Specifically: 1) The second-level sub-track substitution difficulty coefficient will increase the highest domestic production rate in the future, and the most significant technical barriers of leading companies will be the most important stock selection position in the direction

(report producer: Guojin Securities)

1. Macro: Independent and controllable is the core direction of Chinese modernization

1.1. The world has not seen a century of great changes, coordinated development and security

The world has not seen a century of great changes, determines that we must coordinate development and security. To achieve the second centenary goal, we must recognize the changes in the world situation we are facing, the changes in the balance of power among major powers, the intensification of anti-globalization, etc., which has increased the uncertainty of the external environment we face. Since 2018, anti-globalization ideas have risen, unilateralism and protectionism have increased significantly. The United States has adopted "special" measures such as technological blockade and trade tariffs on Chinese high-tech companies, which have had a significant impact on related fields. The impact of the epidemic on the global supply chain, the European energy crisis, etc., further intensified anti-globalization behavior and had a profound impact on the global industrial chain, supply chain pattern.

Two "century years" determine that we must follow the independent and controllable high-quality development path of , and there is great potential for localization of the supply chain and industrial chain. To achieve the "second centenary" goal, high-quality development is the primary task, and the construction of a modern industrial system is one of the key steps; and under the great changes in the world that have not been seen in a century, the security of the industrial chain and supply chain has become an important prerequisite for achieving high-quality development, and it also determines that we must follow the path of independent and controllable . At present, my country's domestic production rate in the fields of basic materials, key equipment and systems is relatively low, and it is necessary to increase policy support, corporate talents and R&D investment to achieve core technology breakthroughs.

2. Strategy: Independent controllable and domestic substitution tracking system

2.1. Combining top-down and bottom-up filtering of subdivided tracks

bottom-up to select subdivided tracks. We have unified the standards for the core indicators of the industry's independent control level. Analysts from various industries have conducted unified standards on the current situation, difficulties and prospects of independent control and domestic substitution in sectors, and the industry is relatively clear. And forward-looking analysis of the independent and controllable paths in the sub-sectors of big technology and big manufacturing. A panoramic display of stock selection standards and tracking research framework that presents the general direction of "independent and controllable".

2.2. Panoramic research framework: two dimensions of subdivided track and core company

First of all, for the subdivided track mentioned above, we portray the current situation, difficulties and prospects of domestic substitution from the four dimensions of "current domesticization rate, difficulty in domestic substitution, difficulty in stuttering the neck, and time to overcome difficulties". 1) Current domestic production rate: the current share of Chinese enterprises in domestic sub-sectors. 2) The difficulty of domestic substitution is divided into 5 levels from difficulty to easy. Title 1: Extremely difficult. Overseas companies are monopolized, and domestic companies cannot see that they can break through in the short term; Level 2: It is more difficult. Domestic single or very small leading companies have made breakthroughs of 0 to 1 and can obtain a certain market share of low-end products, but high-end products cannot be entered yet; Level 3: Medium. Several domestic companies have made breakthroughs, and the market share of low-end has increased rapidly. The high-end market is also beginning to make breakthroughs and is in a steadily improving stage; Level 4: Easy. A number of domestic companies have made breakthroughs, and the overall domestic market share has increased rapidly; Level 5: Easy. Chinese companies have reached a high domestic market share and have begun to rush overseas, and their export share has entered a steadily increasing stage.

From the perspective of investment attributes: the second-level sub-track difficulty coefficient will increase the highest domestic production rate in the future, and the most significant technical barriers of leading companies will be the most important stock selection position in the direction of "independent and controllable". Tips 3 and 4 are the accelerated stages of domestic substitution. Leading companies are expected to usher in rapid performance growth, but they will also be under pressure from intensified competition. Section 1 is an area where progress is continuously observed in the medium and long term, and has strong thematic investment attributes. The fifth level is that the domestic company has basically stable structure.

3) "Bocking Neck" Difficulties: The core difficulties in the process of domestic substitution in subdivided fields, which helps to judge and track the time and rhythm of the domestic process. 4) Time to overcome difficulties: It is expected that the approximate time will be required to overcome the "bottleneck" difficulties, such as 1-2 years, 3-5 years and more than 5 years.Secondly, for companies in different segmented tracks, systematically sort out the core advantages, industry status and future prospects of leading enterprises. Deeply explore the investment opportunities of domestic leading companies in sub-sectors and second- and third-tier leading companies.

At the same time, considering that the recent US chip bill restricts US nationality from participating in the work of Chinese semiconductor companies, we have also sorted out core technical personnel and management of foreign companies in sub-sectors. Judging from the 130 sample companies we have sorted out, foreign personnel account for a relatively high proportion of core technologies and senior executives in the communications, electronics, medicine, computers and automobile industries, while non-ferrous industries have no foreign personnel.

3. Electronic

3.1. Supported by the new national system, the localization of semiconductors is expected to accelerate

. The United States' sanctions continue to increase, and the focus on supply chain security is increased under anti-globalization. The United States has launched the chip science bill, and many international and economies around the world, including the EU, Japan, South Korea, India, etc. have also begun to support local chip and increase policy subsidies. Against the backdrop of anti-globalization, the uncertainty of the global supply chain has increased, and local equipment and parts suppliers have more to undertake local demand, and the domestic production rate is expected to continue to increase. Faced with the escalating sanctions from the United States, on the one hand, the domestic investment in mature processes continues to increase, and the localization of the industrial chain is expected to accelerate the introduction of upstream domestic equipment, parts and materials, and verification is accelerated; on the other hand, in the field of advanced logic and memory chips that are currently being thwarted, the national system is concentrating its efforts to break through the limitations of processes and equipment.

policy support is expected to increase. On September 6, 2022, the Central Committee for Deepening Reform pointed out that "to improve the new national system for key core technologies, we must organically combine the government, market and society, scientifically coordinate, concentrate our efforts, optimize mechanisms, and coordinate research. "Aim at several key areas and major tasks related to my country's industry, economy and national security, and clarify the main direction and core technology breakthroughs. "In the core of semiconductors, we expect to increase the support of relevant policies in the future.

3.2. Domestic substitution of equipment/parts/materials, high-end GPUs and memory chips

Semiconductor equipment: It is expected that with the breakthrough of process technology of domestic equipment manufacturers, the product types will continue to expand, and the penetration rate of domestic equipment is expected to increase rapidly in the future. We believe that the subsequent equipment links with low domestic production rates are expected to accelerate, and investors are advised to focus on equipment sectors with low domestic penetration rates, such as thin film deposition, ion implantation, glue coating development, measurement and detection, lithography and other links. Semiconductor equipment parts: The components sector continues to benefit from the domestic production demand of domestic semiconductor equipment Growth and rapid development, the domestic production of equipment and the domestic production of parts. semiconductor materials : Semiconductor materials are less restricted by the United States, mainly Japanese and European suppliers, but in the context of anti-globalization, downstream verification import is expected to accelerate.

EDA software: As EDA international giants cut off supply of to some Chinese chip design companies , domestic replacement is imperative. Once the United States cuts supply of EDA, design companies will be unable to use the latest version of EDA software and IP for chip design, and they will not be able to obtain the production process PDK of downstream foundry factories. High-end GPU: We believe that the United States continues to increase export restrictions on China's high-end chips, and the process of domestic production of chips such as GPU and CPU related to high-speed computing will inevitably accelerate. At present, global GPU The industry scale is US$20 billion, and it is expected to reach US$35 billion in 2025, with an average annual growth rate of 13%. Currently, the GPU industry market is mainly dominated by Nvidia and AMD (AMD 17%, Nvidia 83%).

4. Computer

4.1. Building an independent and controllable domestic IT ecosystem

Innovation and Innovation: Under the policy-driven, the industrial chain is becoming more perfect, and the scenario is deepened from the party and government market to key industries. The core of Innovation and Innovation lies in the realization of domestic substitution at the hardware and software levels by building an independent and controllable domestic IT underlying architecture and ecological system.Starting from 2018, against the backdrop of the United States' technical sanctions on Huawei , ZTE and other companies, Xinchuang entered a period of rapid promotion. At present, the pace of domestic production is in the stage of evolution from "usable" to "easy to use". After the party and government, industries such as finance and telecommunications have taken the lead in entering the stage of implementation. In the next 3-5 years, on the one hand, the party, government and trust creation will sink to county and township markets, and on the other hand, the information creation will be relayed for key industries such as finance, operators, and energy.

Intelligence will most likely bring about the reconstruction of IT standards, providing relevant manufacturers with the opportunity to "overtake on the curve" in the medium and short term. In the short term, as the information innovation and innovation move from the party and government to key industry markets, the number of participants increases and the ecology is gradually improving. In the long run, the reconstruction of IT industry standards has brought about the reshaping of the industrial chain. Chinese IT companies have first overtaken and then promoted industrial upgrading. The technology and capital-intensive characteristics of the IT industry mean that as the industry matures, under the scale effect, the concentration is expected to increase, and the top manufacturers with technical moats are gathered.

Industrial software: The weakness of a major country with hard manufacturing, and localization brings development opportunities. In 2021, China's industrial software market size was RMB 241.4 billion, with increasing by by 24.8% year-on-year, significantly higher than the global market. However, compared with the world's largest manufacturing power, China's industrial software accounts for less than 10% of the global market size, and its development is significantly backward. The mid-term R&D and design industrial software is small in size and is the shortcoming of industrial software. As the most difficult industrial software segment, there is a huge gap between Chinese manufacturers and foreign manufacturers. At present, general-purpose R&D and design software still dominates foreign manufacturers, with the domestic production rate in CAD, CAE, EDA, BIM and other fields being less than 5-10%.

With the help of the localized east wind, domestic manufacturers such as Zhongwang Software, Huada Jiutian, and Guanglianda have gradually made breakthroughs in sub-vertical tracks such as CAD, EDA, and BIM. Production control software, high-end discrete industries are mainly overseas brands, and process industries with monopoly and mature production processes have initially completed import substitution for domestic brands. The domestic production rate of DCS, MES, SCADA has reached about 50%, and leading companies such as Central Control Technology, Guodian Nanrui , Baoxin Software , and Petrochemical Yingke have emerged.

4.2, domestic substitution of industrial software,

, INFORMATION - CPU: mainly include Huawei, Feiteng, Haiguang, Loongson , Zhaoxin, Shenwei and other participants. At present, the overall domesticization rate is low, and domestic substitution is difficult, mainly due to advanced process chip foundry and other links, focusing on Haiguang information. Xinchuang-operating system: The main participants include Galaxy Kirin , Wuhan Shenzhidu, winning bid software, etc. operation system is the most important domestic substitution link. At present, the overall domesticization rate is low, mainly due to ecological construction. The operating system is more important than database and office software. All upper-level applications must be adapted to the operating system, and the operating system controls the ecological entrance. Focus on Chinese software (Kirin). Xinchuang-Database: The main participants are Renmin University Jincang, Wuhan Dameng, Shenzhou General Motors, Nanda General Motors , Jusse Database, Oceanbase, GaussDB, TiDB, etc. The strategic position of databases in the digital transformation of government and enterprise customers is extremely important. The domestic production rate is low. Ecological construction needs to be strengthened, and focus on Dameng data.

Industrial Software -EDA: EDA software is an upstream basic tool in the field of integrated circuit , running through integrated circuit design, manufacturing, packaging and testing. At present, the EDA market is still mainly monopolized by the three overseas giants, Synospys, Cadence, and Siemens EDA. In recent years, the United States has imposed multiple restrictions and sanctions on my country's chip industry, forcing domestic substitution to progress, and also opening up market space for domestic EDA companies. At present, some domestic EDA tools have reached the level of domestic substitution, and are expected to usher in rapid growth under the dual catalysis of internal and external policies. Industrial Software-CAD/CAE: Overseas manufacturers dominate my country's CAD market, and there may be a "ten-year gap" at home and abroad. According to IDC, in 2021, local manufacturers in my country's CAD market accounted for nearly 20%, of which Zhongwang Software surpassed PTC and entered the domestic market CR4, accounting for 11.4%; overseas manufacturers in the 3D market still accounted for more than 90% of my country's share, and there is huge room for local manufacturers to replace them.

Industrial Software -MES/DCS: The domestic production rate of the entire production control industry is around 30%, and the mid-range products are around 50%. Compared with overseas manufacturers, the domestic manufacturers of DCS, SCADA, PLC are smaller in scale and mainly focus on mid- and low-end products; MES companies have competitive advantages in some sub-track tracks, but they still have a gap with foreign software.

5. Communication

5.1. "De-A" and "De-C" are combined into

The iterative upgrade of the information and communication industry (ICT) has promoted the transformation of the strategic pattern, and China's voice and dominance in the global industrial competition pattern have been continuously strengthened. The development of the ICT industry has risen to a dispute over national competitiveness and strategic dominance, and the supply chain pattern is at risk of being reconstructed. On the one hand, the United States has strategically adopted containment measures against China in high-tech fields such as 5G, artificial intelligence and , and promoted "de-Cization" in its mainland United States and traditional allies. On the other hand, some domestic companies have begun to consider "de-A-based" based on their own business continuity and supply chain security, changing the current situation of transitioning to rely on American companies in core components and key technology fields in the past. Compared with the consumer electronics supply chain, the domestic substitution process will be relatively slow due to large R&D investment and high technical barriers on the communication equipment side.

5.2, domestically produced and replaced

communication main equipment: it has achieved global leadership. The global communication equipment market structure remains stable, and domestic communication equipment manufacturers have a high share of the world. According to Dell'Oro Group, in 2018-22H1, the global market share of domestic leading communication equipment manufacturers Huawei and ZTE remained at around 40%, among which Huawei firmly ranked first, with a market share of nearly 30%, significantly leading overseas manufacturers such as Nokia and Ericsson . Domestic substitution has been basically completed, and the two leading domestic markets account for a total of 90%. From the perspective of the Chinese market, in the first half of 2022, Huawei's share in the Chinese market reached 58%, ZTE's 32%, and other manufacturers' supply accounted for 10% of the market share.

upstream core chips for communication equipment: there is broad space for domestic replacement. Domestic chip development is slow, and talents and experience are relatively scarce. At present, due to policy and industrial chain support, technology is constantly breaking forward, and there is huge room for domestic substitution in core fields such as FPGA, baseband chip , AD/DA, DSP. The industrial and communication market is the key to domestic substitution of FPGAs. Judging from the downstream structure of FPGA in my country, the communications market occupies the largest share and continues to grow rapidly. According to Frost&Sullivan, the FPGA scale for the communications market will reach 14.04 billion in 2025, accounting for 42.3% of the total, and a three-year CAGR of 17.4%. The FPGA market has a high concentration and is dominated by foreign-funded manufacturers.

According to Frost&Sullivan, the global FPGA market is mainly dominated by Xilinx and Altera (acquired by Intel ), which account for 52% and 34% of the shares respectively. Together with lattice (5%) and Microchiph (4%), the top four manufacturers have accounted for nearly 95% of the shares, and the market concentration is very high. In the domestic market, although foreign companies still occupy the majority of the share, domestic manufacturer Anlu Technology has ranked among the top four, and domestic production has made a slight breakthrough. Although it started late, benefiting from its huge reserve of technical talents and market demand, China's FPGA market already has high-quality companies such as Unigroup Tongchuang and Anlu Technology. At the same time, Huawei has also developed an FPGA cloud platform to provide global experts in artificial intelligence, big data and other fields to provide disruptive development models. FPGA is still expected to gradually realize domestic replacement.

optical module : Domestic substitution has been basically completed. In 2016, domestic manufacturers such as Hisense , Optoelectronics, and Zhongji Xuchuang ranked among the top ten optical modules in the world. According to LightCounting, in 2021, there are already 5 Chinese manufacturers among the top 10 optical module manufacturers in the world. Zhongji Xuchuang is ranked first with the US Coherent (II-VI, Finisar) company, indicating that domestic optical module manufacturers are no less than overseas companies. In addition, according to Omedia's perspective, the total share of leading domestic manufacturers in 2021 reached 26%. Considering that Coherent was merged by II-VI and Finsar, the share of domestic single manufacturers is comparable to that of overseas manufacturers, and domestic substitution has basically been completed.

optical passive devices: It is expected to become the next important link in the localization of the optical communication industry. As for the optical device industry, high-end optical active devices have high barriers, and suppliers are still mainly foreign manufacturers, including the United States Coherent, Lumentum, and Japan's Sumitomo . At present, the domestic technology development of optical passive devices has been relatively mature. In recent years, domestic small and medium-sized manufacturers represented by Tianfu Communication , Bochuang Technology, Taichen Light and Light Ku Technology are gradually rising. We believe that domestic optical devices are currently in a stage of rapid development. Taking Tianfu Communication as an example, domestic high-speed passive optical device product technology continues to make breakthroughs and share continues to increase. The localization of the optical communication industry chain is expected to continue to break through from optical modules to the upstream. In the short term, from optical passive devices, optical active devices and long-term optical chip products, achieving complete domestic substitution of the industrial chain.

Electronic measurement instrument: Domestic production is still in its infancy, and the penetration rate is expected to increase rapidly. European and American giants occupy the main share of the global market, and domestic brands are accelerating their catch-up. Due to its good foundation in upstream and downstream electronics industry and mature measurement technology, the electronic measurement instrument industry started early, overseas companies have accumulated a lot of design and development experience, especially in high bandwidth and high frequency products, which have significant technological advantages. Domestic brands started late and are currently mainly concentrated in the mid- and low-end markets. With the advancement of my country's information technology and measurement technology, domestic brands have gradually expanded from low-end to medium-high-end through years of R&D investment and technical accumulation. In the long run, high-quality domestic companies have ushered in long-term development opportunities under the general trend of domestic substitution.

According to Frost&Sullivan, overseas leading companies, Keys Technology, Tektronix, Rhodes and Schwarz, and the United States National Instruments account for nearly 80% of the world's share; in the domestic market, Keys Technology and Tektronix account for 19.1%/13.8% of the shares respectively, and a single domestic manufacturer only has 1%-2%, and there is a lot of room for domestic production. National policies strongly support and promote the development of the electronic measurement industry. In recent years, my country has continued to promote policy support and encourage the research and development, production and technological upgrade of general electronic measuring instruments such as high-end general scientific instruments, 5G radio frequency instruments, measurement instruments and equipment to achieve industrialization, digitalization and informatization, bringing the development of the electronic measurement industry to a new level and accelerating the improvement of national measurement capabilities and levels.

Satellite Communication: Pay attention to the domestic production of upstream core components. The advent of the 5G era has made the communications industry an important driving force for phased array T/R chips to enter the civilian field. The 2018 Central Economic Work Conference first proposed the concept of " new infrastructure ", including accelerating the pace of 5G commercialization and strengthening the construction of new infrastructure such as artificial intelligence, industrial Internet, and the Internet of Things. As the new driving force for the development of economic development, 5G has become the leader in new infrastructure, laying the foundation for the development of the Internet of Things, industrial Internet, artificial intelligence, cloud computing and and other fields. According to the Ministry of Industry and Information Technology, my country has built more than 1.39 million 5G base stations in 2021, and the number of 5G terminal connections has reached 518 million. We believe that 5G construction will continue to drive the prosperity of the base station RF chip industry in the next 3-5 years.

6. Mechanical

6.1. Domestic substitution of core components, the road to high-end equipment manufacturing is clear

. Domestic development of core components is long. As a major manufacturing country, my country has made breakthroughs in most equipment and parts fields in the past, and some products have achieved world-leading leadership, but there is still a certain gap with imported brands in some high-end fields. The import dependence of products including bearings, lead screws, guide rails, seals, servo motors, , PLC and other products is still relatively high; the lack of core components also limits the domestic production process of high-end products such as machine tools and industrial robots.

products need win-win cooperation in the industrial chain and policy support for the "first set". Taking machine tools and industrial machines as examples, the domestic production rate of core functional components in the past was low, which made domestic hosts rely on imports on core functional components, thus limiting the cost-effectiveness of the domestic brand; and the slow development of domestic hosts in turn limiting the domestic production process of core components.However, some areas have achieved common breakthroughs through in-depth cooperation in the industrial chain, such as construction machinery and its core components have achieved significant domestic production. We believe that domestic hosts and domestic parts need to strengthen cooperation to jointly achieve product quality improvement. At the same time, policy support for the "first set" is also expected to accelerate the process of domestic production.

6.2, high-end machine tools and oscilloscopes domestic substitution

machine tools: Domestic core components are maturing, and the road to "independent and controllable" is gradually becoming clear. The global machine tool industry is about US$71.2 billion, and China is the world's largest machine tool market. The consumption in 2021 reached US$23.89 billion, accounting for nearly 34%, far exceeding the second place in the United States. German and Japanese companies dominate the global high-end market. China's machine tool exports are mainly mid- and low-end, and the domestic production rate of high-end machine tools is relatively low. The machine tool industry is perfectly competitive, with Germany, Japan and the United States being the main machine tool countries. Overseas brands are in the leading position in terms of technology, scale and brand influence. In terms of export volume, Germany and Japan account for about 45% of the global market. The domestic high-end machine tool market is mainly monopolized by overseas companies. As of 2018, the domestic production rate of high-end machine tools in China was only 6%. CNC system relies on imports, weak foundations of core functional components, and other factors have led to a slow domestic replacement of China's high-end CNC machine tool . CNC machine tools have precise functional components including spindle units, lead screws, guide rails, tool magazine turrets, etc. At present, the leading domestic machine tool companies are actively planning to make core components.

oscilloscope: driven by multiple factors, import substitution has entered a critical stage. 1) Technical level: Many domestic electronic measurement instrument manufacturers promote self-developed chips to lead the independent and controllable chips. Domestic manufacturers have continuously broken through technical bottlenecks in the UO chip link in recent years. Among them, Puyuan Jingdian has successively launched two chipsets, "Phoenix Seat" and "Centaur Horse Seat", breaking the monopoly of overseas chip supply. Dingyang Technology and Ulide are also expected to launch high-end oscilloscope products equipped with self-developed chips by the end of 22.

2) Performance level: Domestic manufacturers' product performance continues to improve, and the performance of multiple products has advanced to the international high-end level. The four mainstream products of general electronic side-meter instruments have reached the international mid-to-high-end level, and the performance gap between domestic products and overseas products has gradually narrowed. 3) Policy level: The policy continues to be strengthened, and the interest subsidy policy releases the procurement needs of colleges and universities in advance. The state revised the "Scientific Progress Law" to help domestically replace scientific instruments. Driven by the above-mentioned multiple factors, the market share of domestic manufacturers has increased rapidly. Based on the data of Frost & Sullivan, the global market share of Chinese representative companies Puyuan Jingdian and Dingyang Technology increased from 0.32%/0.17% in 2018 to 0.53%/0.34% in 2021, respectively, and the market share of domestic manufacturers increased rapidly.

7. Military

7.1. Equipment safety. Domestic demand is outstanding, ensuring the efficiency of delivery and supporting

0. The security of the military industry mainly includes two aspects: one is independent and controllable, and improving the domestic production rate; the other is supporting cooperation in the industrial chain and improving efficiency.  First of all, it is domestic production. Weapons and equipment are an important guarantee of national security and are also the focus of export control. They must achieve independent and controllable; at present, the domestic production rate in some key links such as military new materials and integrated circuits is still not high; in recent years, the national level has continuously issued relevant policies for the domestic production in key areas of the military industry, and the targets in key areas are 100% domestic production, which correspondingly brings huge room for growth in the domestic market. With informationization and localization, we are most optimistic about the growth elasticity of military electronics, especially military integrated circuits.

integrated circuit is the cornerstone of the informatization of weapons and equipment, and is a bottleneck that my country's military industry urgently needs to break through. Whether it is digital chips such as FPGAs and CPUs or analog chips, the degree of domestic production needs to be improved. According to the procurement data of military enterprises such as Cox Technology and Zhimingda, the proportion of imported integrated circuits or chips produced and used by these enterprises is still more than 50%.Under the requirements of independent and controllable military products, foreign manufacturers are expected to prioritize domestic opportunities. Taking the module power industry as an example, Zhenhua Micro, Xinlein, Guowei Electronics and other companies have risen rapidly, and related products can already partially replace foreign products, and their share in the corresponding domestic market has increased significantly.

is followed by the development characteristics of the military industry chain. With the increase in the demand for equipment production during the 14th Five-Year Plan period, key military-industrial enterprises will focus on core technologies and core products, and cooperate with civilian-entered enterprises through "big cooperation"; core military-industrial enterprises will focus on assembly and key sub-systems, and fully mobilize social resources in the sub-system and component supporting links. On the one hand, it will help build a local industrial chain and ensure the security of the supply chain; on the other hand, it will help reduce costs, diversify risks, and improve production efficiency and scale benefits. Currently, the three growth logic of military aviation engine equipment is driven by the triple growth logic of military aviation engine equipment + replacement + maintenance. We are optimistic about the long industrial chain and the domestic supporting market is huge.

high-temperature alloy is a key raw material for aircraft engines. my country is currently a complete range of brands, but high-end varieties have not yet fully achieved independent control and a large gap in supply and demand. Major enterprises represented by Fushun Special Steel have accelerated their technological breakthroughs and are actively expanding production to ensure supply. In the mid-East forging casting process, relevant enterprises represented by AVIC Heavy Machinery horizontally extend platform supply and vertically expand component and machine-added processes. The integrated solution capabilities help control manufacturing costs, improve industrial chain efficiency, and ensure supply chain security. Under the supporting cooperation of the entire industrial chain of AVIC , the production and delivery capacity of the host is improved and the mass production rhythm of model is accelerated.

7.2. Domestic substitution of military integrated circuits and military materials

Military integrated circuits: low self-sufficiency rate, broad space for domestic substitution. In the field of military integrated circuits, according to procurement data from military enterprises such as Cox Technology and Zhimingda, the proportion of imported integrated circuits or chips produced and used by these enterprises is still more than 50%. Whether it is digital chips such as FPGAs and CPUs or analog chips, the degree of domestic production needs to be improved. Integrated circuits are the cornerstone of the informatization of weapons and equipment, and are a bottleneck that China's military industry urgently needs to break through. The domestic opportunities hidden in this can also be explored. Under the requirements of independent and controllable military products, foreign manufacturers whose technology and products can be replaced by foreign products are expected to give priority to domestic opportunities. Foreign companies still have a considerable market share in China's military market with their technical level, product performance and brand advantages. Taking the module power supply industry as an example, the domestic military industry and aerospace market is still dominated by foreign companies such as Vicor and Interpoint; in the special integrated circuit market, the products of Xilinx, Altera, and TI still have far-reaching influence.

Aerospace Industry Chain: Ensure host delivery tasks. In order to achieve the goal of with the goal of becoming the top-up , the production task of mature domestic engines is heavy, and the development and development of new models is accelerated. In order to achieve stable delivery, the OEM outsources will outsource and transfer non-core businesses, focusing on core businesses such as assembly and R&D, and 70% of the final products will be outsourced. Ensuring stable delivery of the supply chain is crucial. The business of midstream enterprises is extended to improve supply quality. Forging and casting are the mainstream processes of metal forming and are widely used in engines. Under the guidance of industrial chain changes, relevant midstream enterprises have actively improved their supply capabilities, expanded their business horizontally to provide platform supply capabilities, and extended their supply capabilities vertically to improve their supply capabilities.

business expansion can improve product delivery quality and control manufacturing costs on the one hand, and on the other hand, it can reduce the information cost of after-sales maintenance and improve supply chain security. Upstream high-temperature alloys are actively expanding production and research and development to make up for the supply gap. The working environment of the aircraft engine is harsh and has high requirements for material performance. High-temperature alloys are widely used in aircraft engines and are used in advanced engines for more than 40%. my country's high-temperature alloys have experienced years of development and are currently relatively complete in grades, but there is still a certain gap with the world's advanced level. High-end varieties have not yet achieved independent control, and the supply and demand gap is large. Driven by the supply chain safety requirements, the breakthroughs in high-temperature alloy-related technologies have accelerated, and related enterprises in the industrial chain have actively expanded production and ensured supply.

8, Pharmaceutical

8.1. The domestic substitution process of scientific instruments is accelerated under the encouragement of policies and policies. Scientific instruments are the basis for the high-quality development of the national economy and basic scientific innovation. They play a very important role in the fields of pharmaceuticals and biomedicine, food safety, environmental monitoring, semiconductors, petrochemicals, etc. Globally, scientific instruments have a large room for growth and rapid growth (especially in the domestic market). Scientific instruments mainly include chromatography instruments, mass spectrometry instruments, optical instruments, life science instruments, physical performance instruments and other instruments.

scientific instruments are produced at a low rate, their independent controllable and domestic substitution are of great significance, and the performance of leading enterprises is highly elastic in the process of domestic substitution. At the policy level, support for the instrument industry continues to increase, especially the huge accelerating effect of interest subsidy policies on domestic subsidy. ① The 14th Five-Year Plan supports the development of scientific instruments in various aspects. 2022 is a critical year for the implementation of the "14th Five-Year Plan" to connect the past and future. Several "14th Five-Year Plan" development plans such as market supervision, traditional Chinese medicine, pesticide industry, health and bioeconomy have been released and implemented. ② Continue to increase ecological and environmental protection. In the first half of 2022, the country focused on promoting the "third national soil census". In addition, with the issuance of funds for air pollution, water pollution and soil pollution prevention and control, and the release of a new pollutant control plan, the demand for environmental monitoring instruments and related equipment has remained sustainable. ③Tax preferential policies support.

8.2, chromatograph, spectrometer, mass spectrometer, and domestic substitute of drug glass

chromatograph: excellent quantitative and separation tools. China mainly imports high-end chromatographs from abroad, and exports are concentrated in medium- and low-end products. In 2019, China's chromatograph exports were US$109 million and imports were US$999 million; in 2020, China's chromatograph exports were US$115 million and imports were US$1.037 billion. In 2020, China imported LC chromatographs, with a total of 16,584 liquid chromatographs imported, accounting for 59.96% of the total import volume of chromatographs; the import amount was US$673 million, accounting for 64.88% of the total import amount of chromatographs. In 2020, China imported 8,980 hue chromatographs, with an import amount of US$269 million. China's chromatography imports account for about 70% of the total market size and are highly dependent on imports.

spectrometer: Strong qualitative capability. North America, Europe and Japan markets are the largest market for spectral instruments in the world. The strongest companies are distributed in developed countries such as the United States, Japan, Germany, the United Kingdom, and France. According to data from the China Analytical and Testing Association, the global spectrometer market size in 2018 was US$8.281 billion. Among them, the market size of North America (US and Canada) is US$2.717 billion, accounting for 32.81%, the European market accounted for 25.65%, the Japanese market accounted for 12.27%, and China accounted for 10.29%. Between 2015 and 2018, the annual compound growth rate of my country's spectral instrument market reached 7%, and the market size in 2018 reached US$852 million, or approximately RMB 5.638 billion (according to the average exchange rate of RMB against the US dollar in 2018 announced by the National Bureau of Statistics at 6.61741).

mass spectrometer: satisfies qualitative and quantitative analysis with high sensitivity and high accuracy. my country's research and development, industrialization and application technology level in the field of mass spectrometers lags behind Western developed countries, and the domestic high-end mass spectrometer market has been monopolized by international industry giants for a long time. There are few professional companies in China that master the professional technology of various links such as principles, simulation, calculation, design, engineering, process, production, application development and maintenance involved in mass spectrometers. According to statistics from China's customs, from 2004 to 2020, the import scale of mass spectrometers in China increased from 543 million yuan to 10.675 billion yuan, with a CAGR of 20.46%. In 2018, imports from the United States accounted for 39.06%, making it the country with the largest imports of mass spectrometers in my country; affected by the Sino-US trade war, Singapore replaced the United States and became the main importer of mass spectrometers in 2020, accounting for 33%.

Medical imaging related instruments: There is a lot of room for improvement in per capita ownership. Domestic medical imaging equipment started late, and there is still huge room for improvement compared with developed countries. In 2020, the number of PET/CT per capita per capita in China was 0.61, while the number of PET/CT per capita in the United States was 5.73 in the same period.Driven by the dual wheels of market demand and policy dividends, China's medical imaging equipment market will continue to grow. The market size in 2020 has reached 53.7 billion yuan. Zhushi Consulting expects the market size to be close to 110 billion yuan in 2030, and the average annual compound growth rate is expected to reach 7.3%.

gene sequencing: high industry concentration and broad application prospects. In 2019, the upstream market size of the global sequencing industry was approximately US$4.138 billion, Illumina's market share was approximately 74.1%, and related business revenue was US$3.068 billion; Thermo Fisher's market share was approximately 13.6%, and related business revenue was US$563 million. Other companies, including BGI Intelligent Manufacturing, jointly accounted for about 12.3% of the market share, with high industry concentration. The gene sequencing industry has begun to mature gradually. Application areas include: multiomics research, population cohort gene sequencing program, new drug research and development and innovation, microbial detection, non-invasive prenatal gene detection, tumor diagnosis and treatment, assisted reproduction, etc. In addition, there is still huge development potential in other application scenarios including agriculture, forestry, animal husbandry and fishery, food safety, customs inspection and quarantine, early tumor screening, etc.

X Line Detector: Downstream applications are constantly opening. According to YoleDéveloppement, the global X-ray detector market size in 2018 was US$2 billion, of which the market sales share of medical and pet products accounted for about 74%. With the rapid development of medical beauty, pet medical, oral, DSA, endoscope, power batteries and a variety of industrial testing, the market size is expected to reach US$2.8 billion by 2024, with a compound annual growth rate of 5.9% in 2018-2024.

pharmaceutical glass industry: Medium borosilicate glass tubes rely on imports, and conquering the medium borosilicate pipe making process is the key to achieving rapid replacement. The medium borosilicate molding process has been basically broken, and the control process is still in a "bottleneck" state. The technical barrier of medium borosilicate pulling tubes is that during the melting process of high boron content, the viscosity of the glass increases and the melting temperature increases, and bubble lines, nodules and outer diameter stability will occur during the production process. China's self-developed pipe pulling technology has not solved these problems well. There is a certain gap between the yield of pipe pulling and import, so mass production is limited. Only a few companies in China have achieved self-produced glass tubes through independent research and development. More generally, domestic enterprises will import glass pipes from foreign companies for secondary processing, and the difficulty of bottle making technology is lower than that of pipe making technology. Self-produced medium borosilicate glass tubes are not only technically difficult, but also have higher production costs than other medicinal glass bottles. The production line investment of borosilicate glass tubes in

is about 150 million yuan, while the production line investment of low-borosilicate glass tubes is only 20 million yuan. The equipment for the production of borosilicate glass tubes mainly comes from imports. The high temperature generated when the glass melts will cause greater corrosion and loss to the kiln, and the later maintenance investment will be higher. In order to ensure production quality, the precious metal platinum-rhodium alloy is also wrapped in for the material channels, stirrers, rotary tubes, etc. used for production, which increases the production cost of glass tubes. It is optimistic that the bottle making technology is already available, the production of pharmaceutical glass has a certain scale, and it has a company that is producing self-produced medium borosilicate glass tube technology and is currently developing medium borosilicate glass tube technology.

9. Medical

9.1. Policy supports rapid replacement of domestic products

medical devices with a large number of subdivided tracks and imports and replacement space is broad. At present, only a small number of domestic substitutes have been completed in the domestic medical device industry, and the domestic production rate of a large number of high-end subdivided fields is still relatively low, and there is a lot of room for domestic substitution in the future. In recent years, some leading domestic manufacturers have gradually approached the international advanced level by relying on their continuous increase in R&D investment and abundant product lines, and have increasingly strong market competitiveness. Policy Support the rapid development of domestic equipment. With the rapid development of domestic medical devices, the country has introduced a series of policies to promote the localization of medical devices, and the market share of domestic medical device companies in terminal medical institutions is expected to continue to increase. Once corporate products can be recognized by doctors and consumers in clinical practice, they are expected to achieve rapid replacement with their excellent cost-effective advantages.

IVD Domestic substitution has entered the process, bringing greater space and opportunities.With the comprehensive improvement of domestic products in recent years, the curtain of domestic substitution of IVD has been slowly unfolding, but referring to the experience of the development of other categories of medical devices, domestic substitution and domestic output clearance have been launched simultaneously. There is great space and opportunities for domestic substitution, but it is only the leader in each sub-industry. In 2021, Anhui Province took the lead in launching volume-based procurement of chemiluminescence products. Against the backdrop of domestic substitution, the winning bidders are expected to increase their market share. Against the backdrop of normalized volume-based procurement, accelerate the clearance of the industry's production capacity, leading enterprises that expand domestically and overseas markets and diversify product innovation will have better risk-averse value.

9.2, High-value consumables, medical devices, domestic substitution in vitro

High-value consumables: There is a huge space for domestic substitution in the subdivided fields, and technological changes are emerging one after another. The range of devices covered by high-value consumables for medical use is large, including vascular and non-vascular interventions, orthopedic interventions, electrophysiology, ophthalmology, extracorporeal circulation and blood purification. Some sub-industry, such as peripheral vascular intervention, neurointrusion, cardiac electrophysiological intervention, etc., have developed for a short time in China, and there are high barriers in product design and production processes. At present, a large number of sub-industry markets are still occupied by foreign brands such as Abbott, Johnson & Johnson, Medtronic, and Boston Science. As domestic companies continue to increase their R&D investment in recent years, the number of registered certificates and technical gaps in domestic products that have been listed are gradually narrowing. In the future, domestic companies with strong innovative R&D capabilities such as Xinmai Medical, Huitai Medical, Nanwei Medical, Lepu Medical and other companies are expected to continue to increase their share and drive the company's sales to achieve rapid growth.

Medical equipment: High-end equipment products have high barriers, and policies support the increase in domestic products. In the fields of endoscopy, ultrasound and large-scale imaging equipment, the United States, Japan, Germany and other developed countries and regions have a long history of development. Related companies have accumulated advantages in technology, brands, funds and other aspects in the industry, and have occupied the high-end market in the endoscopy field. However, the gap in technical level, brand influence, financial strength of domestic manufacturers is constantly narrowing compared with leading overseas companies. Against the backdrop of national policies supporting public hospitals to actively purchase domestic equipment, domestic manufacturers are expected to improve their competitiveness through continuous technological innovation and cost manufacturing advantages.

In vitro diagnosis: The domestic substitution process continues to advance, and chemiluminescence improves with the improvement of product quality. Domestic manufacturers are expected to usher in important market substitution opportunities. According to the Frost&Sullivan report, the market size of China's in vitro diagnosis in 2019 was approximately 86.4 billion yuan. In the past twenty years, China's in vitro diagnostic industry has experienced rapid development under the leadership of policy support, rising downstream market demand and technological progress, and the degree of industrialization has increased rapidly, and is expected to continue to grow in the future. my country's in vitro diagnostic market is composed of sub-sectors such as immunodiagnosis, biochemical diagnosis, hematology and body fluids, immediate testing, and molecular diagnosis. Among them, the immunodiagnosis market is the largest, accounting for about 31% of the domestic in vitro diagnostic market, but the chemiluminescence immunodiagnosis market, especially high-end markets such as tertiary hospitals, are still mainly monopolized by imported brands, and the market share of domestic brands is only about 30%. With the development of domestic chemiluminescence immunodiagnosis technology, domestic brands will gradually replace imported brands in the future.

10, Automobile

10.1, Parts accelerated domestic substitution

Electric smart cars are rising, and the domestic production of parts is accelerating. Under the accelerated trend of electric intelligence, on the one hand, the product iteration speed is accelerating, and on the other hand, the share of independent brands has increased significantly year by year, driving the acceleration of domestic substitution trends for parts.  The domestic production rate in the three major areas of safety, actuators and cockpits is expected to be the first to significantly increase. In the fields of active and passive safety, actuators, suspension, etc., due to the long product certification cycle and high barriers, it has always been a relatively low domestic production rate. At present, the active and passive safety field is expected to become the area with the fastest increase in domestic production rates, mainly including seat belts, airbags and line-controlled brakes. At the same time, due to the significant cost advantages of domestic suppliers, actuators such as micromotors and seats, the increase in domestic production rate is also accelerating.

10.2, chassis, cockpit, intelligent driving and unsprung domestic replacement

chassis: 1) Air suspension: Currently, the domestic production rate of air compressors reaches 60%+. Benefiting from the low product cost of domestic enterprises + fast service response, the domestic production rate is expected to increase rapidly in the future, and the beneficiary companies: Zhongding Co., Ltd. and Baolong Technology. 2) Braking: The domestic production rate of 21-year linear control is less than 1%. Benefiting from the shortage of chips, foreign-funded suppliers have insufficient production capacity + low development costs of domestic enterprises, the domestic production rate is expected to increase rapidly in the future.

Cockpit: 1) Seat: According to Marklines, the global seat market CR5 in 2021 will be approximately 78%, all of which are foreign-funded enterprises. Benefiting from the lower labor costs and faster response speed of domestic enterprises, the domestic production rate is expected to increase rapidly in the future, and the beneficiary companies: Jifeng Co., Ltd., Tiancheng Automation, Shanghai Yanpu; 2) Passive safety: The current domestic production rate is expected to be 10%. Benefiting from the increase in the share of independent car companies + the cost advantages of domestic enterprises, the domestic production rate is expected to increase rapidly in the future, and the beneficiary companies: Songyuan Co., Ltd.; 3) Micromotor: The current domestic production rate is about 40%-50% (excluding Dechang Motor, it is estimated to be 15%), and the domestic production rate of micro-drives is estimated to be 15%. Benefiting from the technological breakthroughs in the increase in the share of independent brands and the market growth brought about by new categories, the domestic production rate is expected to increase rapidly in the future.

Intelligent driving: 1) Controller: The current domestic production rate is about 10-20%. Benefiting from the increase in the share of independent brands + the rise of domestic chips + the supporting volume of local tier1, the domestic production rate is expected to increase rapidly in the future, and the beneficiary companies: Desai SV and Jingwei Hengrun; Perception algorithm: The current domestic production rate is 0.3%, benefiting from the increase in the share of independent brands + the improvement in the self-developed technology of domestic auto companies, the domestic production rate is expected to increase rapidly in the future, and the beneficiary companies: Xiaopeng Motors and Great Wall Motors.  Unsprung: 1) Tires; in 21 years, Michelin + Bridgestone + Goodyear accounted for 36% of the global market. Benefiting from the low cost and continuous breakthroughs in domestic enterprises and the continuous breakthrough in technology and entering the high-end market, the domestic production rate is expected to increase rapidly in the future, and the beneficiary companies: Sailun Tires and Senqilin. 2) Bearings: The world's eight major multinational bearing companies account for 70% of the global market. Among them, the automotive bearing field, benefiting from the rise of independent car companies, the domestic production rate is expected to increase in the future.

1, Metal

11.1, Domestic substitution of metal materials accelerates

Domestic copper alloy companies have started late, although they have reached international production standards in some fields, there is still a certain gap compared with international copper alloy giants in the field of special copper alloys. It is mainly reflected in two aspects: one is that the processing accuracy of high-end foreign products is higher; the other is that some foreign products are still within the patent protection period, so they cannot be produced in China. The global stock special copper alloy market competition pattern is relatively stable. The mainstream international manufacturers mainly include Germany's Wilander, Germany's Dai Ao Jingong, the United States' Olin Brass, Japan's Mitsubishi and South Korea's Fengshan. Since most downstream high-end markets require certification, the probability of switching suppliers normally after the certification is passed is relatively small. In recent years, on the one hand, overseas production capacity cannot guarantee supply stability due to factors such as force majeure or high energy costs. The stable supply capacity and rapid corresponding capabilities of domestic manufacturers have given them unique advantages over overseas production capacity; on the other hand, the surge in downstream demand for new energy and other products has made special copper alloy materials usher in an incremental market. With the continuous improvement of product performance of domestic manufacturers, they have gained a share of the incremental market.

my country's high-temperature alloy industry is developing strongly, but there is still a certain gap between the alloy design and development, smelting and processing and preparation technologies for high-temperature alloy structural parts and the world's advanced level, and the domestic production capacity is insufficient. The market is currently in and will be in short supply for a long time. As a high-end strategic material, independent control is crucial. Domestic substitution and import have become one of the development trends of the domestic high-temperature alloy industry and one of the main sources of domestic demand growth. my country's high-temperature alloy industry faces global competition. Compared with imported products, there are two major gaps: "quantity" (production capacity) and "quality" (technology). Developed countries implement export controls on advanced high-temperature alloys, but on the other hand, my country's high-temperature alloy import dependence is as high as 40%.This shows that my country's high-temperature alloy industry is facing global competition. Compared with advanced high-temperature alloys, my country's high-temperature alloys have two gaps: (1) "quantity" - capacity gap: Demand continues to be strong, so it is necessary to control and narrow the capacity gap through continuous expansion.

At present, the gap in demand for high-temperature alloys in my country is still large. In the future, with the modernization of equipment and the transformation of energy structure, the demand for high-temperature alloys in equipment such as military aviation engines, civil aviation engines, gas turbines, and nuclear power is expected to continue to be strong. Therefore, it is necessary to narrow the gap in production capacity by expanding production capacity. (2) "Quality" - Technical gap: insufficient supply of high performance, and it is necessary to improve performance, improve quality, and reduce costs. High-end high-temperature alloys used in the domestic aerospace field are heavily dependent on imports, and are mainly imported in the United States, etc. The competition between domestic and foreign products is mainly reflected in technology, quality and production costs. Although my country has the production capacity of high-quality high-temperature alloys, there is still a big gap with the United States, Russia and other countries in terms of product performance, quality stability and yield.

11.2, copper alloy, high-temperature alloy domestic substitution

copper alloy: downstream high-end application scenarios require copper plate and tape to have good comprehensive performance. The current trend of global copper alloy research and development is to balance other properties such as stress relaxation, bending, corrosion resistance, thermal conductivity, etc. according to downstream needs while pursuing high strength and high conductivity. While adding other elements to copper alloys to increase strength, the conductivity will generally be reduced. Therefore, how to improve alloy strength and comprehensive performance without significantly reducing the conductivity is the core of the technical differences between copper plate and tape manufacturers. According to the strength and price of copper alloy plates, they can be roughly divided into brass series, tin-phosphorus bronze series, copper nickel silicon/copper chromium zirconium series, and beryllium copper/titanium copper series. Among them, brass and tin-phosphor bronze have simple production processes and relatively average performance, and there are many domestic manufacturers; the copper-nickel silicon/copper-chromium zirconium series are medium and high-strength high-conductivity alloys, which also have good stress slack resistance and other properties, and are relatively high-end products. Only a few companies in China, including Bowei Alloy, Xingye Shengtai, China Aluminum Luo Copper, Sirui New Materials, have mass production capabilities; beryllium copper/titanium copper alloy has the highest strength, while manufacturers mainly use foreign countries.

High-temperature alloy: The high-temperature alloy industry chain shows a pattern of two-end concentrated at the upstream parent alloy supply mainly Fushun special steel and downstream component demand mainly Aerospace engineering applications. 1) Fushun Special Steel: It is an important production and research and development base for special steel materials in China's high-tech fields such as national defense and military industry, aerospace, etc. With the research and development and manufacturing of special steels and alloy materials as its main business, it produces four main products: alloy structural steel, stainless steel, high-temperature alloy steel, and alloy tool steel. 2) Steel Yangaona: Positioned in the fields of high-end and new high-temperature alloys, specifically including three main businesses: cast high-temperature alloys, deformation high-temperature alloys, and new high-temperature alloys. It has the ability to produce more than 1,000 tons of high-temperature alloy master alloys for aerospace.

3)Tunan Co., Ltd.: a high-tech enterprise specializing in the research and development and production of special alloys and their products such as high-temperature alloys, corrosion-resistant alloys, precision alloys, etc. In terms of high-temperature alloys, the company has achieved industrial production of ultra-pure high-temperature alloys with O and S content in high-temperature alloys with less than 10ppm, forming a complete product structure of more than 30 varieties of alloy materials and multi-specimen casting products. 4) Longda Co., Ltd.: Since 2015, it has built a cast high-temperature alloy production line and a deformation high-temperature alloy production line, mastering the advanced "vacuum induction + electroslag remelting + vacuum self-consumption" triple smelting process, and its technology is at the advanced level in China.

12. Chemical

12.1. Domestic substitution of mid-to-high-end materials accelerates

Basic chemical products layout is relatively complete, providing a foundation for the extension of materials to mid-to-high-end fields. Compared with other overseas countries, after 40 years of development after my country's reform and opening up, the scale of my country's basic chemical products has continued to expand, becoming the world's largest chemical market, far ahead of other countries. In the process of continuous improvement of the industrial chain, it has already had relatively complete product types, providing a good industrial foundation for the localization of mid-to-high-end materials.Large-scale domestic enterprises can use the industrial chain layout to achieve the extension of downstream high-end materials, which not only enriches product categories, but also disperses risks and forms product competitiveness.

After years of accumulation and catching up, domestic enterprises have already had the foundation for research and development of mid-to-high-end materials, and have gradually expanded the material field. Unlike the early stages of development, my country's talents, funds and technologies are extremely scarce, and it is blank in the mid-to-high-end fields. After so many years of development, my country has been continuously investing in the field of technology research and development. The countries with the largest investment in R&D in the global regional chemical industry have been the country with the largest R&D investment in the field of chemical industry. Although there is still a gap in the product refinement rate of developed countries, domestic leading chemical companies have accumulated for a relatively long time. In the continuous market competition, they optimize production processes, improve production methods, and expand product categories, and have continuously formed their own R&D systems. At the same time, the progress of major scientific research institutes and engineering companies in my country has also driven a considerable number of products to gradually extend from the laboratory stage to the industrialization stage. my country has been able to form partial substitutions in some materials in the mid-to-high-end fields and accelerate expansion.

The international situation has intensified the requirements for localization of materials, and downstream enterprises cooperate with the promotion of R&D certification. Under normal conditions, the performance requirements of mid-to-high-end materials are extremely strict and have a great impact on the performance of downstream products. Therefore, under normal conditions, most downstream manufacturers do not easily replace suppliers, so it is difficult for material supply to effectively understand downstream demand and carry out targeted product development. In recent years, on the one hand, downstream manufacturers have begun to pay attention to cost control to achieve profitability improvement. On the other hand, the changing international situation has made most manufacturers begin to speed up domestic supply cultivation. Downstream manufacturers and upstream material suppliers have cooperated closely, accelerated the R&D speed of the domestic material end, and continuously promoted product certification and supply chain entry. Domestic manufacturers have ushered in a good opportunity to supply materials end to downstream manufacturers.

12.2. High-end engineering plastics/fibers, electronic chemicals, and new energy materials domestic substitution

High-end engineering plastics: The performance of high-end engineering plastics is relatively outstanding, generally has high technical barriers and high process requirements, and of course the products also have high product added value. my country's development started late, but with the recent decade, my country's leading enterprises have gradually improved the platform for the refining and chemical business field in the previous period, domestic enterprises have begun to gradually have a good industrial chain layout. At the same time, combined with R&D foundation and internal training, domestic enterprises have begun to gradually have the R&D pilot capabilities in the field of high-end engineering plastics, such as high-temperature nylon, POE, PEEK, etc. High-end engineering fiber: my country's high-end fiber field has gradually made product breakthroughs in China, and has gradually applied to downstream products in the low-end fields. With the improvement of quality levels of some leading manufacturers, it has gradually expanded to mid-to-high-end fields in the past two or three years, achieving structural upgrades in downstream application fields, such as aramid, carbon fiber, and ultra-high molecular weight polyethylene.

Electronic chemicals, optical films, high-end coatings and adhesives: With the development of the domestic downstream electronic display industry, the downstream drives the upstream domesticization process to begin. Domestic companies have begun to carry out targeted research and development of upstream materials, including semiconductor materials, electronic special gases, optical films, high-end coatings and electronic adhesives. All of them have relatively good product demand space. As downstream manufacturers begin to conduct continuous technical cooperation, process discussions, and parameter certification with upstream material suppliers, domestic companies can gradually form material supply for some products.

New energy materials: The rapid development of terminals drives the acceleration of domestic production of upstream materials. Compared with other terminal application fields, new energy has good policy support. At the same time, the industry supply foundation has been gradually improved, and technology has been continuously updated, including photovoltaics, wind power, trams and other fields, which has driven the rapid development of upstream materials.Among them, some high-end materials fields have relatively high product requirements, and in the early stage, the market demand is relatively small, mainly relying on product imports. With the rapid increase in demand, the market demand space is growing rapidly. Domestic enterprises seize the opportunity to accelerate product promotion. Products such as conductive carbon black and EVA have gradually begun to be gradually supplied. With the continuous improvement of technology, the process of domestic production has been accelerated.

13. Conclusion

top-down and bottom-up comprehensive filtering of sub-track tracks. Focus on electronics, computers, communications, machinery, military industry, medicine, automobiles, metals, chemicals and other industries in the fields of large technology and manufacturing. The current situation, difficulties and prospects of independent control and domestic substitution in various industries were analyzed from the four dimensions of "current domesticization rate, difficulty of domestic substitution, difficulty of choking, and time to overcome difficulties", and the road of independent control in large technology and large manufacturing sub-sectors was foreseeable, and the stock selection standards and tracking research framework for the general direction of "independent control".

From an investment perspective, the sub-tracks with different difficulties in domestic substitution correspond to investment opportunities at different stages. Specifically: 1) The second level of the domestic substitution difficulty coefficient (more difficult to replace) sub-track, the domestic production rate will increase at the highest speed in the future, and the most significant technical barriers of leading companies are the most important stock selection position in the direction of "independent and controllable". 2) The third level of the domestic substitution difficulty coefficient (medium substitution difficulty) and the fourth level (easier to replace) are the accelerated stages of domestic substitution. Leading companies are expected to usher in rapid performance growth, but they will also be under pressure from intensifying competition. 3) The first level of domestic substitution difficulty (extremely difficult to replace) is an area where progress is continuously observed in the medium and long term, and has strong thematic investment attributes. 4) The fifth level of domestic substitution difficulty (easy to replace) is basically in the stable stage of domestic companies.

panoramic display of independent controllable and domestic substitution investment opportunities: 1) First of all, the core focus areas: those sub-tracks with difficulty in substitution are more difficult, especially those sub-tracks that are expected to overcome core difficulties in the past five years, as well as those sub-tracks with low domestic production rates in the industry. Among them, the investment recommendation order of sub-sectors that have been conquered for a long time (more than five years) is relatively low. 2) Secondly, attach great importance to areas: those sub-track tracks with medium difficulty and relatively easy-to-replace domestic sub-track, especially those sub-track where the current domestic rate is relatively low and there is a lot of room for improvement in domestic production in the future. Among them, the investment recommendation order of sub-sectors that have been conquered for a long time (more than five years) is relatively late. 3) Again, seize the theme investment opportunities: the theme investment opportunities in those sub-tracks that are extremely difficult to replace domestically.

(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]