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Building a strong manufacturing country, industrial automation will be a long-term trend

2023/08/24

Automation has always been the core of industrial development, and it is also the direction of future development in the field of industrial control. According to the World Bank's 2019 data, China's per capita industrial added value is still less than 1/4 of the average of the United States and Japan, reflecting that China's industrial automation level and industrial added value still have huge room for improvement.

China's economic development has entered a new normal of speed change, structural optimization and power conversion. Resource and environmental constraints are constantly strengthening, the cost of production factors such as labor is rising, the extensive development model mainly relying on resource factor input and scale expansion is no longer sustainable, and improving quality and efficiency has become the main goal of economic development.

Since 2016, with the fading of the domestic demographic dividend, the economy of automation has become more prominent, and the demand for industrial control industry has continued to grow positively, especially manufacturing enterprises experiencing labor shortages after the epidemic have become more and more motivated to accelerate automation upgrading. The logic of demand growth in the industrial control industry, first of all, we must consider the national "counter-cyclical investment" control policy, and the demand growth rate of photovoltaic, 3C, wind power, and lithium power industries has continued to maintain rapid growth in the past two years; However, with the convergence of the growth rate of policy industry construction, the foothold of demand in the industrial control industry should return to the perspective of corporate profits, and small and medium-sized enterprises are accelerating automation and upgrading after the epidemic will become a new growth point.

Figure Typical industry automation (generalized) maturity

Intelligence is an important opportunity for new products to enter the industrial control market

With the in-depth application of new technologies such as the Internet of Things, big data, cloud computing, edge computing, 5G, and artificial intelligence in the manufacturing industry, people are experiencing a new industrial revolution, the fourth industrial revolution. In the "Industry 4.0 era", intelligent production characterized by "Internet + manufacturing" will become the future development trend, and almost all industrial fields are facing technological transformation, giving birth to a large number of business opportunities.

Intelligent manufacturing is the core concept of Industry 4.0, which is based on automation, advanced network and modern sensing technology, deeply integrates information and communication technology with industrial technology, and builds a highly flexible personalized, digital and intelligent manufacturing model. According to Deloitte research, the global smart manufacturing market was valued at $2021.2 billion in 459 and is expected to reach $2028.5 billion by 762, growing at a CAGR of 2021.2028% from 12 to 7.

Figure Industry 4.0 maturity model and intelligent manufacturing corresponding stages

Intelligent manufacturing puts forward new demands for industrial control, and the traditional industrial control system has many aspects that need to be improved, which cannot meet the needs of the rapid development of industrial automation, and has become a bottleneck hindering the development of industrial control technology. The difficulties of intelligent upgrading based on traditional industrial control systems are mainly reflected in the following two aspects:

First, the hardware processing performance is difficult to meet the requirements. Traditional PLC products mainly realize switching logic control, so the overall capacity of its supporting CPU, memory unit and so on is small, and the software does not support the current general intelligent computing framework. If you want to meet the needs of intelligent computing, computing power and storage expansion need to add different types of servers to the station, and the protocol docking is complex, intelligent computing will also interfere with real-time, and the upgrade cycle is long and the cost is high.

Second, the software and hardware of Transcontrol industrial control are strongly coupled, and the upgrade openness and flexibility are insufficient. The software and hardware systems of different manufacturers are relatively closed, and the intelligent upgrade cycle and cost are very high. In order to maintain market competitiveness and technical barriers, the hardware system of each manufacturer's products is usually closed, and the software and hardware are strongly coupled, so the control product standards of different manufacturers are different, the upgrade openness and flexibility are insufficient, which greatly increases the difficulty of intelligent upgrading and transformation.

In short, driven by artificial intelligence and digitalization, the inflection point of the industrial local intelligent market has arrived, the main contradiction at the system level lies in the contradiction between the demand for production control systems and the single point supply, the pain point at the specific software and hardware level is that the existing industrial control software is not intelligent enough, based on the existing software and hardware architecture intelligent upgrade faces insufficient computing power, not cloudified, insufficient scalability and other pain points, urgently need to upgrade the product form, to achieve modern industrial control in the intelligent era.

Localization substitution is the trend of the times, gradually affecting procurement decisions

For a long time, the weak research on basic technology of China's manufacturing industry has become the main bottleneck restricting the development of the manufacturing industry. The development of China's manufacturing industry to intelligent manufacturing must rely on the breakthrough and in-depth application of underlying basic technologies such as sensing, control, communication, and industrial software. Strengthening independent and controllable supply capacity is the key task of China's intelligent manufacturing development. The "2025th Five-Year Plan" intelligent manufacturing development plan (draft for comments) clearly states that by 70, China's supply capacity will be significantly enhanced, the technical level and market competitiveness of intelligent manufacturing equipment and industrial software will be significantly improved, and the domestic market satisfaction rate will exceed 50% and <>% respectively. Therefore, in the current world political and economic environment, China's intelligent manufacturing field to achieve independent controllable, localized replacement will be a long-term development trend, industrial control industry as a key core link, will fully benefit from the domestic substitution process.

The logic of domestic substitution has clearly extended from the military industry to state-owned enterprises. According to expert interviews and customer interviews, although domestic substitution is not a strong logic for state-owned enterprises, at present, state-owned enterprises are promoting "stuck neck" related projects, and industrial control systems, as a key link in the industrial process, belong to the "stuck neck" project. Moreover, at present, the logic of domestic substitution increasingly affects procurement decisions, and the willingness of state-owned enterprises is clear, and the typical case is the Internet of Things project promoted by PetroChina Liaohe Oilfield Unmanned Station, and the localization rate has reached 100% (not traced back to the component level).

The market ceiling can reach tens of billions, and the edge computing market is the best entry market

PLC, industrial computer, controller, DCS, SCADA, industrial gateway, edge server and other "industrial computers" have entered the golden period of development, and will reach a market size of 100 billion yuan in the future. In terms of the current market statistics, market statistics are divided into traditional industrial control markets (mainly including PLC, DCS, SCADA, etc.) and industrial edge computing (predictive maintenance, energy efficiency management, intelligent manufacturing, etc.).

The traditional industrial control market maintained rapid growth. In 2020, the size of China's PLC market was about 129.99 billion RMB. According to data from MIR Rui Industry, China's PLC market size in 2020 was 129.99 billion yuan, and it is expected that China's PLC market size will be about 2023.165 billion yuan in 4, with large and medium-sized PLC market accounting for 51.20% and small PLC market accounting for 48.80%. In 2021, the DCS market in China was worth about 111.2 billion RMB. In 2021, the market size of DCS products reached 111.2 billion yuan, a year-on-year increase of 24.6%. Rui Industry expects that the DCS market will still maintain stable growth from 2022 to 2027, with an average annual growth rate of 5-6%. In 2020, the size of China's SCADA market was about 124.2014 billion. According to the data of Toubao Research Institute, the size of China's SCADA market has steadily increased from 77.1 billion yuan in 2018 to 100.2 billion yuan in 6, with a compound annual growth rate of 8.12%, in the future, with the deep integration of industrial technology and information technology, informatization gradually drives industrialization, SCADA application popularity will continue to increase, it is expected that in the next five years, the development growth rate of China's SCADA industry will increase to 0.2023%, to 176, The market size of China's SCADA industry is expected to reach 6.<> billion yuan.

Edge computing is an open platform that integrates the core capabilities of network, computing, storage, and applications on the edge side of the network close to the source of things or data sources, and provides edge intelligence services nearby, meeting the key requirements of industry digitalization in terms of agile connectivity, real-time services, data optimization, application intelligence, security, and privacy protection. Edge computing has a close relationship with industrial control systems, industrial control systems with industrial Internet interfaces are essentially an edge computing device, but now edge computing focuses more on intelligent control, to solve the contradiction between the high real-time requirements of industrial control and the uncertainty of Internet service quality. According to IDC's forecast, China's vertical industry edge servers will be less than 2021 billion RMB in 30, but a year-on-year increase of 75.0%, and will maintain rapid growth in the future, bringing more room for imagination. In the industry distribution of edge custom servers, pan-industry (power, energy, manufacturing, etc.) is the largest application field, Chinese industrial enterprises are accelerating the construction of edge computing infrastructure, relying on industrial visual intelligence and data intelligence technology to support the deployment of digital applications such as industrial quality inspection, equipment predictive maintenance, and line/pipeline inspection.

Figure Overall market size of industrial automation (100 million yuan)

Peng Qikang, investment director of hard technology of New Henglida Capital, believes that from the market level, we believe that the industrial control track market is large enough, and startups are ushering in development opportunities. Industrial automation is a long-term trend, the ceiling of the industrial control market can reach hundreds of billions, and the track will accommodate multiple listed companies; At the same time, now entering the era of Industry 4.0, intelligent upgrading has become an inevitable trend, putting forward new demands for industrial control, and the traditional industrial control system has many aspects that need to be improved, based on the new product form of startups ushered in an important opportunity to cut into the market; in addition, domestic substitution will also provide a good environment for domestic entrepreneurial enterprises.

从竞争层面来讲，基于PC的工业控制实际竞争者少，赛道处于蓝海状态。工业控制发展数年，竞争格局已然稳定。智能化拉动产品形态变革，虽然倍福、霍尼韦尔、西门子等国际工控巨头均在布局基于PC的工业控制，但目前市场仍主要被倍福的基于PC的工业控制设备占据。总之，就基于PC的工业控制赛道，以边缘计算+工业控制切入，整体市场属于蓝海状态，随着产品技术持续被验证，将迎来供不应求的局势。

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