Pharmaceutical logistics may currently be enjoying strong growth, but the industry’s favourable position should not be mistaken for immunity from structural change. Lessons from the chemical and automotive industries show how quickly established industrial models can be disrupted when competitors take a fundamentally different approach to manufacturing and supply chains.
Both sectors share characteristics with pharmaceuticals: complex supply networks, significant R&D requirements, specialised engineering talent, substantial energy needs and highly integrated production processes. They also rely on ecosystems in which manufacturers, suppliers and logistics providers operate closely together.
“Why shouldn’t we be worried? Pharmaceutical logistics is a huge sector, quite well doing, with huge growth rates today, so what should be worrying about it?” Professor Dr. Roel Gevaers, University of Antwerp, said, speaking at Day One of the 2026 Pharma.Aero Masterclass at the Frankfurt University of Applied Sciences. “But as professors, we almost always need to ask what you should know about it. So let’s look into some old industries and try to learn from them.”
The chemical industry warning
The European chemical industry provides one of the clearest examples of how a manufacturing ecosystem can be weakened over time. Production has fallen significantly over the past decade, alongside an 80 percent decline in investment in European chemical industries in 2025.
The shift has been driven in part by a strategy that saw European and US companies move basic, lower-value production offshore while retaining more complex and higher-value activities at home. China, meanwhile, has been moving in the opposite direction, using its position in basic manufacturing as a starting point for moving further up the value chain.
“The chemical industry was heavily relying on what you call ecosystems of clustering,” Gevaers explained. “Europeans and Americans started to say we can offshore the basics, the cheap products, and focus on the high-value, more complex products. China did exactly the opposite.”
The development of Chinese chemical companies illustrates the strategy. Companies that began as subcontractors for international manufacturers, gradually developed their capabilities, acquired European businesses and moved into increasingly sophisticated products.
The result is a progression from contract manufacturing towards control of a much broader section of the value chain. That shift matters for pharmaceuticals because the same pattern can emerge when a manufacturing base accumulates knowledge, technology, engineering expertise and supplier relationships over several decades.
The automotive lesson
The automotive industry offers another example of how quickly competitive positions can change. Chinese car manufacturers have been transforming, many of which initially entered the market through partnerships and contract manufacturing before developing their own technologies, brands and supply ecosystems.
Companies that were once dismissed as producers of low-cost vehicles are now competing globally in electric vehicles and other advanced technologies. Their advantage is not simply lower manufacturing costs but the ability to integrate components, suppliers, technology and production into a single ecosystem.
“Many of these manufacturers started as subcontractors, or they started from a totally different industry, but then they started to add parts and parts and ecosystems around the whole value chain,” Gevaers said.
“What is interesting is the vertical integration and the ability to integrate everything and build the ecosystem around their own system.”
The shift is particularly visible in electric vehicles, where battery technology, software, electronics, vehicle manufacturing and charging infrastructure are increasingly interconnected. Companies such as BYD have used capabilities developed in battery manufacturing to build a broader position across the electric vehicle ecosystem.
Xiaomi, which entered automotive manufacturing from consumer electronics, is another example. The company was able to apply existing expertise in electronic systems to an industry in which the vehicle itself is becoming increasingly software- and electronics-driven.
The lesson for pharmaceuticals is that industrial boundaries can change faster than companies expect. Competitors do not necessarily have to enter an industry through its traditional route if they can bring capabilities from adjacent sectors and assemble a new ecosystem around them.
From outsourcing to integration
The common denominator between the chemical and automotive examples is the different philosophy towards the value chain.
European and US businesses spent decades embracing outsourcing, focusing on core competencies and breaking large industrial ecosystems into specialised components. China has increasingly pursued the opposite model, integrating production, suppliers, engineering and technology to build greater control over the complete value chain.
“Instead of breaking value chains and ecosystems into bits and pieces, they do exactly the opposite: integrate everything again, make again the ecosystems,” Gevaers said. “If we believe in Europe and the USA that focusing on R&D and the high-end will be enough because China or maybe India will never be able to make it, that will be wrong.”
That does not mean every pharmaceutical company needs to bring every activity in-house. The more important question is whether the industry understands where strategic dependencies are developing and whether it retains enough capability to respond if those dependencies become vulnerabilities.
That could mean a changing role as manufacturing footprints evolve. Supply chains built around fragmented production and long-distance flows may look very different from ecosystems in which more activities are integrated geographically and operationally.
The talent equation
There is also a less visible factor behind the shift: engineering capacity. The European Union produces far fewer engineering graduates than China, according to figures presented during the session. While China has the scale of its domestic market behind it, its ability to train and deploy large numbers of engineers also gives manufacturers the capacity to develop technologies, production systems and integrated supply chains at speed.
That creates a challenge beyond manufacturing costs. Maintaining industrial competitiveness requires the skills to design, operate and continuously improve increasingly sophisticated production ecosystems.
“If you look at the engineering graduates, the European Union has a much smaller number, while China has around 1.5 million,” Gevaers said. “Even if you want to change it now, they will still have huge capacities to keep on investing and integrating.”
A different supply chain strategy
The pharmaceutical industry has traditionally benefited from the strategy of concentrating on high-value activities while sourcing less differentiated inputs elsewhere. Gevaers’ warning is that this model may become increasingly exposed if competitors follow the integration strategy already visible in chemicals and automotive.
China’s rise in both industries demonstrates that starting with lower-value manufacturing does not necessarily mean remaining there. Companies can use subcontracting to acquire knowledge, build supplier relationships, develop engineering capabilities and gradually move towards more complex products.
The challenge for Europe and the US is therefore not simply to protect today’s pharmaceutical production. It is to consider whether the industrial ecosystems supporting tomorrow’s production are being developed at the same time.
“Many of us were taught that the main way of management was to outsource everything and focus on your core,” Gevaers said. “That was taught by many universities and colleges over the past 30, 40, even 50 years, but China is not teaching that.”
For pharmaceutical logistics, the lesson is potentially significant. The next supply chain reset may not be driven primarily by tariffs, freight rates or individual sourcing decisions, but by a broader contest over how industrial ecosystems are built.
Companies that continue to optimise individual links in the chain could find themselves competing with businesses that are designing the entire chain around them. The chemical and automotive industries suggest that once that shift is underway, catching up can be considerably harder than anticipating it.
“It’s not only about production and manufacturing; it is highly linked to logistics, R&D and engineering,” Gevaers said. “That’s why we should have an idea about what is happening and understand that these changes are not only about tariffs or trade policy, but about how entire ecosystems are being built.”
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Author: Edward Hardy
