed matter most, a “Shenzhen stack” is often the default choice, even if it arrives via intermediaries in Singapore or Vietnam; whereas: India lacks deep industrial infrastructure, but it has world-class software talent. Its strategy is not to dominate hardware but to specialize in foundation-model fine-tuning, domain-specific AI services, and open-platform integration.

Moreover, India is actively hedging against Chinese technological dominance. New factories have deliberately diversified their supplier base by bringing in Siemens, Rockwell and Japanese robotics firms rather than depending solely on Chinese platforms. Many of the most advanced facilities, such as Foxconn’s Tamil Nadu complex or Tata’s emerging semiconductor lines, already operate hybrid stacks: Chinese actuators and machine-vision hardware at the physical layer, with Western or Indian middleware and AI systems on top. Crucially, the intelligence layer, where value is now migrating, is increasingly developed by Indian engineers using open standards and domestically trained models.

India’s light-touch, sandbox-driven regulation explicitly favours multi-vendor, interoperable systems rather than the closed ecosystems China prefers. Chinese companies will continue to supply the cheap iron and silicon, but India is determined to own the software, the data flows, alongwith the final orchestration.

Team Maverick.