For global semiconductor strategists, the finding that digital adoption is reshaping manufacturing in China signals a shift in competitive dynamics—where service-led upgrading may become a new determinant of supply chain leverage.
A new study published in The World Economy reveals that Chinese manufacturing firms—including those in advanced sectors—are increasingly integrating services into their core production activities, a process known as servicification. The research, which draws on highly disaggregated firm-product level data, demonstrates that the adoption of digital technologies is the primary driver behind this structural transformation. Chinese scientists have found that firms embracing digitalization not only generate more service outputs but also achieve significantly higher productivity and profitability.
This finding carries particular weight for the global chip manufacturing ecosystem. As China’s semiconductor fabs and advanced packaging facilities digitize their operations, the boundary between what is “manufacturing” and what is “service” is dissolving. The study shows that digital adoption encourages firms to either complement traditional manufacturing activities with services or substitute products entirely with service offerings. For an industry where foundries increasingly offer design services, testing, and logistics as bundled offerings, this trend underscores a strategic evolution already underway among Chinese players. The researchers also observed through sentiment analysis that only firms with a positive strategic attitude toward digitalization expanded their service outputs—suggesting that intent and corporate strategy are as crucial as technological capability.
Why it matters:
For international chip suppliers, investors, and technology partners, this research reveals that China’s manufacturing competitiveness is being redefined not merely by better fabs or lower costs, but by how deeply digital services are woven into production. Firms that master this service-led upgrading are likely to gain disproportionate influence in global value chains, making it essential for foreign stakeholders to monitor the digital maturity of their Chinese counterparts.
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