I have to agree with the group of people who believe Infrastructure should play a part in Industrial output. Not in terms of the Factory cap, the system you describe in the DD I think is very good and will work with the overall system in place but there should also be a factor of Industrial Efficiency. For starters, the concentrated Industry versus dispersed industry would have different % modifiers for Factory Output. I also think that the % efficiency modifier should be capable of reaching higher than 100% which would better portray more developed countries ability to produce.
Infrastructure should also have a % efficiency modifier....This would also create that separation between the industry and infrastructure of Europe to say China who has the population (and in this system say Metropolis regions) but lacked the infrastructure to support efficient factory output.
Economic geography is destiny. Ample relatively flat and easily developed land with ready access to material resources, cheap energy, adequately skilled labor, and efficient local transport with clement weather and year-round waterborne transport to the rest of the world is the basis for a thriving metropolis or megalopolis to develop naturally.
The importance of water transport is obvious if thought of but easily overlooked in the age of more glamorous transport of goods and services autos, planes, Internet, now Amazon delivery drones making deliveries in the trackless Amazon (not yet? well, soon enough). Simple physics dictate that trucking costs per ton-per km are many times those of railways, and those of railways many times those of ships, and thus the great ports are great and ports for a reason, as industry and trade tend in a free economy to concentrate where it can operate most cost-effectively. .
This includes the efficiency of what we normally consider to be infrastructure, but much more as well in goes into overall productivity, and that which will vary with respect to particular kinds of products and services. Swiss watches or German optics are high value to weight, almost liberated from the issue of transport costs. Tank hulls are heavy. Coordinating production of components and outputs to avoid unnecessary transport cost and delay favors factories in closer proximity, in great industrial complexes designed for economic efficiency but ideal targets for bombing or mishaps.
On the other end of the scale, some apparently worthless "wastelands" such as much of Israel and the Great American Desert now known as the Great Plains can be brought to bloom under cultivation (and export aided by rail and river transport overseas from throughout the Mississippi basin). Other wastelands are just wastelands, a waste to attempt to develop.
P.S. I think Johan's comment also indicates that the earlier method of calculation was also obscure to the player, as well as obtuse, but now it is obviated by an approach that is more objective and obverse.