According to a research report by Sinolink Securities, starting from 2025, the automation market demand is showing a moderate recovery driven by policies such as equipment upgrades and corporate digital transformation. In recent years, the localization process for front-end equipment has significantly accelerated. Leading domestic manufacturers are actively collaborating with downstream core clients to promote the verification and adoption of automation products, with expectations that related products will enter a growth phase of scaled mass production. By 2026, the industry is expected to officially usher in the "Robot IPO" era.
Key insights from Sinolink Securities are as follows:
**2025 Industry Overview**: The recovery trend is confirmed, with market concentration favoring leading players. Benefiting from policy-driven equipment upgrades and digital transformation, automation demand has shown a moderate rebound since 2025. The OEM market size grew 2% YoY in the first three quarters, reversing the three-year downtrend since 2022. Downstream sectors such as industrial robots, lithium batteries, packaging, and logistics remain highly active, while new productive forces—represented by low-altitude and embodied AI—are transitioning from 0 to 1. At the micro level, companies exhibit a trend of "revenue growth but profit divergence," with intensified "Matthew Effect" among industry leaders.
**2026 Outlook**: Stable demand in traditional sectors, with optimism for new productive forces and overseas expansion driving profit and valuation flexibility. 1. **Domestic Market**: - Structural opportunities lie in technology-driven equipment investments, including: - Rising demand for semiconductor and electronics manufacturing equipment driven by "AI+" industries. - A new equipment cycle spurred by solid-state battery pilot lines and lithium battery capacity expansion. - New productive forces (e.g., low-altitude, embodied AI) may exceed expectations, further boosting automation market recovery.
2. **Overseas Expansion**: - Automation firms are accelerating strategic shifts abroad, which could contribute to mid-to-long-term earnings growth.
**Advanced Manufacturing**: Localization enters deeper stages, with core segments enjoying structural benefits. Semiconductor and high-end electronics manufacturing demand extreme precision, yet front-end equipment localization remains below 20%, leaving vast room for substitution. Domestic front-end equipment substitution has accelerated recently, with leading manufacturers working closely with major clients to adopt automation products, paving the way for volume production. Benefiting from strong downstream demand (semiconductors, electronics, lithium batteries), the market size for inverters, servos, PLCs, and relays is projected to grow from RMB 87.4 billion in 2024 to RMB 103.1 billion by 2027, at a 6% CAGR—outpacing the broader automation sector.
**Humanoid Robots**: The era of mass production approaches, driven by OEM contracts and technological advancements. 2026 may mark the start of "Robot IPOs," with industry leaders like Tesla (Gen3 launch in Q1 2026, mass production in Q2, and a million-unit Optimus production line by year-end) driving true scaled production. Innovations such as axial flux motors warrant attention. Industrial control firms, leveraging power electronics expertise, are well-positioned in joint modules and core components (motors, drives, encoders).
**Low-Altitude Economy**: 2026 is pivotal for airworthiness certification, with orders expected to surge for segment leaders. Policy support, regulatory easing, infrastructure development, and supply chain growth are accelerating eVTOL commercialization. New airworthiness certifications may emerge from 2026. Electric drive systems, with high power density and safety, face steep certification barriers but enjoy strong client stickiness. Wolong Electric’s partnerships with COMAC, Volocopter, and others position it to capitalize on early order fulfillment.
**Overseas Expansion**: From "optional" to "essential," AIDC opens new frontiers. The global industrial automation market (USD 240 billion, per Statista) is 4-5x larger than China’s, with domestic firms expanding from emerging to high-end markets. The surge in AIDC capital expenditure is driving demand for high-voltage DC relays and thermal management systems, creating new growth avenues.
**Investment Recommendations**: Focus on three themes: 1. **Strategic Leaders with Scale**: Prioritize established leaders with cross-cycle resilience, such as **Inovance Technology**. 2. **High-Growth Players**: Target firms benefiting from industry growth and localization, like **Xinje Electric** and **Leadshine Technology**. 3. **Emerging Niche Champions**: Highlight core component suppliers in high-growth areas like AI data centers, such as **Broad-Ocean Motor**.
**Risks**: Manufacturing downturns, intensifying competition, R&D uncertainties, and supply chain cost pressures.
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