The Real Opportunity for China's Industrial Software: Not Replacement, but a Lane Change

The real opportunity for China's industrial software may not be copying foreign software all over again.

Why is that?

Over the past six years, Chinese manufacturing's understanding of industrial software has undergone a massive shift.

Six years ago, Huawei's EDA cut-off made the entire industry realise for the first time:

Industrial software is not ordinary software – it can directly determine whether an entire industrial chain can operate.

So in recent years, everyone has been talking about domestic substitution.

But here comes the problem.

Six years on, why do we still feel that core industrial software remains difficult?

On one side is the "chokepoint."

On the other side, manufacturing enterprises themselves say:

"Domestic software isn't unusable – it's that I simply can't afford it and can't use it well."

This is the most noteworthy contradiction in China's industrial software today.

For example, a manufacturing enterprise with annual revenue of 80 million yuan spent 2 million on an MES.

The software's features may be very comprehensive.

Production, quality, equipment, warehousing, reporting… it has everything.

But three years later, only 30% of the features may actually be in use.

The boss finally discovers:

It's not that the software is bad – it's that the enterprise simply cannot digest it.

Why?

Because software is only the first step.

Behind it are data governance, process mapping, system implementation, personnel training, and ongoing operations.

And for the vast number of small and medium-sized manufacturers, what is truly scarce is not software.

It is the ability to put software to use.

So you will find that China's industrial software used to face the first question:

"Does it exist?"

Now it is entering the second question:

"Can it be afforded and used?"

And these two questions actually reflect two completely different industrial logics.

In the past, industrial software competed on features.

Whose modules were more numerous, whose parameters were more complex, whose functions were more comprehensive.

But today, SMEs are increasingly unwilling to buy into this.

Because what manufacturing enterprises truly need is not software that "can do everything."

Rather, it is:

"I have a problem today – can you let me start using it tomorrow?"

This means a very important shift is occurring in China's industrial software:

The core of competition is shifting from "software feature competition" to "software usage threshold competition."

01Where Is the Opportunity for a Lane Change?

This is also where China's industrial software may truly have a "lane change" opportunity.

The advantages foreign industrial software has accumulated over decades are, of course, difficult to replicate in the short term.

Especially in high-end R&D and design fields such as CAD, CAE, and EDA, where technical barriers, industry know-how, and ecosystem accumulation run very deep.

But look at it from another angle.

China has the world's largest manufacturing sector.

And within China's manufacturing sector, there are vast numbers of SMEs.

Their needs may not be that complex.

They do not need a massive system worth millions, taking years to implement and requiring dozens of people to train.

What they may need is simply:

A device data collection tool.

A simple production schedule.

A quality analysis assistant.

An AI that understands their own factory knowledge.

Or even, a boss asking one question:

"Why did the yield rate of this batch suddenly drop today?"

And the system can directly tell them:

It may be caused jointly by Machine No. 3, the material batch replaced yesterday, and the recently adjusted process parameters.

At this point, the form of industrial software begins to change.

It is no longer necessarily the old "big platform, big project, big implementation."

Instead, it may become:

Small product + AI + Industry knowledge + Rapid deployment.

This is highly consistent with the "small, fast, light, precise" digitalisation approach that has been gaining increasing attention recently.

02Redefining the Way Enterprises "Use Industrial Software"

So what truly deserves attention in China's industrial software going forward is not necessarily:

who can completely replace foreign software.

Rather, it is:

who can redefine the way manufacturing enterprises "use industrial software."

From the past:

Buy software — Do implementation — Build systems — Train people.

To:

Use on demand — Deploy quickly — AI-assisted — Continuously iterate.

In the future, enterprises may no longer even care whether they are buying MES, ERP, or some other industrial software.

The boss cares about only one thing:

"Can you help me solve this problem?"

If yes.

The software has value.

If not.

No matter how many features it has, it is ultimately just an expensive "digital decoration."

03AI May Be the Biggest Variable on This New Track

So the next round of competition in China's industrial software is not just domestic substitution.

The real competition is:

whether industrial software can be transformed from a "heavy asset system" affordable only by a few large enterprises into a production tool that tens of thousands of SMEs can truly use.

The former is catching up.

The latter may be the lane change.

And AI may be the biggest variable on this new track.

Because AI is gradually turning the most expensive parts of industrial software – implementation, configuration, training, and knowledge accumulation – into things that can be completed with machine assistance.

This may be the true next opportunity for China's industrial software.