Based on the digital innovation theory and analyzition of digital technology innovation， it empirically analyzed the impact mechanism of digital technology innovation on industry upgrading with the data of China advanced display industry from 2007 to 2017. Results indicate that： digital technology innovation is the process driven by technology fusion and technological and the reformation of technological system； diversified innovation does not always promote industry upgrading， and frequent cross-module innovation and innovative cooperation within modules are not conducive to industrial upgrading； for the advanced display industry， bottom-up innovation in basic components， cutting-edge technological and systematic innovation are equally important. Cooperation between leading core enterprises and edge enterprises is an important way to cultivate a decentralized and prosperous industrial innovation system. The conclusions expand theories of digital technology innovation and industry upgrading， and provides important references for industry innovation and catch-up.