On May 11, the Executive Meeting of the State Council reviewed and approved the “Action Plan for Digital Transformation of the Manufacturing Industry”. The conference pointed out that the digital transformation of the manufacturing industry is an important measure to promote new industrialization and build a modern industrial system. It is necessary to explore typical scenarios by industry according to the diverse and individual needs of the manufacturing industry. Accelerate core technology research and promotion and application of achievements, and do a good job in equipment networking, mutual recognition of agreements, standard setting, and platform construction. It is necessary to increase support for the digital transformation of small and medium-sized enterprises, organically combine it with carrying out large-scale equipment renewal actions and implementing technological transformation and upgrading projects, improve public service platforms, and explore the formation of long-term mechanisms to promote the digital transformation of small and medium-sized enterprises.

Furthermore, on January 25, nine departments including the Ministry of Industry and Information Technology issued the “Work Plan for Digital Transformation of the Raw Materials Industry (2024-2026)” to create more than 120 typical scenarios for digital transformation, cultivate more than 60 benchmark factories for digital transformation, and form a number of digital transformation benchmark enterprises.

Meanwhile, in March, the State Council issued the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In”. According to the “Action Plan”, by 2027, the scale of equipment investment in industry, agriculture, construction, transportation, education, cultural tourism, medical and other fields in China will increase by more than 25% compared to 2023; the energy efficiency of major energy equipment in key industries has basically reached the energy saving level, and the production capacity ratio of environmental protection performance has increased dramatically; the penetration rate of digital R&D and design tools and the numerical control rate of key processes in industrial enterprises above scale will exceed 90% and 75%, respectively.

According to reports, industrial digitalization aims to improve industrial production efficiency, quality and flexibility through the application of information technology, while reducing costs and resource consumption, with the aim of building smart factories. Industrial digitalization falls under the category of new industrialization. It is a key path and core content for achieving a new type of industrialization. It is also an important driving force for the formation and development of new quality productivity. The realization of industrial digitalization will drive the emergence of new business formats and models in the industrial field, such as intelligent manufacturing, personalized customization, and service-oriented manufacturing.

According to statistics from the Galaxy Securities Research Report, it is conservatively estimated that the overall smart factory market size in China is not less than 8 trillion dollars. Intelligent industrial equipment, industrial networks, industrial software, and industrial data are common requirements essential for smart factory development. The industrial Internet is a neural network for smart factories, and the scale of the industry is growing rapidly; industrial software is the brain of smart factories, and the market size is expected to double in the next five years; industrial control products and digital intelligent equipment are the limbs of smart factories, and the market size will grow steadily, and attention should be paid to high-end and localized needs in development.

Furthermore, according to the “Industrial Internet Innovation and Development Report (2023)” issued by the China Industrial Internet Research Institute, nearly 8,000 digital workshops and smart factories have been built nationwide, and the scale of the core industrial Internet industry exceeds 1.2 trillion yuan. Among them, more than 2,500 have reached the level of maturity of intelligent manufacturing capabilities above level 2, and have basically completed digital transformation, and 209 have become intelligent manufacturing demonstration factories with international advanced standards. After transformation, the product development cycle of these demonstration factories was shortened by an average of 20.7%, and production efficiency increased by an average of 34.8%. As of December 2023, there were 153 “lighthouse factories” worldwide, 62 of which were located in China, accounting for 40.52%, and the total number continues to lead the world.

At the same time, manufacturing is an important application area for artificial intelligence, bringing new opportunities for industrial digitalization. AI will accelerate the pace of technological innovation on the industrial side, such as providing auxiliary design on the R&D side to accelerate the development of new products, and make robots more intelligent on the execution side and continue to increase the penetration rate.

Galaxy Securities believes that considering building smart factories is the only way to achieve a new type of industrialization. In the future, smart factory construction in all walks of life in China is expected to continue to rise. AI will accelerate the penetration rate of various digital and smart terminal products, and the four major sectors of smart factory building will benefit. The bank believes that one of the suggestions is to seek leading suppliers in products with common needs, and the other is a smart factory solution provider with industry know-how.

Great Wall Securities said that in the digital transformation campaign, the bank is optimistic about building smart factories around the intelligent upgrading of the entire manufacturing process. The plan focuses on the integration of software and hardware updates, and the position of software in digital intelligent upgrading in industrial scenarios is highlighted. Smart factory construction is expected to drive up demand for industrial software.

Recommended attention: Industrial Robots: Hikvision, Obi Zhongguang - UW; ERP: Kingdee International, User Network, Hande Information; CAD: Zhongwang Software; EDA: Huada Jiutian, General Electronics; DCS: Central Control Technology; MES: Baoxin Software, Baotsu Electronics; PHM: Rongzhi Rixin; BIM: Guanglianda, Henghua Technology.

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