China Market Insider Siemens Relies on China for Industrial Artificial Intelligence

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Siemens aims for market leadership with an "operating system for industrial AI." China serves as a central testing ground.

Does Siemens have to go to China or the USA to realize its vision of an "operating system for industrial AI"? At times, it seems so, especially when listening to Roland Busch, the company's CEO.

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Siemens decided to hold its first major "Siemens RXD Summit" in Beijing. More than 2,000 customers and partners gathered there at the end of March to learn firsthand how the company intends to turn industrial AI from a buzzword into real solutions in manufacturing.

"For the practical application of AI, more than just outstanding models are needed," said Roland Busch to this audience in the Chinese capital. "An operating system for industrial AI is required, a technology stack that seamlessly connects data, software, and intelligent hardware." In Beijing, he further stated, "we are showcasing how this system is evolving, through close partnerships and new products."

Siemens aims to become the global supplier of this new "operating system" for the manufacturing industry and has announced investments of one billion euros at home for this purpose. China has six million manufacturing companies being pushed by the Beijing government to quickly adopt AI through an "AI-Plus" master plan.

China has thus become perhaps Siemens' greatest hope for capturing a significant global market share in automation in the AI era with its digital twins and industrial AI models.

Through an expanded partnership with Alibaba, Siemens aims to bring simulation software to the cloud. Manufacturers in China will be able to use Computer-Aided Engineering (CAE) functions as Infrastructure-as-a-Service (IaaS), as Siemens announced in a press release from Beijing. Additionally, 26 new Siemens products have been developed that are specifically tailored to the Chinese market, including programmable logic controllers, compact servo systems, and AI-powered applications for optimizing industrial processes.

The choice of Beijing as the venue for this "Real Meets Digital" or RXD Summit is a "clear signal of how central China has become to Siemens' global AI strategy," wrote "Forrester Research" in an analysis titled "Siemens RXD Summit 2026: Industrial AI Shifts from Models to Systems, and China is the Testing Ground."

A few weeks later, Roland Busch warned at the Hannover Messe that "a large portion of the company's over one billion euros in industrial AI investments" could "flow to the USA," citing "regulatory burdens in Europe" as the reason. This was reported by the news agency Bloomberg on April 20 following an interview with Busch on the sidelines of the trade fair.

"The Siemens AG will prioritize its investments in artificial intelligence in the USA and China if the European Union does not adjust its restrictive regulations," the agency quoted the Siemens executive.

"It is complete nonsense to treat industrial and machine data the same as personal data," said Busch. "I cannot explain to my shareholders why I am investing money in an environment where I am being held back."

"The AI Act and the Data Act of the EU 'miss the mark' as they treat industrial AI like consumer applications and create additional layers of oversight in areas already subject to sector-specific regulations," said Busch.

The contrast between Beijing, where Siemens is welcomed with open arms, and its European home, where one set of regulations follows another and a new technology is already being curtailed before it has even fully arrived in factory halls, has rarely been as stark as this spring.

Siemens is not only expanding its cooperation agreements with the major cloud provider Alibaba in China but has also managed to sign a new partnership agreement with the Beijing International Data Exchange "to jointly build an 'industrial trusted data space,'" reported the Beijing daily "Xinjing Bao."

"We want data to flow across borders, and the Chinese government has at least allowed the possibility for industrial and machine data to cross borders," Roland Busch said according to media reports on the sidelines of the Siemens summit in Beijing.

The government in Beijing makes exceptions for companies like Siemens regarding its restrictions on cross-border data transfers, which are overseen by the top data protection authority, the China Administration of Cybersecurity (CAC). This has slightly reduced a significant hurdle for Siemens' business in the field of industrial AI in China.

"China, with its enormous market volume, well-developed industrial system, and high pace of innovation, has become a central testing ground for the development and application of new technologies as well as an important market for the use of industrial AI," said Cedrik Neike, the CEO of Siemens Digital Industries, in a recent interview with the Chinese People's Daily.

At the Hannover Messe, Roland Busch finally received support from Federal Chancellor Friedrich Merz regarding the overregulation of industrial AI in Brussels.

"I will advocate for easing European AI regulation and, if possible, removing industrial AI from the currently overly restrictive framework of the European Union's AI regulation," said Merz in his opening speech for the fair.

Merz also intervened directly in Brussels. Following Siemens' threat to shift its billion-euro investment to the USA, as well as efforts by the German Federal Chancellor and other lobbying initiatives by European companies, there was at least some movement in the bureaucratic stronghold of Brussels.

On the night of May 7, the negotiators of the EU Council Presidency and the European Parliament reached a "provisional agreement" to "streamline" certain AI regulations so that they would not bring additional restrictions for many applications in mechanical engineering. After all, there is already the Machinery Products Regulation, it was suddenly noted.

The EU Parliament and the EU Commission still need to formally approve this. Meanwhile, strict rules remain in place for eleven other AI application areas.

What lies behind this bureaucratic jargon is a very serious question, which the portal "Euronews" phrased as follows: "Can Europe retain its industrial champions in the AI era?"

Siemens hopes to export automation products to the world from China. In the USA, subsidies and a dynamic market for data centers are enticing, as the incumbent President Donald Trump has embraced "Make America Great Again." Siemens also aims to supply components for data centers.

However, the regulatory zeal of EU bureaucrats is only one of the problems Siemens faces in realizing its ambitious vision. Equally significant is the reluctance of many companies to disclose their industrial process data. This is unfortunately no different in China than in other parts of the world.

On the sidelines of Siemens' major AI summit in Beijing, Roland Busch stated that some Chinese partners were hesitant to share real factory data needed for training and fine-tuning industrial AI models.

This hesitation exists not only in China. Industrial AI is only meaningful if it can be used in connection with well-structured, real data from production. Without such datasets, the large language models (LLMs) that currently inspire so much hope are more like "humanities tools," as Chinese AI entrepreneur Wang Yuhang stated during a panel discussion at the Siemens conference.

For artificial intelligence to truly begin unleashing its full potential in the manufacturing industry, many invisible barriers must still be torn down. Bureaucratic overregulation and concerns about patents and process knowledge within companies are currently slowing down the progress of a disruption that can likely only be compared in scale to the electrification of industry during the transition from the 19th to the 20th century.

A consolation is that it also took many years back then for the new technology to enable real productivity leaps.

*Henrik Bork is Managing Director at Asia Waypoint, a consultancy specializing in China, based in Beijing. "China Market Insider" is a joint project of the Vogel Communications Group, Würzburg, and Jigong Vogel Media Advertising in Beijing.

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