CITIC Securities: Supply chain adjustments force the industrial chain to independently upgrade scientific instruments to usher in a wave of domestic substitution

The Zhitong Finance App learned that CITIC Securities released a research report saying that in the context of increasing US export controls and tariffs, domestic scientific instruments are facing a “double decoupling” situation of supply chain and technology, forcing the entire industry chain to upgrade autonomously and controllably, and the development of the industry ushered in major strategic opportunities. The localization rate of scientific instruments in China is low, but leading manufacturers already have global competitiveness in their fields of advantage. The bank judges that leading segments will continue to consolidate their dominant product positions and gradually expand their product matrix horizontally, fully benefiting from this wave of domestic substitution. It is recommended to focus on domestic leaders in the electronic measuring instrument segment.

CITIC Securities's main views are as follows:

Incident: Recently, the United States imposed export controls on China's scientific instruments.

In January, the United States imposed export controls on high-parameter flow cytometers and liquid chromatography mass spectrometers to China. According to customs data, in 2024, China imported US$8.05 billion of physico-chemical analytical instruments, of which US imports accounted for 23.4%; imported electronic measuring instruments such as oscilloscopes and spectrum analyzers amounted to US$3.636 billion, of which US imports accounted for 16.3%. The bank determined that US export controls and tariff increases would force China's scientific instrument industry to develop rapidly.

The scientific instrument industry is on the rise, and domestic autonomy and control are imperative.

According to Intelligent Research Consulting and China Business Research Institute, in 2023, China's laboratory analytical instruments/electronic measuring instrument markets will reach 380/37.8 billion yuan respectively, but the localization rate is still low, and there is plenty of room for replacement.

1) Analytical instruments: According to the Chinese Society of Instrumentation, the localization rate of analytical instruments increased from 32.2% in 2011 to 44.6% in 2023. However, the localization rate of high-end models is low. For example, the sales share of domestic mass spectrometers in 2023 was only 11.2%.

2) Electronic measuring instruments: According to comprehensive statistics on the 2024 revenue data of Puyuan Precision Electronics, Dingyang Technology, and Ulide, it is estimated that the sales scale of the leading domestic electronic measuring instrument company is only 5.5% of the import scale. The bank determined that high-precision scientific instruments are essential measuring equipment for scientific research and industrial production, and domestic autonomous and controllable upgrades are imperative.

Leading manufacturers cultivate global competitiveness, and supply chain collaboration helps domestic production grow.

1) Analytical instruments: Juguang Technology and Wanyi Technology have core technology platforms for mass spectrometry, chromatography, and spectroscopy, and their penetration rate in the energy, manufacturing and pharmaceutical industries is gradually increasing.

2) Electronic measuring instruments: According to the “Electronic Measuring Instrument Industry and Standardization Research Report (2024)” issued by the China Institute of Electronic Technology Standardization, Puyuan Jingdian's high-speed digital oscilloscope is equipped with self-developed software to solve the “stuck neck” problem of digital interface physical layer signal testing; Dingyang Technology's new RF microwave products entered the world's forefront, driving the company's orders from January to February 2025 to increase 30% year-on-year; Ulide's DC resistance tester industry is leading in accuracy, providing domestic inspection solutions for automated patch production lines; Kun Heng Shunwei's wireless channel meter simulates the bandwidth and bandwidth, The dynamic range and multi-channel processing capability have reached the international advanced level. In terms of the supply chain, chips are core components, and BOM costs account for 35%-45% of electronic measuring instruments. Iterative upgrades of domestic ADCs, DACs, and FPGA chips will lay a solid foundation for domestic manufacturers to impact the middle and high-end markets.

Risk factors:

Costs are rising due to a shortage of key components; delivery is slow due to immature domestic supporting supply chains; market competition intensifies due to dumping of mature products abroad; and downstream demand falls short of expectations due to slow economic recovery.