As far as we could tell e.g. from https://gerrit.wikimedia.org/g/integration/config/+/fa9b21486b0b5b662295d40c61e92b8095865aa4/tests/test_zuul_layout.py#219 and https://gerrit.wikimedia.org/g/integration/config/+/fa9b21486b0b5b662295d40c61e92b8095865aa4/zuul/layout.yaml#1822
This template should be on all extension repositories that are either production ready or aspire to be. It's not a statement of fact that "this repository is currently in production" but rather "check that this repository has this type of jobs run against it".
In this case even extensions that are not yet production ready but hope to be soon should have this template attached.
Perhaps it could be renamed to something like 'wikimedia-production-ready'?
For context we came across this when working on adding some CI to WikibaseManifest (see: https://gerrit.wikimedia.org/r/c/integration/config/+/622166/2)
@Jdforrester-WMF maybe could tell us if we interpreted this correctly?