The supply side reform aims to gather internal and external resources and make key breakthroughs in the weak links of the industrial chain. The fields of “four bases” and “five cores” deserve the most attention. The supply of a large number of key core technologies and Middleware in China’s manufacturing sector is heavily dependent on foreign countries, and the autonomy of the supply system is not strong. China’s supply system has many requirements in terms of quality, safety, diversity and stability in meeting production demand. From the perspective of macroeconomic system, although the counter cyclical and cross cyclical policies are inclined to the supply side, there are still problems of mismatch, insecurity and low quality, especially in the field of industrial machine tools. We suggest that supply shortage and transformation and upgrading are the two main lines of manufacturing investment. It is expected that manufacturing investment will be the main contributor to economic growth in 2022, with an annual growth rate of 11.1%.
The industrial base is relatively weak, and the supply of “four basic” products is obviously in short supply
The development of China’s industrial base lags behind, which not only pushes up the production costs of Chinese enterprises, but also restricts China’s progress towards the middle and high-end of the global manufacturing industry chain, but also affects China’s economy and industrial security. Generally speaking, the industrial foundation includes four aspects: core basic parts (components), advanced basic technology, key basic materials and industrial technology. High end chips, core parts of high-speed railway equipment, marine power systems and devices, most industrial Siasun Robot&Automation Co.Ltd(300024) precision reducers, servo motors and drives and many other “four base” products (i.e. core basic parts, advanced basic processes, key basic materials and industrial technology basis) rely on imports. China’s weak industrial infrastructure has seriously hindered China’s technological innovation and placed China’s manufacturing industry at the middle and low end of the global manufacturing industry chain for a long time. At present, many industries in China still have the problems of “lack of core”, “less core” and “weak base”, which is due to the weak basic industrial capacity. In 2018, science and technology daily listed 35 “neck blocking” technologies in a series of reports on “core technologies to be tackled urgently”. Key technologies and core parts are highly dependent on imports, and the self-sufficiency rate of key parts, materials and components is only one third. High end CNC machine tools, chips, lithography machines, high-end sensors, etc. have the problem of neck sticking. The survey results of the Ministry of industry and information technology on more than 130 key basic materials of more than 30 large enterprises in China show that 32% of the key materials are still blank, 52% of the key materials rely on imports, and 95% of the high-end special chips of most computers and servers, more than 70% of the intelligent terminal processors and most of the storage chips rely on foreign imports.
The pace of domestic substitution has accelerated, and the investment in the “five nuclear” field is the main starting point
Domestic substitution has become the first priority to enhance the autonomy and controllability of the industrial chain under the background of anti globalization. The basic direction of domestic substitution is in the five core areas of the short board of the industrial chain, namely, core materials, core components, core equipment, core technology and core algorithm. Specifically, the industries in the “five core” field are concentrated in technology and knowledge intensive industries. Among them, information and communication technology (ICT), high-end equipment, new materials, biomedicine and medical devices are the main direction of domestic substitution. The common ground of these fields lies in high R & D intensity, high technical barriers and fast iteration. Some fields are closely related to basic research. Enterprises need to maintain high-intensity R & D investment to obtain technological leadership.
First, China’s material industry is large but not strong, and the purity, strength, hardness and other index parameters of core materials are poor. For example, aviation steel, high-end bearing steel, high-strength stainless steel and other special steels with high performance requirements do not pass the technology, special steel still needs to be imported in large quantities, and the domestic material foundation of large aircraft, high-speed railway and other high-end equipment is not solid. Another example is the field of semiconductor materials based on chemical technology. Core semiconductor materials such as large silicon wafer, photoresist, electronic gas and sputtering target are highly dependent on imports from developed countries such as Japan and the United States. In 2021, the global semiconductor industry suffered a severe setback due to the core shortage crisis, but at the same time, it also accelerated the pace of domestic substitution, and the United States, South Korea, Japan and EU countries invested on a large scale. According to our preliminary research, we are accelerating the verification and introduction of domestic materials. Many wafer factories in China are expanding their production both in semiconductor materials and chip production.
Second, many core component technologies in China have not been overcome. For example, high-end chips (such as CPU chips and memory chips), RF devices, CIS image sensors and other core components widely used in the production of consumer electronic products are highly dependent on imports. For another example, the localization degree of high-pressure plunger pump, the core component of the hydraulic system of construction machinery, is very low, and there is a certain supply chain risk.
Third, some core equipment is highly dependent on imports. For example, in recent years, China’s OLED panel production capacity has expanded rapidly. As the core equipment vacuum evaporation machine has not been localized, it can only be imported from Japan and South Korea. The core equipment is controlled by others, which hinders China’s capacity expansion and the improvement of manufacturing technology.
Fourth, because the technology accumulation of China’s high-tech manufacturing industry is not long, many core processes are difficult to master in a short time. Taking the lens polishing process as an example, ASML, a lithography supplier, purchases lenses from Zeiss in Germany, which is mainly due to the lens polishing process of Zeiss. After several generations of technical accumulation, the lens finish is second to none in the world. For example, core processes such as advanced chip manufacturing process and ultra precision polishing process lag far behind the forefront of the industry, and there is a huge space for domestic substitution. Fifth, China is seriously lack of competitiveness in algorithm application fields such as basic software (operating system, database, office software) and industrial software. For example, EDA tool software and aviation design software for chip design are highly dependent on foreign procurement, and the technical gap between industrial software and foreign software is widening. Based on the advantages of algorithm, manufacturing powers such as Japan and Germany have begun to adopt full digital control technology in the production line, and the production efficiency has been greatly improved. Without mastering the underlying core algorithm, the stability, ease of use, yield and other key indicators of China’s high-end CNC machine tools, industrial Siasun Robot&Automation Co.Ltd(300024) and other intelligent equipment are far lower than those of Japanese and German equipment, and the failure rate remains high.
The shortage of supply has forced technological innovation and fixed asset investment in the neck field
The national economy is a dynamic and circular organic whole. The premise of the balanced relationship between science and technology, industry and finance is to improve the supply capacity and quality through reform and adjustment and promote the continuous improvement of the overall efficiency of the national economic system. The proportion of basic research investment in China is still relatively low. In the division of labor in the global value chain, it is still limited to low value-added links such as processing and assembly, while it is still faced with being “stuck” in core technology fields such as chips, semiconductors, industrial software and aeroengines.
Taking semiconductor as an example, downstream design has been able to enter the first echelon in the world, and midstream wafer manufacturing is catching up, while there is still a large gap between upstream equipment and materials and overseas leaders. There is a big gap between the overall technical level of China’s local photoresist and the international advanced level, and it is mainly concentrated in the field of PCB photoresist with low technical content.
The reason is that foreign monopolies directly block China’s high-end photoresist production technology, resulting in a very low self-sufficiency rate of photoresist in China. In addition, the shelf life of photoresist is generally only 6-9 months. In case of emergencies (such as war, trade disputes, epidemic disturbance and poor shipping), China’s chip manufacturing will be threatened.
Photoresist industry is a typical technology and capital intensive industry. Although the manufacturing cost of photoresist is low, the technical barrier is very high. The main components of photoresist include photoresist resin, photosensitive agent, solvent and additive. According to the application scenario, photoresist can be divided into PCB photoresist, panel photoresist and semiconductor photoresist, and the technical difficulty increases in turn. The 14th five year plan proposes to accelerate the breakthrough of key technologies of high-performance resins, photoresists for integrated circuits and other electronic high-purity materials in high-end new materials. In recent years, China’s major semiconductor photoresist enterprises have made continuous efforts. The government and enterprises have jointly arranged KrF (248nm), ARF (193nm) and other high-end photoresists and related products. Some progress has been made in the localization of photoresists.
The neck sticking problem of industrial mother machine is difficult to solve in the short term, which requires more large-scale capital investment
Industrial mother machine is a machine used to manufacture machines and machinery. It provides production equipment for the equipment manufacturing industry, including all kinds of machine tools and processing centers. It also covers process equipment such as casting, forging, welding, heat treatment and surface treatment, additive manufacturing equipment and composite processing equipment. On the whole, China’s manufacturing technology of industrial machine tools lags behind Germany and Japan for about 15-20 years. The foundation of China’s machine tool industry is not solid, and the gap with the world’s advanced level has not been significantly narrowed in terms of positive design, basic common technology and industrial cutting-edge technology research.
At present, China relies heavily on high-end industrial equipment, CNC system and its related high-end components, and the manufacturing level of domestic high-end industrial components and components is seriously restricted. In terms of the technology of additive manufacturing equipment, limited by the weakness of core devices and special software, China’s high-grade additive manufacturing equipment, especially the high-performance metal additive manufacturing equipment, has a certain gap compared with the world’s advanced level, and the quality, performance and stability of the equipment still need to be improved.
Most of the CNC systems of China’s high-end machine tools still rely on imports from Japan and Germany. We believe that the control accuracy of high-grade CNC system depends on the accuracy of current, voltage and waveform control, which depends on the cooperation of software and hardware. There is a big gap in basic material science, technology and design, as well as practicability, reliability, compatibility and stability. For example, foreign machine tools can process one part in one second without stopping for 24 hours, but domestic industrial machine tools are difficult to do in the short term. First, the quality of components is weak, and domestic components cannot meet the conditions of manufacturing process, manufacturing environment, raw materials and so on. Second, the weak quality of key parts limits the technical height of domestic machine tools. For example, for high-end machine tools equipped with the same CNC system, the speed of domestic machine tools is only 1 / 3 of that of foreign countries, and the error range is 5 times that of foreign countries. Third, the control accuracy is not high. Foreign high-end CNC systems are better than China in intelligence, high speed and high precision. The average failure free time of foreign systems can reach four times that of Chinese products. In recent years, machine tools and equipment are gradually transitioning from traditional ordinary machine tools to high-grade CNC machine tools. With the complexity of the structure of processed products, the continuous improvement of processing accuracy requirements and the improvement of production efficiency, the requirements for the processing accuracy, efficiency and stability of industrial mother machines are gradually improved. Taking the linkage shaft as an example, its quantity is the standard to measure the advanced degree of NC machine tools. Five axis linkage numerical control technology is difficult and widely used. It integrates computer control, high-performance servo drive and precision machining technology. Five axis linkage CNC machine tool is the only means to solve the processing of key industrial products such as aeroengine impeller, blade disc, blade and marine propeller.
We expect that with the policy support and the demand for manufacturing upgrading, driven by the high-profile industries such as downstream new energy and consumer electronics, the industrial mother machine is expected to maintain a high growth rate of capital expenditure and strive to solve the problem of supply shortage.
Investment growth point of multi-level fund supporting guarantee in response to supply shortage
First, the national large fund has sufficient capital guarantee. In order to promote the development of integrated circuit industry, CDB finance, China tobacco, Yizhuang state investment, China Mobile, Shanghai Guosheng, China Electronics Technology, Ziguang communication, Huaxin investment and other enterprises initiated the establishment of a large fund (national integrated circuit industry investment fund Co., Ltd.) to focus on investment in integrated circuit chip manufacturing, taking into account chip design, packaging and testing, equipment and materials and other industries. While the “big fund phase I” withdrew orderly, the national integrated circuit industry investment fund phase II Co., Ltd. (“big fund phase II”) is following up one after another, and the fund-raising scale is expected to exceed 200 billion yuan. From the perspective of investment mode, it mainly focuses on agreement transfer, private placement and overseas acquisition, and plays a dual role of industrial guidance and financial investment. The investment projects cover the whole industrial chain of integrated circuit design, manufacturing, packaging and testing, which has played a good exemplary role in integrating market resources and promoting industrial development.
Second, industrial chain investment has traction and scale effect. We tend to focus on the fields of “four bases” and “five cores”, give full play to the effects of professional division of labor, industrial correlation and cooperation, reduce transaction costs and innovation risks, and promote the rational flow and optimal allocation of factors. In particular, relying on the existing industrial parks and other platforms to promote the effective agglomeration, division of labor and cooperation and collaborative innovation of enterprises, scientific research institutions and financial institutions, we can build a number of strategic emerging industry growth engines with their own characteristics, complementary advantages and reasonable structure. At the same time, combine promoting the development of advanced manufacturing clusters with promoting the coordinated development of large, medium and small enterprises, and cultivate a number of “specialized, special and new” small giant enterprises and “single champion” enterprises focusing on subdivided fields.
The investment of state-owned enterprises has the first mover advantage and demonstration effect in dealing with the supply shortage
State owned enterprises take self-reliance and self-improvement in science and technology as the strategic support for national development, strengthen key core technology research for industrial machines, high-end chips, new materials and new energy vehicles, strengthen upstream and downstream industrial coordination, lead and drive enterprises of all kinds of ownership to increase the investment layout of strategic emerging industries, and drive qualified enterprises of all kinds of ownership to independently or jointly undertake the research and development of various national strategic emerging industries Innovation capacity and industrialization. In the same period of 2023, the number of state-owned enterprises holding 100% shares increased by 13.2%, while the number of fixed assets invested by Taiwan and Macao enterprises increased by 13.2% year-on-year, higher than that of the same period in 2023. We judge that state-owned enterprises will further integrate into the national basic research and innovation system and continuously enhance the supply of common technologies in the industry. During the 14th Five Year Plan period, state-owned enterprises will speed up the layout of a number of basic application technologies in the direction of information, biology, energy and materials, accelerate the breakthrough of a number of cutting-edge technologies in artificial intelligence, space technology and equipment manufacturing, and accelerate the forging of a number of long board technologies in the fields of power equipment, communication equipment, high-speed railway, nuclear power and new energy.
The work plan of chain length system is a breakthrough to partially solve the problem of supply shortage
The so-called “chain leader system” refers to the selection of the core industries of local economic development, through the main officials of local governments and even the top leaders of provincial and municipal governments as the “chain leader”, and a series of system designs aiming at “supplementing the chain” and “strengthening the chain”
