Industry Knowledge

How is the upstream and downstream of the supply chain divided?

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2024/1/11 Viewed：

1. The upstream industry originally refers to the industry located at the beginning of the entire industry chain, including the extraction and supply of important resources and raw materials, as well as the manufacturing and production of components. This industry determines the development speed of other industries and has the characteristics of foundation, raw materials, and strong connectivity. In modern industry chain theory, upstream industry is a relative concept.

2. Downstream industries refer to industries located at the end of the entire industrial chain, processing raw materials and components, manufacturing finished products, and engaging in production and service.

According to the smile curve theory, the upstream is often an industry with relatively abundant profits and mild competition. The reason is that the upstream often controls certain resources, such as minerals, or industries with core technologies and high entry barriers. Therefore, many investors prefer stocks in the upstream industry. To form a competitive advantage in an industry, it is essential to have world-renowned suppliers and close cooperation between upstream and downstream industries.

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