The growth of the industrial control equipment and industrial software markets is driven by the horizontal structural upgrading and vertical technological upgrading of the manufacturing industry: horizontal structural upgrading refers to the shift of leading manufacturing industr

(report producer: Changjiang Securities )

Industrial structure upgrade and core technology upgrade drive the continued growth of the industrial software market

The growth of the industrial control equipment and industrial software market is driven by the horizontal structural upgrade and vertical technology upgrade of the manufacturing industry:

Horizontal structural upgrade It refers to the development of leading manufacturing industries from labor-intensive industries such as textiles and clothing, food, etc., to capital-intensive industries such as steel and chemicals, and then to knowledge-intensive industries such as computers and electronics. On the one hand, the emergence of emerging industries will bring new demands for automation and informatization construction, and in turn drive the expansion of the industrial control equipment and industrial software markets. On the other hand, as the industrial structure continues to upgrade, the production processes of emerging industries will become more complex and the production processes will be more sophisticated. Industrial control equipment and industrial software penetration rate (proportion of automation and informatization expenditures) has further improved compared with traditional industries.

Vertical technology upgrade refers to the increase in manufacturing investment and corresponding market expansion brought about by the emergence of emerging technologies (electrification, automation, and information technology). On the one hand, technological upgrading will inevitably be accompanied by the emergence of new software and hardware products. Under the strong demand of enterprises to improve quality and efficiency, the market will expand accordingly; on the other hand, the application of industrial control equipment and industrial software will inevitably lead to changes in production technology and production processes. Reshaping, the application scenarios of emerging technologies have increased significantly, and the penetration rate (expenditure ratio) has increased, driving the growth of the market size.

Every round of manufacturing upgrades (structure/technology) is accompanied by the rapid growth of manufacturing capital expenditures and the size jump of related industrial control and industrial software companies. China is currently at the intersection of horizontal structural upgrades and vertical technological upgrades. Reviewing past industrial upgrades around the world will help predict the development path of my country's subsequent industrial automation and industrial software-related enterprises.

Overseas Review: Every manufacturing structure/industrial upgrade is a cycle of high capital expenditures.

Horizontal structural upgrade essentially means that the industrial structure changes from labor-intensive industries to capital-intensive industries and then to technology-intensive industries. The process of industrial transformation is often accompanied by the transfer of the industrial chain (countries in the process of industrial upgrading transfer low-tech industries outwards). Although industrial chain transfer by definition only refers to the transfer of low-end industries from high-industrial-level countries to low-industrial-level countries, the input of complete industrialization often gives low-industrial-level countries the possibility of industrial upgrading, and ultimately in the field of high-end manufacturing. It also creates a certain degree of competitiveness. Historically, there have been four industrial chain transfers in the global dimension in the past, corresponding to the industrial structure upgrades of four types of countries:

The first time, the UK transferred to the United States: from the end of the 18th century to the first half of the 19th century, the UK transferred part of its excess production capacity ( Steel, coal) moved to continental Europe and the United States, and European and American heavy industry (steel) rose accordingly.

The second time, the United States transferred to Japan and Germany: From the 1950s to the 1960s, the United States transferred traditional industries such as steel and textiles to Japan and Germany, the defeated countries in World War II. With the rapid recovery of their industrial base, Japan and Germany are gradually transforming into the automobile and computer industries.

The third time, Japan and Germany transferred to the " Four Little Dragons" in Asia and some Latin American countries: From the 1970s to the 1980s, Japan and Germany transferred heavy industries such as steel, chemical and light industries to the "Four Little Dragons" in Asia and some Latin American countries. Since then, the "Four Little Dragons" industries have upgraded rapidly, giving birth to high-tech enterprises such as TSMC.

The fourth time, the United States, Japan and Germany moved to China and Southeast Asian countries: From the 1990s to the present, developed countries such as the United States, Japan and Germany have transferred labor-intensive industries and low value-added industries to China and Southeast Asian countries. Inland China has gradually become the world's The largest recipient and beneficiary of industrial transfer.

During the third industrial chain shift, Japan's situation was relatively similar to China's current situation, which has certain reference significance for the development of China's industrial automation in this round.1) At the industrial structure level, both are facing the transformation process from capital-intensive industries (steel, chemical industry) to technology-intensive industries (semiconductors, new energy vehicles); 2) At the technical level, both have proposed "building a country through science and technology", "independent innovation", etc. strategic policy and start a large-scale technology self-research process; 3) At the personnel endowment level, all are facing rising labor costs and the "demographic dividend" is no longer available, but the existence of the "engineer dividend" allows industrial automation and informatization to still be relatively stable. Low cost and rapid promotion; 4) With the rapid economic growth in the past and the continuous improvement of residents' living standards, both countries are facing an increasingly diverse demand for consumer goods, and production has shifted from large-scale standardized production to small batches, multiple types, and flexible production methods. change.

Between 1948 and 1972, light processing transitioned to heavy industry.

"Heavy industrialization" promoted Japan's rapid post-war economic growth. Before 1970, Japan was in the post-war recovery phase. Its GDP experienced rapid growth and major changes in its industrial structure. It could be divided into the post-war recovery period (1948-1955) and the rapid growth period (1956-1972). Among them, during the post-war recovery period, labor-intensive light industry (printing, papermaking, food, etc.) was the leading industry, and stabilizing employment was the stage economic goal. The rapid growth period is dominated by heavy and chemical industries (steel, chemicals, etc.), accompanied by the rapid development of metal products manufacturing. During the period of rapid growth, the proportion of Japan's heavy chemical industry in the total manufacturing industry increased from 57% in 1956 to 65% in 1972. At the same time, the proportion of high-tech industries exceeded that of low-tech industries, and Japan's manufacturing industry produced obvious "heavy industrialization" and " technology intensification” trend. The

automation process has quietly begun, and automation in steel and chemical industries was the mainstream at that time. In order to enhance the international competitiveness of the country's heavy industry, in addition to actively introducing overseas advanced technology to improve product quality, automation equipment with efficiency improvement functions has also been vigorously promoted by Japan. The expansion of production capacity brought about by the rapid growth of the industry has ushered in automation equipment manufacturers. An expansion cycle. Taking the steel industry as an example, the Kimitsu factory built by Nippon Steel Corporation in 1965 and the Oita factory built in 1971 have both achieved significant development in automation applications. Both of them have used computers extensively to establish full-factory automation systems. Production continuity is greatly improved. During this period, the construction of automation was mainly participated by Mitsubishi Electric , Toshiba Electric, Hitachi Group and other large motor manufacturers. Large computers were used for centralized control, distributed microcomputers were rarely used, and automation was still in the early stages of development.

1973-1991: The industrial structure was upgraded, and the rise of emerging industries brought opportunities for overtaking in corners

The oil crisis drove Japan to start the process of industrial structure upgrading. The outbreak of the first oil crisis in 1973 had a great impact on the Japanese economy (in 1974, Japan's economic growth rate showed negative growth for the first time since the war). At that time, Japan's manufacturing industry, dominated by energy-intensive heavy and chemical industries such as petroleum, chemicals, and steel, consumed most of Japan's energy. The skyrocketing price of oil forced Japan's manufacturing industry to make adjustments and begin to gradually move away from high-energy-consuming industrial clusters. , turning to an industrial structure dominated by high value-added assembly and processing industries.

With the advancement of industrial upgrading, significant changes have taken place in the leading industries in its manufacturing industry. Judging from changes in the total manufacturing volume structure. The proportion of light industry represented by the textile industry continues to decline. The output value of the textile industry as a share of the total manufacturing output value dropped from 16.2% in 1955 to 3.1% in 1985. At the same time, the heavy chemical industries such as steel and petrochemicals, which are dominated by energy consumption, The proportion of output value (excluding machinery) in the total manufacturing output value also showed a gradual and gentle downward trend, from 31.2% in 1975 to 27% in 1985. The proportion of assembly and processing industries with higher technical content such as automobiles and machinery has shown a clear expansion trend, rising from 14.6% in 1955 to 40% in 1985, replacing the original heavy and chemical industry as a "single force" in the manufacturing industry. "big" leading position.

Under the strong demand, traditional manufacturing manufacturers have begun the process of automation transformation.In October 2019, the American "CONTORL" magazine announced the list of the world's top 50 automation companies in 2018. A total of 9 Japanese companies were on the list, namely Mitsubishi Electric , Yokogawa Electric, Omron , FANUC, Yaskawa The industrial automation business of Motors , Azbil, Fuji Electric , Horiba Manufacturing Co., Ltd., and Hitachi Machinery Co., Ltd. all emerged during the period of industrial upgrading in Japan, and their growth has certain common characteristics:

were all transformed from established motor or instrument manufacturers. Since then, industrial genes have been strong: Looking at the growth history of Japan's leading automation manufacturers, their product matrix changes have generally followed two paths. One is the expansion from execution systems (motors) to drive systems, control systems, and output systems. The representative company is Mitsubishi Electric. , Yaskawa Electric, Fuji Electric and other motor manufacturers. The second is the expansion from feedback systems (instruments) to control systems. Representative companies are instrument manufacturers such as Yokogawa Electric and Azbil (formerly Co., Ltd. Yamatake). Among the above-mentioned manufacturers, except for Fanuc, which was established relatively late (but is backed by and Fujitsu ), the other manufacturers are all old industrial giants with nearly a century of history and strong industrial genes. The growth rate of

is greatly affected by subdivided industries: it can be seen from journal documents in the late 1970s that automation construction at that time was mainly in the form of large-scale electronic control equipment packages, and most of the automation equipment was produced by Mitsubishi Electric, Toshiba Electric, and Hitachi Machinery They are provided by large motor manufacturers such as the Institute and are widely used in traditional industries such as steel, power generation, cement, papermaking, and chemicals. However, it can be seen from the 2019 Control magazine list that, except for Mitsubishi Electric, which still maintains a large sales scale, Hitachi Machinery and Toshiba Electric are ranked low, and battery welding, automobile assembly, semiconductor manufacturing, and robots Omron, Fanuc, and Yaskawa Electric, which are the main business areas, have succeeded in catching up from behind and ranked high in sales scale (data in 1979 shows that Yaskawa Electric's scale is far lower than Fuji Electric, but in 2019, the automation business has achieved overtake in scale). Under the wave of industrial transformation, automation manufacturers with emerging industries as their main customers have grown relatively rapidly.

Benefited from the input of Western technology, product performance breakthroughs were rapid: starting from post-war reconstruction, Japan completed the industrial automation process in just over thirty years. The construction speed is relatively fast. On the one hand, this is due to Japan's overall technology introduction policy. On the other hand, it is also because of the long-term and lasting cooperation between Japan and European and American automation companies. Among motor companies, Yaskawa Electric has had long-term technical cooperation with BBC Corporation since 1954; Fuji Electric has long-term technology contracts with Siemens, and Mitsubishi Electric has long-term technology contracts with Westinghouse. The product structures of both parties are almost the same. Among instrument companies, Yokogawa has long-term cooperative relationships with Foxboro of the United States, Azbil and Honeywell . The continuous technological input from European and American companies is an important reason for the rapid increase in the performance and penetration rate of Japanese automation products.

Three factors ensure that the Japanese automation industry is sufficiently competitive. From the booming development of the automation industry in 1972 to the bursting of the bubble economy in 1991, the Japanese automation industry has always maintained strong competitiveness. Japanese PLC (Mitsubishi, Tateishi, Hitachi, etc.) once occupied the top spot with their good product quality control. US low-end PLC market. Here, PLC (programmable logic controller) is used as an example to illustrate the three core competitiveness points of the Japanese automation industry:

technology is in the same echelon: benefiting from the long-term technical support of post-war European and American companies and Japan's active technology introduction policy, Japanese PLC It has always been in the same technological echelon as European and American PLCs (the American Digital Equipment Company invented PLC for the first time in 1969, and Japan introduced it in 1971 and completed self-development of the product that year). Close performance is a prerequisite for competition in the global market.

Lean production creates high cost performance: Compared with European and American PLC products, Japanese PLC has advantages in both product quality and price dimensions.In terms of product quality, thanks to the prevalence of "lean production" and other cultures, Japanese industrial products have good quality control, ranging from automobiles to small chips, and have a good reputation among customers; in terms of product price, compared with conventional digital input PLCs ( In the field of digital switching input /output points greater than 40 points), Japanese products have a price advantage, but in the field of micro digital input PLC (digital switching input/output points less than 40 points) and analog input PLC, European and American products The product has a price advantage.

Strong awareness of overseas expansion: Based on the idea of ​​​​"building a country through trade", Japan had already begun the process of overseas market expansion as early as the 1970s. Taking the Chinese market as an example, after the reform and opening up in 1982, Japanese and European and American PLC manufacturers entered the Chinese market at the same time and established joint ventures to carry out production in my country, occupying a large share of the domestic market. Considering that PLC also has strong usage stickiness, Japanese PLC manufacturers can enjoy huge performance returns by taking the lead in occupying overseas market share.

Today, industrial automation has surpassed traditional businesses such as motor sales and has become the main source of income for the above-mentioned automation manufacturers. The high industrial investment brought about by the upgrading of Japan's industrial structure has contributed to the long-term prosperity of Japan's automation industry. At present, our country is also in the process of upgrading its industrial structure, and various high-end discrete manufacturing-related industrial automation and industrial software manufacturers enjoy the dividends of high industry prosperity.

The demand for automation construction brought about by the expansion of production capacity in emerging industries such as automobiles and electronics, as well as the increase in the penetration rate of automation equipment in various industries, have led to the growth of many leaders in the industry. As of 1995, Japan had 12 large-scale industrial automation manufacturers (cutting, measurement, control), and their total revenue in 1994 reached 1.0489 billion yen, equivalent to RMB 85.692 billion (in 1994), converted into current value: Revenue is 122.28 billion yuan (2021), and the average revenue of companies in the industry reaches 10.2 billion yuan (converted to 2021 data). Considering that the current scale of China's manufacturing industry is several times that of Japan, there is huge potential for growth of industrial automation and industrial software-related companies. (Report source: Future Think Tank)

Review of Europe, America and Japan from 1990 to 2014: Why Japanese industrial software lags behind

Vertical technology upgrade refers to the rapid growth of manufacturing production efficiency driven by breakthroughs in objective technology. In the past, the emergence of Industry 1.0, 2.0, and 3.0 originated from breakthroughs in steam conduction, electric drive, and computing technology respectively.

Industrial 1.0: refers to the steam era from the 1860s to the mid-19th century. Factory mechanization was realized through steam engine , mechanical production replaced manual labor, and the economy and society transformed from agriculture and handicrafts to a new model of economic development driven by industry and machinery manufacturing.

Industry 2.0: refers to the electrical era from the late 19th century to the early 20th century. On the basis of division of labor, electric power is used to drive the mass production of products, and through the successful separation of parts production and product assembly, a new and efficient model of product mass production is created.

Industry 3.0: refers to the electronic and information age from the 1970s to the present. The extensive application of electronic and information technology has greatly improved the degree of automation and control of the manufacturing process. Machines can gradually replace human work, taking over not only a considerable proportion of "manual labor" but also part of "mental labor."

At present, my country's manufacturing industry as a whole is relatively backward and is still in the stage of coordinated advancement of automation and informatization. As the informatization of production scenarios increases, emerging demands for quality improvement and efficiency are continuously developed, and new industrial software products continue to emerge. Combined with the continuous reshaping of production processes by industrial software, the upper limit of the market space continues to open, and companies in the industry will inevitably usher in volume. jump. At present, my country's domestic industrial software is still in the early stages of development. Various automation manufacturers, information management software manufacturers, industrial software implementers, and integrators are committed to the development of industrial software products, and the market competition pattern is still unclear. Referring to the transformation process of automation manufacturers in Europe, the United States, and Japan in the 1990s, it may serve as a reference for predicting the future trend of China's industrial software market.

After 1990: The transformation process of Japanese automation manufacturers gradually lags behind that of European and American

automation fields, and Japanese manufacturers have strong competitiveness. By the late 1980s, Japan had become the world's main supplier of high-end manufacturing products, and its share of the world's cutting-edge technology exports increased from 19.8% in 1975 to 32.1% in 1984, surpassing the United States (30.4%) and the United Kingdom. (27.6%), West Germany (27%). Behind the high prosperity of the manufacturing industry is the vigorous development of the automation industry. Taking robots as an example, Japan's robot output value reached 43.76 billion yen in 1989, an increase of 5.6 times compared with 1980. The robot contains server , controller and other automation equipment, which is a concentrated reflection of the development level of the automation industry. The prosperity of the robot industry symbolizes the overall strength of the automation industry.

However, the advantages of the automation industry have not extended to the industrial software field. The prosperity of Japan's automation industry has not given Japan an advantage in the field of industrial software. Although Japan's software industry is very developed, with total annual software sales second only to the United States, 86% of software sales in its information service market come from customized software development services, and only 14% come from software product sales. Embedded industrial software is relatively developed. However, the progress of industrial software productization is significantly lower than expected. From an enterprise perspective, although Japan has many industrial automation manufacturers, it lacks industrial software product manufacturers. Until 2016, Yokogawa Electric successively acquired independent software companies such as cloud data service provider Industrial Evolution and energy management technology provider SVM. Japan The road to software transformation for automation manufacturers has only gradually begun.

At the same time, European and American automation manufacturers have successfully transformed into integrated software and hardware solution providers. Since the 1990s, traditional European and American automation manufacturers (Siemens, Rockwell, etc.) have begun to transform into industrial software product providers through mergers and acquisitions, and their transformation progress is much ahead of Japanese manufacturers.

The transformation process of Japanese automation companies lags behind that of European and American automation companies, mainly for three reasons:

The bubble economy has broken, and the willingness and ability of enterprises to transform have been greatly reduced: The break of the bubble economy has affected the information transformation process from the aspects of corporate profitability and entrepreneurial willingness. Create suppression. In terms of corporate profitability, with the sharp decrease in national consumption willingness after the bursting of the bubble economy, and the expansion of a large number of low-efficiency production capacities in Japan in the 1980s, the profitability of various companies in the Japanese automation industry has been significantly reduced after 1990 due to price competition. Against the background of shrinking profits, companies are less willing to transform; in terms of entrepreneurial willingness, with the collapse of the bubble economy, market risk appetite has decreased, the number of startups has plummeted, software start-ups/teams are missing, and it is difficult for large automation groups to enhance industrial software through mergers and acquisitions. Product development strength and transformation capabilities are impaired.

Rigid personnel and systems slow down the transformation process: Most automation companies in Japan, Europe and the United States have a long history and developed along the lines of electrification and automation. Most of the corporate executives are hardware-related experts and pay less attention to software; corporate research and development The system is biased towards hardware, and software is only treated as an auxiliary service rather than a separate product. Therefore, established automation manufacturers in Japan, Europe and the United States will face problems such as rigid corporate management ideas and rigid R&D systems in the process of transforming into software product manufacturers. There is a large gap in the transformation progress between Japanese and European and American automation manufacturers. Part of the reason is Japan's merit-based culture. Under the merit-based culture, company personnel turnover is slow. Executives from the traditional hardware business have occupied management positions for a long time, and software development talents lack the right to speak. However, the low social entrepreneurial willingness caused by the bursting of the bubble economy makes it difficult for Japanese companies to absorb fresh blood through mergers and acquisitions like European and American companies (Siemens, etc.), thereby achieving organizational structure changes and senior management replacements.

Compared with automation hardware, industrial software has a stronger Matthew effect , and the first-mover advantage is obvious: Compared with pure automation hardware, software and hardware integrated solutions have stronger stickiness, higher replacement barriers, and obvious Matthew effect. . At the same time, software products are less affected by regional factors and are easier to promote globally.The bursting of the bubble economy and the sequential culture of meritorious service have caused Japanese automation companies to miss the point of transformation. Under market competition, it is difficult to catch up later.

The industrial software market is expanding. The gap in size between Japanese and European and American automation companies continues to widen. The manufacturing informatization upgrade since the 1990s has prompted the continuous emergence of new industrial software products, rapid increase in penetration rate, and ultimately brought about a great expansion of the industrial software market. The launch of industrial software products and integrated software and hardware solutions has driven the old European and American automation companies to achieve another jump in market value, gradually widening the gap with Japanese automation companies. At present, our country is in the stage of coordinated promotion of automation and informatization. Under the background of domestic substitution, industrial control and industrial software-related companies also have the possibility of a jump in market value.

reflects the domestic situation: under dual upgrades, how will the industrial software market structure be interpreted?

Currently, our country is at the intersection of industrial structure upgrading and industrial technology upgrading. Benefiting from the rapid growth of manufacturing capital expenditures under dual upgrades, the industrial automation and industrial software markets have experienced significant expansion, and the market value of related listed companies continues to rise. However, the overall market competition pattern is not yet clear. Automation manufacturers, information management software manufacturers, industrial software implementers, and integrators are still in the stage of deep exploration of segmented tracks. Competition mostly occurs within the same track, and there is less cross-industry competition.

Emerging Track: The Possibility of the Rise of Independent Industrial Software Vendors

Comparing Japan (1972-1990), my country is currently also in an industrial structure upgrading cycle. The development sequence of China's manufacturing industry is similar to that of Japan, both following the upgrading process of "light processing industry - heavy industry - high-end discrete manufacturing industry". Our country is currently in an upgrading cycle from high-end discrete manufacturing industries. In recent years, the total revenue (above scale) of enterprises in the automotive, electronic equipment manufacturing, electrical machinery and other industries has continued to increase as a proportion of the total revenue (above scale) of manufacturing enterprises (above scale), and the industrial structure has been upgraded. The high investment in industry brought about by it makes it possible for related industrial automation and industrial software manufacturers to overtake in corners.

Referring to the development history of Japan's automation industry and combining it with my country's current situation, three conclusions can be drawn:

Every industrial upgrade is the arrival of high industrial investment. Referring to the rapid rise of automation manufacturers during the upgrading of Japan's industrial structure, my country's new energy, semiconductor and other emerging industries are currently in a period of accelerated development. Industrial upgrading has given industrial control equipment and industrial software manufacturers opportunities to jump in size. In the emerging track of

, independent industrial software vendors may rise. Referring to Yaskawa Electric (mostly used in automobiles and electronics), Fuji Electric (mostly used in the steel industry) exceeds the scale of automation business. In the process of industrial upgrading, while emerging industries are expanding their production capacity, they are also investing far more in automation and information construction. Ultra-traditional industry. Considering the emerging industrial fields, traditional automation manufacturers do not have an absolute advantage in performance, and independent industrial software manufacturers may have opportunities to rise.

It takes some time for independent software vendors to grow. The development of industrial automation and informatization is essentially a gradual iterative process. The rapid breakthroughs in product performance of Japanese automation manufacturers are closely related to the long-term technological input of European and American manufacturers. In the context of the trade war, my country's industrial software mainly relies on independent research and development and domestic mergers and acquisitions, and it may take longer for various industrial software manufacturers to grow.

Traditional industries: Scenarios are king, focus on industry automation giants with first-mover transformation advantages

Against the background of significant expansion of market space, automation manufacturers with first-mover transformation advantages may continue to lead in future industrial software (traditional industries) competition.Referring to the past transformation history of European, American and Japanese manufacturers, most of the current automation giants were transformed from large motor and instrument manufacturers, while most of the industrial software giants were transformed from automation manufacturers. Independent software developers mostly exist in the research and development of design software and information. At both ends of the management software spectrum, traditional automation giants with first-mover transformation advantages (, Baoxin Software, , Central Control Technology, etc.) may continue to compete in the future industrial software (especially production control software, embedded software) market competition. Leading, for the following reasons:

Manufacturing informatization upgrade is a gradual process, and automation giants are more likely to have first-mover transformation advantages: Manufacturing technology upgrades are often slow (Japanese automation promotion took nearly 40 years), and enterprise informatization needs Emergence is a long process. In actual business operations, traditional automation giants are more likely to discover the pain points and difficulties of enterprise informatization, and use a gradual and iterative approach to promote the transformation of their business from pure hardware to integrated software and hardware products (especially for enterprises that have grown up in the information age). As a result, it has a certain first-mover advantage in the field of industrial software.

Automation giants were established earlier, and most of them have capital advantages: Compared with industrial software manufacturers, automation manufacturers appeared earlier, have a longer development time, and generally have certain capital advantages. Although such enterprises may have problems such as rigid systems and insufficient innovation capabilities. However, relying on their strong M&A capabilities brought about by their capital advantages, large-scale automation companies still have a high error tolerance rate in choosing strategic directions, and are more likely to form competitive advantages in market competition.

smart manufacturing is biased towards the actual production process, and third-party software developers lack competitive advantages: 1) Referring to the past "hardware-system-application" ecosystem of smartphones and PCs, there are a large number of third-party application developers in the ecosystem. Different from the industrial software customer group, the mobile phone and PC customer groups are individual consumers with diverse needs. Compared with hardware and system manufacturers, a large number of third-party developers can meet the diverse needs of customers through high-frequency iterative updates. However, for manufacturing customers, their demand for intelligent manufacturing is limited and closely related. Although industrial software has different forms and names, its ultimate purpose is to serve industrial production to improve quality and efficiency. Compared with third-party independent software vendors, Software and hardware integrated manufacturers have no significant competitive advantage; 2) R&D design software such as CAD and information management software such as ERP are mostly used on PC systems. The coupling degree of software and hardware is low , but production control software related to smart manufacturing, Most embedded software highly relies on automation equipment to provide data, and the high coupling of software and hardware gives automation manufacturers greater competitive advantages in aspects related to smart manufacturing. (Report source: Future Think Tank)

In the context of intelligent manufacturing and domestic substitution, three factors drive the transformation of industrial software in automation leaders to continue to advance:

Industrial software may be one of the core competitiveness of domestic automation manufacturers in the future: the current industrial automation products Innovation comes more from the application level, and its product matrix has expanded less in recent years. The competitiveness among automation companies is more reflected in the input-output ratio of developing new products and the test of management capabilities during production expansion. Innovation at the industrial software level may become one of the core competitiveness of automation manufacturers in the future. From the perspective of the development path of European and American manufacturers, there are many precedents for industrial automation manufacturers to grow into integrated software and hardware manufacturers, and the transformation path can be smooth; in the context of

technology upgrades and domestic substitution, the performance ceiling has increased significantly: On the one hand, with the informatization upgrade Gradually, the categories of industrial software have increased, the value of the software side has expanded, and the performance limit of software and hardware integrated manufacturers transformed from automation manufacturers has increased significantly. The existence of domestic substitution enables the above-mentioned manufacturers to occupy the increasingly expanding industrial software market at a relatively high growth rate. The expansion of the upper limit of market space drives automation manufacturers to transform into the field of industrial software; the transformation of

industrial software helps corporate valuations rise: 1) With the improvement of business models, corporate performance has gained greater flexibility.The integrated software and hardware solutions brought about by industrial software transformation enable enterprises to have higher premium capabilities and enhance profitability. At the same time, the incubation of standardized industrial software products allows enterprises to gain greater performance flexibility. Improvements in business models increase expectations for future performance growth and further drive upward valuations; 2) Compared with hardware, software has a stronger Matthew effect, is less restricted by geography and supply chain, and has a higher degree of market concentration and certainty in the final outcome. High caps give high valuation premiums.

Objective conditions determine that the stagnation of transformation of Japanese automation manufacturers will not be repeated in China: As mentioned above, the stagnation of transformation of Japanese automation manufacturers in the informatization trend can mainly be attributed to the damage to corporate profits caused by the bursting of the bubble economy, and the transformation Low willingness, and the rigid thinking of employees caused by Japan's seniority-based culture. At present, my country's automation industry is still in the domestic substitution cycle, the localization rate is at a low level, the market space is vast, and competition is fierce. Some automation manufacturers have a strong desire to develop in the field of industrial software. In addition, most of my country's automation companies were established after 2000 and grew up in the information age. Internal personnel within the company have a high degree of acceptance of information technology. The stagnant transformation of Japanese automation manufacturers is unlikely to happen to domestic automation manufacturers.

Simultaneous self-research and acquisition is the mainstream transformation method: the transformation of overseas automation manufacturers relies more on mergers and acquisitions. The reason is as mentioned above. It is mainly due to the thinking of traditional automation manufacturers’ executives and the rigid R&D system. Therefore, a large number of mergers and acquisitions are required to introduce external New blood improves software product development capabilities. However, most of the domestic automation companies were born after 2000, and company personnel are highly receptive to industrial software transformation. Some companies have independent software product R&D departments in their R&D systems, and their self-research capabilities are relatively complete. Different from the development history of European and American companies, both self-research and acquisition may be the mainstream transformation method in the future.

(This article is for reference only and does not represent any investment advice on our part. If you need to use relevant information, please refer to the original text of the report.)

Selected report source: [Future Think Tank]. Future Think Tank - Official website