My country's equipment manufacturing industry: technology is king, both internal and external

Private equipment manufacturing companies urgently need to improve their supply chain management capabilities, lean manufacturing capabilities and business model innovation capabilities in order to win the government's long-term favor and better meet the challenges of foreign competitors. Private companies with strong technology and innovation capabilities will achieve great success with the support of the equipment manufacturing industry revitalization plan.

Industry reform pressure: ★★★☆

Policy adjustment strength: ★★★☆

Innovation space: ★★★★★

Private company participation: ★★★★★

"Entrepreneur" attention: ★★★★★

Industry diagnosis: in the ascendant

Equipment manufacturing is a typical traditional manufacturing industry, mainly including engineering machinery, machine tools, power equipment, rail transportation, oil and gas pipelines, etc. Since the products are not directly facing general consumers, the business model of equipment manufacturing companies is mostly based on "B2B". Although low-cost manufacturing capabilities are regarded as an important aspect of market competition, in the face of complex product application conditions, the competitive advantages of superior companies are based on a stable supply of spare parts, lean manufacturing capabilities, a complete after-sales service network, and the provision of financial leasing. In addition, it is the ability to grasp the cyclical fluctuations of industrial development.

China's equipment manufacturing industry has developed rapidly in recent years, but various signs show that the competitiveness of Chinese equipment manufacturing enterprises is still far behind that of multinational companies such as Caterpillar in the United States and KOMATSU in Japan, especially in the upstream spare parts supporting capabilities of the industrial chain and the construction of downstream channels and sales models.

At present, China has more than 1,000 general spare parts manufacturers of various types, and the scale is generally small. The core technology and market supply of key parts, such as engines, transmissions, hydraulic components, etc., are mainly controlled by enterprises in regions and countries such as Europe, the United States, and Japan.

In the downstream of the industrial chain, the main sales model of equipment manufacturing products is agents and direct order sales. The agent sales model has a certain effect on general products, while for products with high technical requirements, strict entry barriers, and high market concentration, their sales model will be affected by factors such as product prices, after-sales service, and product stability. In these aspects, due to the lack of necessary profits and technical support, Chinese equipment manufacturing companies have shown obvious disadvantages and it is difficult to establish a business model that meets the diversified needs of the market to win the high-end market.

Policy Interpretation: Walking on Two Legs

The equipment manufacturing industry is a strategic industry that provides technical equipment for various industries in the national economy, which determines: 1) Its development level is consistent with the overall development level of the national economy, and the overall fluctuation cycle of the industry is consistent with the fluctuation of GDP growth. 2) Its development stage determines the development stage of the national economy. In the past three decades, the overall characteristic of China's economy has been total growth. In the next 5 to 10 years, the Chinese government has determined a quality-first development strategy, which depends on the improvement of the overall technical level and service capabilities of the equipment manufacturing industry.

Considering the mutual priority relationship between the equipment manufacturing industry and the national economy, under the strategic transformation of China's economy and the strong support of the government, China's equipment manufacturing industry has entered a stage of development with both total volume and quality rising. According to the plan, the Chinese government will invest huge amounts of money in fixed asset construction in the next 5 to 10 years to accelerate and improve the level of urbanization. These national key construction projects are concentrated in the fields of efficient and clean power generation, ultra-high voltage substation, coal and metal mining, natural gas pipeline transportation and liquefied storage and transportation, high-speed railways, and urban rail transit.

In terms of the current economic development status of countries around the world, the total amount of investment and equipment procurement by the Chinese government in any key engineering field can fully cultivate a global industry. In other words, the construction of these national key construction projects has surpassed the great public construction projects of the United States in the past: the national interstate and defense highway system. The Chinese government will and must seize this opportunity to fully enhance the global competitiveness of China's equipment manufacturing industry.

As for how to improve the technical level and competitiveness of equipment manufacturing enterprises, the revitalization plan has put forward clear ideas:

Internal potential tapping, integration of industry, academia and research.

The revitalization plan requires: "Promote the integration of industry, academia and research with enterprises as the main body, encourage scientific research institutes to enter enterprises, and support enterprises to cultivate and expand R&D teams." Typical companies include Zoomlion, Shanhe Intelligent, and Times New Materials. These companies rely on university researchers, state-owned research institutes or research departments of large enterprise groups to achieve rapid growth in the market segments. Considering that state-owned scientific research institutes have been reformed on a large scale in recent years, we believe that their R&D capabilities will gradually emerge in the next few years, and companies that are good at integrating such resources will benefit greatly.