In the digitalization race, China leads, U.S. accelerates, and Europe lags

The U.S. and China are digitalizing their industries faster than Europe, and both are expanding their lead in using artificial intelligence (AI), digital twins and software-driven manufacturing, according to Industry 4.0 Barometer 2026. Its eighth edition was just published by MHP management and IT consultancy in collaboration with Dr. Johann Kranz, digital services and sustainability professor at Ludwig Maximilians University (LMU) in Munich.

“Our data makes it clear the U.S. is driving the transformation of its production with a strong focus on software and data—just like China. By contrast, the DACH region that includes Germany, Austria and Switzerland has yet to build significant momentum,” says Tobias Hoffmeister, president and CEO of MHP Americas. “While only 3% of companies there are very familiar with software-defined manufacturing (SDM), its share in China and India is 30%, and in the U.S. it’s already 14%. It’s certain that companies that don’t consistently integrate production control, data and software will face increasing pressure.”

More than 1,200 respondents from industrial companies were surveyed for Industry 4.0 Barometer 2026. They were asked to assess Industry 4.0’s status at their companies in the U.S., German-speaking markets in Germany, Austria and Switzerland, the U.K., China and, for the first time, India and Mexico. The study highlights successes, but also reveals gaps in subjects surveyed, including supply-chain transparency, digital-twin technology, AI and SDM.

The survey found that industrial digitalization in all subject areas increased internationally from 48% in 2022 to 66% today. More specifically, China reached 72% (up three percentage points), and U.S. tallied 69% (up three percentage points), while India and Mexico achieved 68%, and 67%, respectively. The two regions that fell behind include DACH that remains stagnant at 57% percent, while U.K. decreased two percentage points to 62 compared to the previous year.

“The degree of digitalization in industry is increasing worldwide, while Europe is also making progress,” says Kranz. “In a comparing countries, however, the U.S. and China are implementing digital production technologies faster, and taking a more integrated and scalable approach than European companies. India and Mexico were analyzed for the first time, and showed better results in some cases.”

Digital twins, AI, SDM assist digitalization

When digital transformations are hampered, Industry 4.0 Barometer reports it’s usually due to technical reasons, such as heterogeneous legacy systems, fragmented data and limited interoperability, which make it difficult to adopt new technologies.

For example, 39% of U.S. companies report data silos are barriers, while 47% blame legacy IT systems. Companies worldwide report similar situations, but this year’s study also shows these classic obstacles are overcome at different rates, especially when digital-twin technology, AI and SDM are involved. It adds that use of digital twins in respondents’ plants and machines has increased from 54% to 62% percent, while in logistics applications, they’ve increased from 61% to 67%, representing the study’s largest jump from an initial 30% in 2022.

Similarly, China leads on using AI in production settings. When asked if they partly or fully employ AI, 71% of Chinese companies report using it, followed by 61% in India, 57% in the U.S., 51% in Mexico, 48% in the U.K., and 37% in the DACH region.

In fact, European companies only report using AI on a pilot basis, and lack deep integration into operations. Meanwhile, 75% of U.S. companies anticipate AI will have significant or groundbreaking impacts over the next five years. The study adds this gap shows that smart algorithms can’t be productive without solid data infrastructures, sensors and digital twins.

Likewise, respondents with a chief information officer (CIO) report they’re familiar with SDM more frequently (33.2%), and add they’re more likely to integrate it into their overall strategy (18.4%). They’re also more likely to invest in SDM (13.8%), though they’re less likely to budget for maintenance (-26.2%). In addition, 30% of respondents in India and China report they’re very familiar with SDM, while 18% in Mexico, 14% in the U.S., 6% in the U.K. and 3% in DACH are familiar with it

Commitment required for expected tumult

Industry 4.0 Barometer adds most respondents expect further upheavals in the next 10 years due to digitalization and software, with 31% firmly believing their industry will undergo fundamental changes, and another 51% considering it likely. In India, for example, 44% of respondents are convinced software is altering their industries, compared to 33% in the U.S., but only 17% in the DACH region.

Because digitalization requires a willingness to invest, 71% of respondents in India report their companies are willing to spend on new digital technologies, Likewise, 65% in Mexico, 59% in the U.S., and just 29% in the DACH region report they’re willing to invest in digitalization.

“Germany, Austria and Switzerland have a strong focus on efficiency and cost optimization, which means potential growth, flexibility and innovation often remains untapped,” explains Prof. Christina Reich of FOM University of Applied Sciences and a manager at MHP. “Emerging markets such as India, China and Mexico are pursuing more differentiated goals. For example, India is focusing on improving quality due to historically competitive positions and global pressures, and aims to meet international standards and open new markets.”

The study adds that international comparison reveals a clear pattern—nations with high investments in software, data platforms and AI are accelerating their industrial transformation, while Europe risks falling behind in digitalizing its digital factories and industries.