With 2300 stores in the United States, Canada and Mexico, it provides over 1 million products to DIY clients, professional contractors, and serves Do-ItFor-Me customers, the largest share of Do-ItFor-Me customers, with revenue of approximately $132 billion in 2020.

(Report producer/author: Tianfeng Securities/Liu Zhangming, Wu Huidi, Li Lujing)

1.1. Power tools are tools to improve efficiency, and the top five categories account for 90%

Power tools are one of the most time-saving devices in history. By using compressed air, electricity, or combustion, they allow those who use them to do work that other people who use traditional tools cannot or take longer to complete. Power tools have many different classification methods, and power tools under each category serve to improve efficiency.

1.1.1. Classification by functional category: The top five categories account for more than 90%

Power tools are all similar in design principles, and functional categories are also relatively concentrated. These categories accounted for 90.5% of the overall power tool sales in 2019, with electric drills accounting for a large market share of 36.3%.

1.1.2. Divided by purpose: Industrial, professional, general-grade

Power tools can be divided into three types: industrial, professional, and general-grade according to their purpose. Industrial-grade products have high precision requirements. Industrial-grade products are mainly used in workplaces with high process accuracy requirements, and can provide high-precision solutions, high technical content, and single-time operation molding. For example, industrial-grade profile cutting machine , this type of product supplies B-end customers, and the market is relatively concentrated.

professional grade product has high power, high speed, long motor life, and can repeat operations for a long time. Professional-grade products are used in fields such as road construction, decoration, wood processing, etc., with high technical threshold and high market concentration.

general-grade products have lower product requirements than industrial and professional fields. General-grade products, also known as DIY products, are mainly used in occasions where accuracy requirements are not high and continuous operation time is not long. Such as gardening power tools and assembly tools. The entry threshold is relatively low and there are many brands. (Report source: Future Think Tank)

1.1.3. According to the source of power: pneumatic, fuel-gas-driven, electric, electric, electric can be further divided into roped and cordless

According to the source of power provided, power tools can be divided into three categories: compressed air drive, fuel-gas-driven, and electric drive. The tools for power drive can be further divided into roped and cordless according to whether the AC power supply with electric wires is used. This article mainly discusses battery-powered cordless power tools.

① Pneumatic tool. pneumatic tool is mainly a tool that uses compressor air to drive pneumatic motor to output kinetic energy to the outside. The pneumatic tool uses compressed air as power.

②Gas fuel power tool. This type of power tool uses burned gasoline, natural gas, , etc. as power to drive the machine to operate.

③Power tools: cordless power tools and cordled power tools.

cordless power tool uses the DC power provided by the battery as the power supply, and the cordless power tool uses the AC power transmitted by the wire as the power supply. From corded to cordless power tools, the most important difference is the use of batteries instead of wired AC as a power supply.

1.2. Development history: Tool category has been developing for a century, and the supply side has been constantly innovating and improving user experience

1.2.1. World industry history: Over 120 years of development, security, ease of use and portability have been gradually promoted

1895, the first modern power tool was born. When Thomas Edison invented the incandescent lamp in 1879, people's perception of the potential of machinery changed. In fact, the first modern power tool was invented just 16 years after the invention of Edison . Germany's C&E Fein invented modern power tools, combining the power of the electric motor with a manual drilling rig, creating a new type of drilling rig that completely transformed the industry. The rig is heavy, 16.5 pounds and requires multiple operators, powered by a large but relatively weak motor, , is slower and bulky, inefficient and difficult to use compared to modern standards, but it dominated the next 20 years.

1910, Black&Decker, the world giant of power tools, was born, and the improved design of the electric drill is lighter, easier to use and more powerful. In 1910, a mold worker named Duncan Black sold his car for $600 and opened a small machinery store with his friend Alonzo Decker. The two decided they could improve the C&E Fein drill by improving the design of the Colt.45 automatic pistol. Within 6 years of opening the store for the first time, Black&Decker began selling a pistol grip and trigger switch drill. Compared to the C&E Fein version, this drill is lighter, easier to use and more powerful, making it quickly occupy the market.

1957, Bosch invented power tools with plastic shells, and the product safety performance is improved. Since 1916, power tools have been developed, with inventions aimed at making power tools lighter and easier to use. Another key aspect of improving power tools is safety, which was often installed in cast metal shells before the 1930s, which resulted in reuse damage and often left the user vibrating. Through experimental comparisons of different materials, Bosch created the first power tool with a plastic shell in 1957, which made it safer to use power tools and protects users from the risk of electric shock. (Report source: Future Think Tank)

Starting from 2008, the cordless power tools led by Chuangke Industrial have begun to advance rapidly. In 2008, Chuangke Industrial made a decision to shift its current power tool business from power cords to wireless mode. It is estimated that the proportion of cordless power tools will reach 55.7% in 2024, becoming the main driving force for the future development of the global power tool industry.

1.2.2. China's development history: It began to become popular in the 1940s, mass production began to be carried out in the 1970s, and after 2011 various innovations such as wirelessization began to appear. The popularity of

power tools increased significantly in the 1940s, and now it has become an indispensable tool equipment in industry and family life in developed countries. After years of development, the global power tool industry has formed a relatively stable competitive landscape: large multinational companies such as Bosch , Makita, Baide, and Hitachi occupy most of the market share and have absolute discourse rights in the domestic high-end market.

my country's power tools were mass-produced in the 1970s. For more than half a century, China's power tool market has been continuously developing in the process of taking over the international division of labor and replacing the status of manual tools. Specifically, the development of power tools in my country can be divided into four stages:

first stage (1942-1979): seller market , which is monopolized by foreign countries. Due to the gap in technology level, China's power tool industry is still in its infancy, with scarce product types and the market is basically monopolized by imported brands, such as products from brands such as Bosch, Makita, and Dewei. At this stage, China's economic situation is developing rapidly, and the power tool field is in short supply and is in the seller's market.

Stage 2 (1980-2011): Supply and demand relationship tends to be balanced. After early enlightenment education and industry competition have become mature. From the perspective of manufacturers and channels, the increase in competitors has led to changes in market supply and demand, and the market supply and demand relationship has become balanced. After the industry enlightenment, users have obvious requirements for product quality. Xinyuan is a representative enterprise in this stage. Through the development of high-power electric drills and Dolix mixers, they have created "star products" and accumulated funds and popularity, and have successfully had a diversified development foundation.

Stage 3 (after 2011): Products tend to be homogeneous. At this stage, product technology began to tend to be homogenized, and the concepts of cost-effectiveness and product upgrades have become mainstream reference standards for consumers. For example, Chuangke Industrial has shifted its power tool business from power supply wire to wireless mode, and has continuously innovated in all aspects, becoming a leader in the power tool industry.

Stage 4: (2021-present): Stage of intelligent development.On the one hand, under the new development stage, with the continuous upgrading of China's industrial technology, power tools have begun to explore and develop towards cordlessness and brushlessness, accelerating the catching up with advanced foreign brands; on the other hand, as my country adopts and develops technologies in AI, 5G, big data, etc., and power tools are developing step by step towards the field of intelligent electric tools, and my country will accelerate the breaking of the monopoly pattern of leading foreign brands.

1.3. The power tool market has continued to grow steadily, with SWK and TTI leading

1.3.1. The world and China's power tool markets have both grown steadily

power tool markets have continued to grow steadily

power tool markets have continued to grow steadily. The power tool market can be simply divided into industrial grade and residential grade (professional + general grade). The industrial grade market accounts for a high proportion, but both markets are developing rapidly.

In China, the power tool market is also wide, and new power tools are replacing old products. At present, power tools are achieving a revolutionary replacement to "intelligence". The current existing power tools will usher in a new round of reform and development in the future. Old-fashioned power tools will be difficult to meet the current needs of smart factories and intelligent production. At that time, smart power tools will usher in a new round of replacement trends, causing the rapid development of the overall industry.

1.3.2. Competitive landscape: SWK and TTI are the leaders, and their share is still increasing

Due to the high unit price of products, fewer product types and the rapid development of power tool technology in the past 10 years, the market share has been concentrated in the hands of a few leading companies. The top five Stanley Black & Decker (SWK.N), Chuangke Industrial (TTI, 0669.HK), Bosch (500530.BO), Makita (6586.T), and Fujiwa (Husqvarna, HUSQA.S) concentrated more than 55% of the market share, and the remaining market was concentrated in the hands of dozens of regional special power tool brand companies. In the figure below, taking the industrial-grade market with high technical content as an example, CR5 is about 87.3%, with a high concentration.

2020, among the major companies in the overall tool industry, only the top two giants have increased their share. As the main leader in the industry, SWK's business includes hand tools and power tools, spanning high and low price band and various application scenarios. TTI mainly operates power tools, Bosch mainly operates power tools business, and in recent years it has transformed its business towards new energy vehicles. Makita, as a Japanese company, mainly operates domestic and European markets. Snap-on operates hand tools and power tools at the same time, mainly aimed at industrial B-end users. The chart shows that the companies account for about 57% of the market share, while the remaining 43% of the unlisted companies as a whole saw their share decline in 2020. (Report source: Future Think Tank)

Although Stanley Baide is higher than Chuangke Industrial in terms of revenue, Chuangke Industrial has the largest market share in the world in terms of cordless power tools. Chuangke Industry continues to innovate in all aspects of cordless power tools: brushless motor , lithium batteries, control systems, etc., and regards rechargeable products as the future development direction of power tools and equipment. Therefore, Chuangke Industry has made great progress in the field of cordless power tools.

1.4. Overall technical trends in the industry: lithium batteryization, intelligence, and diversified uses

The power tool industry is gradually lithium batteryization, intelligence, and diversified uses. (1) Benefiting from the breakthrough in lithium battery technology, power tools have gradually changed to clean energy power supply, battery costs have been continuously reduced, and battery capacity and safety are expected to be greatly improved; (2) Benefiting from the maturity of motor technology, electronic control technology, and artificial intelligence technology, the intelligence level of power tools has been greatly improved, and intelligent tools have gradually entered thousands of households; (3) With the increase in the popularity of households, power tools need to undertake multiple uses, and one machine, multi-purpose or complete set of composite tools will become the mainstream.

1.4.1. Brushless motor: Reduce losses, improve safety and reliability

Brushless DC motor is a typical mechatronics product. It consists of the main body of the motor and the driver. Since the brushless DC motor operates in an autonomous manner, it avoids the addition of the winding on the rotor, and does not cause oscillation and loss of steps when the load suddenly changes.

brushless motor reduces the generation of electric sparks, reduces noise and wear. The brushless motor adopts electronic commutation, the coil remains unmoved, and the magnetic pole rotates, and senses the position of the magnetic pole of the permanent magnet . According to the perception, switch the direction of the current in the coil in a timely manner to ensure that the magnetic force in the correct direction is generated to drive the motor. The brushless motor removes brushes. The most direct change is that there is no electric spark generated when the brushed motor is running, which greatly reduces the interference of electric sparks on remote control radio equipment. At the same time, the friction force of the motor is greatly reduced during operation, and runs smoothly, effectively reducing noise and wear, making maintenance easier.

brushless motor effectively reduces losses on the one hand, and improves safety and reliability on the other hand. Brushless motors help electric tool industry manufacturers develop new products and become a breakthrough in market share. The main loss of traditional power tool motors comes from irreparable wear in brush and rotor commutator parts. After using brushless motors, the wear of the motor itself is only concentrated on bearing . From a mechanical point of view, this wear can be almost neglected. Therefore, brushless motors increase the service life of power tools and reduce maintenance costs, and there is a lot of room for development in the future.

1.4.2. Cordless: battery products are gradually promoted

cordless tools are flexible and convenient, small in size, and safer at the same time. The proportion of cordless tools in global electric product sales is gradually increasing, mainly because cordless tools do not have cables and are flexible and convenient to use. Cordless power tools are generally smaller in size and are equipped with separate storage containers to store the included batteries; they cause less noise pollution and have a higher working duration; cordless power tools have no cables, and the risk of electric shock and accidents is less, so they are safer. With the change of power supply methods, the widespread application of cordless tools brought by new lithium battery energy is the future development trend, but it cannot completely replace DC power power tools. The main reason is that lithium batteries produce low power and have low durability, which cannot meet large-scale high-intensity continuous construction operations. However, the emergence of lithium battery power tools has brought another development direction to the current industry.

tools are cordless, portable and miniaturized, and the increase in cordless rate has driven the development of domestic lithium battery cells. In the process of popularizing electric tools, more and more household consumers tend to complete small tasks by themselves, and cordlessness, portability, and small and lightweight have become the current product development trend of electric tools. At this stage, cordless power tools are mainly used in the European and American markets, with companies such as TTI, Baide, Bosch, Makita, and Baoshide occupying the main market share. The trend of cordlessness will give the broad market space for lithium batteries for electric tools. In 2019, the penetration rate of cordless power tools has exceeded 50%, of which lithium batteries account for about 20-30% of the cost of electric tools. In recent years, with the rise of domestic battery cells, more and more international manufacturers have begun to switch to the lithium battery cells of Chinese manufacturers.

1.4.3. Battery innovation: On the basis of cordlessness, developing into the field of lithium batteries

Compared with nickel-hydrogen cordless tools, lithium battery cordless tools have the advantages of high energy density and long cycle life, and the permeability continues to increase. With the development of its lithium battery technology, the production cost of lithium battery gradually decreases, and the penetration rate of lithium batteries in cordless electric tools has increased rapidly. In 2019, the global lithium battery accounted for about 87% of cordless power tools, and the output of lithium battery power tools exceeded 240 million units, gradually occupying the dominant position in the power tool market.

lithium battery has outstanding performance in terms of loss and energy control. Lithium battery technology has gradually developed and matured. Not only is its efficiency better than nickel-hydrogen batteries, but its loss and energy control have also improved significantly, which is favored by consumers. Lithium battery solutions replace nickel-cadmium battery . The trend of battery will further promote the improvement of the penetration rate of cordless power tools. Related supporting components will also develop rapidly, such as brushless motors of lithium battery management intelligent controllers, battery clips and other lithium battery supporting components.

lithium battery replaces nickel-cadmium battery accelerates, which will give birth to a large amount of market replacement space.Compared with nickel-cadmium batteries, lithium batteries have little pollution to the environment, large power reserves, light weight, long life and short charging time, which is in line with the trend of miniaturization and lightweighting of power tools. In 2017, EU has legislated and mandated the delisting of nickel-cadmium batteries for power tools. The country is also accelerating the construction of a standardized system for power tools. The comprehensive popularization of lithium batteries in the power tool market will bring a new round of demand for lithium batteries.

The battery cells of cordless power tools are mainly cylindrical batteries, which are more suitable for the needs of power tools. At present, whether it is a foreign company or a domestic company, the battery cells that support cordless power tools are mainly cylindrical battery cells, which is closely related to the lightweight, customized and diversified cordless power tools. The cylindrical battery has stable process performance, flexible size, convenient assembly, and fast scale and quantity. It has strong flexibility and adaptability in the diversified product forms of power tools.

power tools have certain requirements for high-speed discharge and high energy density. At present, the materials are basically monopolized by the ternary battery system. Currently, the industry mainly launches cylindrical 18650 battery cells. At the same time, some manufacturers have mass-produced cylindrical 21700 battery cells with small internal resistance, high capacity, large discharge rate and high storage capacity retention rate.

1.4.4. Networking/Intelligent: Intelligent production empowers traditional manufacturing

Currently, power tools are achieving a revolutionary replacement to "intelligence". The existing power tools will usher in a new round of reform and development in the future. Old-fashioned power tools are difficult to meet the current needs of smart factories and intelligent production. Smart power tools will usher in a new round of substitution trends, causing the rapid development of the overall industry. The emergence of

intelligent tools, an intelligent management system built with brushless DC motors as the core power of the product, can exert the characteristics of the entire power tool and achieve the ultimate state. Especially the strong expressiveness of the terminal power under user load use - constant power and constant speed, working efficiency, machine life and other characteristics; it combines many advantages, such as chip algorithm, protection function, human-computer learning, information feedback, working condition customization, online design, personalized service, platform management, etc. The development trend of smart tools has been irreversible. The rapid development of current electronic technology and information technology has laid a solid foundation for the long-term development of smart power tools.

1.4.5. Garden Tools develop rapidly: segmented investment opportunities under the power tool category

With the recovery of the global economy, the disposable income of increases, the horticulture and outdoor markets continue to grow in the future, and the Garden Tools market will also develop steadily. The continuous expansion of urban landscaping area in my country, the demand for garden tools has greatly increased, and the development of garden tools industry has ushered in opportunities. It is estimated that by 2023, the market capacity of garden tools may reach 25.59 billion yuan. At present, my country's garden tool industry is facing industrial upgrading. Faced with the strong demand in the foreign garden tool market, especially in the demand for power tools, it has prompted my country's garden tool companies to increase their investment in R&D in power tools.

fuel engine and alternating current garden tools have certain defects. Garden tools are mainly divided into three categories: fuel engine, alternating current and battery power. Engine garden tools are easy to use and have strong power, but their defects are also obvious, including noise pollution and emission pollution, unclean operation, and unsafe storage of fuel. Considering that Europe and the United States are increasingly strict with environmental protection requirements, in the long run, engine garden tools will be increasingly restricted in the home field and are now difficult to replace in the professional field. Municipal electric garden tools are cheap, have enough power, and have no emission pollution, but the defects are also obvious, and they are inconvenient to use outdoors and have a high risk of electric shock.

lithium battery garden tools are replacing traditional garden tools due to their convenience and safety. The price of lithium battery garden tools is relatively high and the power is weak, but the advantages are that they are convenient outdoor use, clean and environmentally friendly, and have low risk of electric shock. The safety of power batteries will also be solved with the development of battery technology.With the further decline in battery prices, the increase in battery power, and the popularization of permanent magnet brushless position sensor motors, lithium battery garden tools may gradually replace municipal power and engine garden tools in the home field.

2. Upstream of the industrial chain: batteries and other core components

2.1. Power tool batteries: Domestic substitution accelerates, shipments have increased significantly, and the industry is developing towards high magnification and high consistency

2.1.1. Foreign battery manufacturers withdrew, and downstream high prosperity

In the past, companies such as Samsung LG led the market share in the field of power tool batteries. In 2018, domestic Tianpeng power supply market share accounted for about 10%. For a long time, the global battery for power tools has been occupied by Japanese and Korean battery companies such as Samsung SDI , Panasonic , Murata, and LG. However, with Chinese companies such as Yiwei Lithium Energy , Tianpeng, and Haisida in recent years, they have begun to supply large quantities of international power tools such as TTI, Bosch, and SB&D. The share of domestic battery companies in the global high-speed lithium battery market for power tools is gradually increasing.

Foreign tool manufacturers are deploying in China's industrial chain, the epidemic and wirelessization have promoted the growth of demand for lithium batteries, the original leading foreign manufacturers have withdrawn, and the relevant Chinese market companies are in high prosperity. The main reasons for the significant growth of the lithium battery market for power tools are:

1) International power tool terminal companies led by TTI are gradually turning their industrial chain to China, promoting the domestic power tool lithium battery industry to accelerate the industry transformation and layout;

2) The epidemic has led to an increase in demand for household DIY tools and cordless power tools, driving the increase in demand for upstream lithium batteries;

3) Power tools have gradually switched from wired to wireless, and wireless power tools have relatively high power requirements, which has increased the number of batteries used by a single electric tool, driving the increase in the shipment of lithium batteries;

4) Foreign lithium battery companies used for power tools represented by LG, SDI, and Panasonic have gradually shrunk their production lines in 2020 It is used to produce power batteries, reducing the supply of cylindrical batteries for power tools, and this reduced space is quickly occupied by domestic cylindrical battery companies.

Domestic companies in the battery field are accelerating their replacement of traditional international leaders such as Samsung LG. As the gap between Chinese battery cell factories and international lithium battery manufacturers in the field of high-speed batteries gradually narrows, the process of domestic lithium battery replacement will significantly accelerate in the future. Due to the continuous breakthroughs in domestic battery cell factories in the field of high-speed cylindrical battery cells, with the support of comprehensive advantages such as performance, scale, and cost, the choice of electric tool giants for battery cell supply chain has clearly turned to China. (Report source: Future Think Tank)

Tianpeng Power is the main supplier of high-end tool lithium batteries in China and has entered the list of major power tool companies. Tianpeng Power focuses on the small power battery market dominated by power tools, leverages the company's traditional advantages in the high-speed battery segmentation field, and comprehensively promotes stable cooperation with internationally renowned brands such as Bosch, Stanley Black&Decker, TTI, and domestic first-tier tool manufacturers such as Dongcheng and Dayi. The business volume continues to maintain rapid growth. It is the only small power battery supplier in China that has entered the supply chain of the world's top 5 power tool companies.

2.1.2. Performance requirements for power tool batteries: high magnification, high consistency; direction is developing towards lithium batteries, silicon-based materials are gradually applied, differentiated designs

The performance requirements for power tool lithium batteries are mainly concentrated in two aspects: 1) high magnification; 2) high consistency. Currently, the mainstream lithium batteries for power tools are NCM523 with graphite system 18650 cylindrical batteries. A few special foreign brands of power tools use NCM811 or NCA's 21700 and 26650 cylindrical batteries (mainly industrial/professional power tools).

There are several major trends in the future development of power tools batteries: developing towards lithium batteries, starting to apply silicon-based materials, and designing various tools according to scenarios.

① Cordless power tools occupy the mainstream, lithium batteries replace nickel-cadmium/nickel-hydrogen batteries, and shipments are growing steadily;

② Silicon-based materials are mass-produced and applied in the field of power tool batteries, and the NCM811/NCA+ silicon-based materials route will achieve higher magnification and more resistant to high and low temperature products;

③ Batteries will be differentiated according to application occasions (capacitance, magnification requirements), and the penetration rate of 21700/26650 is expected to increase in industrial and even professional-grade power tools.

2.1.3. Battery supply chain Domestic companies: Yiwei Lithium Energy, Tianpeng Power

Domestic power tool battery companies have been increasing in shipments, entering the supply chain of large customers. Among them, Tianpeng Power, Yiwei Lithium Energy and Haisida ranked in the top three.

2.2. Other core components upstream: motor, electronic control, drill clip

Upstream can be divided into several major categories. The circuit-related items include motor, electronic control, and batteries. Battery-related content has been introduced in the above chapters. This section introduces motors and electronic control companies overview. In terms of materials, there are steel, enameled wire, , wire, belt, gear, etc. This section will also introduce drill clip-related companies.

2.2.1. Motor: The main product is DC motor . The brushless and synchronous motor accounts for a small proportion. The industry is labor-intensive, and the high-end is occupied by Europe and the United States. The concentration of small and medium-sized markets is low. From the overall pattern of industry technology development, DC brushless motor , intelligent control and high-efficiency motor are the main trends in future development. It mainly introduces three types of motors: DC motor, brushless DC motor, and synchronous motor. DC motors are widely used.

The stator of the DC motor is equipped with a permanent magnet and a brush that provides current to the rotor, and the rotor is equipped with a winding and a commutator. Once the brush supplies DC current to the commutator, the current starts to flow through the windings connected to the commutator and generates torque. Winding and commutator have a mechanism to keep the current flowing in the same way as torque maintaining the same level. The biggest feature of DC motor is its availability of working with dry battery . You can change the rotation direction by simply changing the connection of the motor wires, which is why DC motors are widely accepted.

Brushless DC motor is a motor that has no brushes and reduces resistance. A brushless DC motor can be described as "a motor without brushes, but it has a characteristic similar to a DC motor." Its structure is that there are windings in the stator and permanent magnets in the rotor. Instead of the brushes and commutators used by DC motors, it has installed a semiconductor switching element outside the motor, which switches current based on the permanent magnet position detected by the Hall element sensor and continuously generates the same level of torque.

China's motor industry is a labor-intensive plus technology-intensive industry . The market concentration of large and medium-sized motors is relatively high, while the market concentration of small and medium-sized motors is relatively low, and competition is fierce. There is a large differentiation within the motor industry. Listed enterprises and foreign-funded enterprises occupy a high market share in the entire industry due to sufficient funds, large production capacity, and high brand awareness.

2020, the high-end market of Chinese motors was mainly monopolized by foreign companies. There are many participants in the servo motor of in China, and can be divided into four types: Japanese, European and American, Taiwanese and domestic manufacturers. Imported products account for more than 70% of the industrial robot servo market in my country. Japanese brand products mainly include low power and medium power, accounting for more than 50% of the domestic market share. Currently representative companies in this field include Huichuan Technology (300124.SZ), Siemens (SIEMENS.NS), Anchuan (6506.T), Huazhong CNC (300161.SZ), etc.

Kangping Technology is a professional motor supplier and whole machine manufacturer in the field of power tools. In 2020, the motor revenue was 670 million yuan and the power tool revenue was 105 million yuan. The company has established stable cooperative relationships with famous multinational power tool production companies such as Baide, TTI, Maitabao and Gaoyi Machinery.

Huarui Co., Ltd. is engaged in the manufacturing of motor commutators. The commutator is the core component of the motor, known as the "heart of the motor", and is a key component on the DC motor and AC commutator motor that allows the motor to rotate continuously.In 2020, the company's commutator products covered major markets such as power tools, automotive motors and household appliances, accounting for 35.42% (258 million), 2143% (156 million), and 15.78% (115 million) of operating income respectively. The company has globally renowned customers such as BLACK&DECKER, BoShi Group (BOSCH), Makita (MAKITA), Nippon Electric (NIDEC), Shunde Weiling, Hubei Shendian and other famous customers.

2.2.2. Drill clamp: Shandong Weida is a drill clamp faucet

Drill clamp is composed of a drill jacket, elastic ring, connecting block, and back cover. Drill chucks are mainly used in DC and AC drills for household use. Its biggest advantage is that it is easy to lock. Just hold the front and rear sleeves of chuck and tighten it to use.

In the power tool accessories industry, Shandong Weida has been engaged in the research and development and production of drill chuck products for nearly 30 years, and its production and sales have been ranked first in the world for more than 20 years. The company has mature processing technology and unique processing proprietary technology. Its products are sold well in more than 80 countries and regions around the world. It is one of the first single champion demonstration companies of the Ministry of Industry and Information Technology's manufacturing (fixture products) and has a wide brand awareness and influence around the world.

2.2.3. Electronic control: The overall market concentration is low

Electronic intelligent controller is the "power management system" in lithium batteries and is one of the essential components and core components of lithium battery modules. The electronic intelligent controller works through a circuit system composed of electronic components and embedded software to control the charging voltage and current of the lithium battery module, control the output voltage and current, and monitor the safety indicators such as temperature, etc., ensuring the safety and reliability of the use of the lithium battery module.

overall market concentration is low, and the market does not have the industry-specific monopoly enterprise . Some high-quality companies usually adopt a centralized strategy to gain a leading position in one or several specific downstream segments, and then obtain profit margins by reducing costs and product differentiation; but as a whole, these companies still have a small market share and influence.

In the field of electric control of power tools, Langke Intelligent has had a long and stable history of cooperation with TTI, a world-class supplier in the industry. The company has rich cooperation experience, has gained the long-term trust and support of customers, can jointly develop and deploy production capacity with customers, quickly deliver products, meet the requirements of diversified and high standards, and has become the core supplier of customers in the field of intelligent controllers. (Report source: Future Think Tank)

electronic control is widely used downstream, not only for power tools. In terms of track application fields, the largest downstream scenario is automotive electronic intelligent controllers, the second is household appliance intelligent controllers, and power tools rank third in the intelligent controller industry.

3. Midstream Manufacturing: Capacity depends on China, Southeast Asia's tariff advantages may be undertaken part of the production capacity

3.1 China's supply chain has certain advantages and provides most of the production capacity

China's supply chain features the first-mover advantage in the power tool manufacturing industry. International power tool manufacturers regard China as the main production capacity layout point. Power tool manufacturing is a labor-intensive industry, and its upstream supply chain requires relatively complete industrial basic supporting facilities. Since China has a large amount of labor and vigorously develops the electronic information industry, China has a first-mover advantage in manufacturing power tools. China's huge economic scale and rapid development strategic planning have provided a lot of demand for power tools. It has established its position as a global manufacturing capacity center in the past 10 years and cultivated a mature supplier and foundry system in the local area. Therefore, international leading power tool companies regard China as the main layout point of their production capacity.

From the data, China provides most of the world's power tool production capacity. my country is the most important producer of power tools and supplier of parts products in the world. The market demand is mainly exported and domestic sales are supplemented. The export rate of power tools and parts reaches more than 80%, ranking first in the world. From 2016 to 2019, China's total power tool output remained around 270 million units, and the output was relatively stable. In 2019, China's total power tool production accounted for about 68% of the global total power tool production.

3.2 Under the post-trade war, Southeast Asia has become a tariff depression, and tool companies that are deploying Southeast Asia have benefited to a certain extent

Due to Sino-US trade frictions, the United States imposed a 25% tariff on Chinese products, causing the power tool tariffs to be higher than normal, affecting China's export trade. Normal tariffs are tariffs on most of the world's imports (including China), but do not include import tariffs on countries that have relevant free trade agreements with the United States, and special countries that have no trade relations with the United States (such as North Korea). When products are included in the US tax increase list for China, an additional 25% tariff is required based on the applicable tax rate for Chinese products. The actual tariff in the table below is the actual tax rate borne by Chinese products. The following table lists tariffs on exporting some power tools from China to the United States.

Southeast Asian countries have become tariff depressions. At the same time, the United States imposes low tariffs on corresponding products of Vietnam, Cambodia and Thailand. The following table is an example of the tariffs of the United States on Vietnam's power tools. The tariff levels of related products in Cambodia and Thailand are the same as those in Vietnam.

4. Power tool consumption is concentrated in Europe and the United States, mainly for housing-related scenarios. Relying on multiple brands and multiple channels for sale

Power tool consumption is mainly in Europe and the United States, and the competitive landscape of downstream companies has stabilized. In foreign countries, the global power tool industry has formed a relatively stable competitive landscape. Large multinational companies such as Stanley Berth, Chuangke, Bosch, Makita, and Maitta have occupied the main market share; Germany, the United Kingdom, the Netherlands, France and other countries in Europe, as well as the United States and Canada in North America, purchase volume accounts for about 50%-70% of the world's total power tool production, making it the most important market for global power tool consumption.

4.1. Typical downstream scenarios include consumer DIY, car repair, engineering construction, industrial

SWK As the industry leader, its downstream scenarios are representative.

4.2. Downstream demand is driven by the housing and automobile industry, and the track continues to be prosperous

Construction field, the data on existing home sales and car ownership in the ten-year upward cycle. The sales of existing homes and car ownership in the United States continue to rise, and these downstream indicators indicate a high prosperity of downstream demand. From the figure below, we can see that since the financial crisis, the downstream representative indicators have been on the upward channel for a long time. We believe that this is naturally brought about by the increase in population and GDP.

4.3. Leading mergers and acquisitions continue to advance, obtaining a diversified brand matrix

4.3.1. Leading companies all have multiple sub-brands

tool industry companies have multiple brands through mergers and acquisitions and are laid out in various price segments. Because consumers have a certain brand mind about brands, it is difficult for a single brand to do well in multiple price bands. At the same time, the brand itself can also reduce the cost of consumer purchasing decisions. For tool leaders, breaking the original brand mind and rebuilding a brand is not only difficult but also time-consuming, which makes them tend to acquire brands, so that new brands and old brands can produce cross-reuse of brands, channels, and products, and produce synergies after mergers.

4.3.2. SWK, TTI and Superstar Technology and other companies continue to promote mergers and acquisitions

mergers and acquisitions can obtain sales channels and can also obtain recognition from consumers corresponding to the brand. The industry giants have always had mergers and acquisitions, which is due to the relatively fragmented industry structure and the leaders have demand for brands and channels. (Report source: Future Think Tank)

4.4. The main offline sales channels include Walmart, Lowes, Homedepot, CTC, Kingfisher, and the main online is Amazon

The main sales channels in the United States include Walmart (Walmart), Lowes (Lawes), and Homedepot (Home Depot). Among them:

Walmart is one of the largest retailers in the world and one of the largest companies in the world. Wal-Mart USA has stores in 50 states and Puerto Rico, including super centers, discount stores and neighborhood markets. In addition, Walmart Global Procurement cooperates with manufacturers to sell its products around the world, including clothing, household goods, jewelry, grocery products, etc.In addition to the United States, Walmart has entered countries such as Chile, China, Mexico, Africa, Canada, India, etc. In terms of the number of stores, as of January 31, 2021, Walmart had 4743 US stores and 11847 stores worldwide, of which 11443 were retail stores.

Lowes is one of the largest home improvement platforms in the world. Provide customers with home maintenance, decoration, reconstruction and decoration products. It serves 2,000w customers in the United States and Canada on average, with revenue of approximately US$90 billion in 2020. Lowe's operates or serves more than 2,200 home improvement and hardware stores, with 1,700+ in the United States and 450+ in Canada.

Homedepot is the world's largest home improvement retailer. With 2300 stores in the United States, Canada and Mexico, it provides over 1 million products to DIY clients, professional contractors, and serves Do-It For-Me customers, the largest share of Do-It For-Me customers, with revenue of approximately $132 billion in 2020.

Canada's main sales channel is CTC (Canadian Tire Corporation). Its retail business is led by Canadian Tire, which provides daily necessities for Canadian adults through its life, entertainment, repair, automotive and seasonal gardening divisions. The company has more than 1,700 retail outlets in Canada.

The main sales channel in Europe is Kingfisher (Cuifeng Group). Kingfisher is an international home improvement company with more than 1,400 stores, operating under multiple brands in eight European countries including B&Q, Castorama, Brico Dépôt, Screwfix, TradePoint and Koçtaş. The company provides home improvement products and services to consumers and trade professionals. Online sales are mainly Amazon.

(This article is for reference only and does not represent any of our investment advice. 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