CITIC SEC: Supply chain adjustments are forcing the industry chain to upgrade independently. Scientific instruments are ushering in a wave of domestic alternatives.

CITIC SEC has released a research report stating that against the backdrop of increasing export controls and tariffs in the United States, domestically produced scientific instruments are facing a situation of supply chain and technology "decoupling," forcing the entire industry chain to upgrade independently controllable, leading to a major strategic opportunity for industry development. Although the rate of localization of scientific instruments in China is relatively low, top manufacturers in their respective fields have already established global competitiveness. The report predicts that leading companies in specific segments will continue to consolidate their advantage in product positioning and gradually expand their product matrix, benefiting fully from the current wave of domestic substitution. The report recommends focusing on leading domestic companies in the field of electronic measuring instruments. Key points from CITIC SEC's report are as follows: Event: Recently, the United States has placed export controls on Chinese scientific instruments. In January, the United States placed export controls on high-parameter flow cytometers and liquid chromatography mass spectrometry instruments to China. According to customs data, China imported $8.05 billion worth of physical and chemical analysis instruments in 2024, with the United States accounting for 23.4% of imports; imported electronic measuring instruments such as oscilloscopes and spectrum analyzers amounted to $3.636 billion, with the United States accounting for 16.3% of imports. The report predicts that U.S. export controls and tariff increases will drive rapid development in China's scientific instrument industry. The scientific instrument industry is growing, and domestic independent controllability is imperative. According to research from Smart Research and the China Academy of Commerce, the market size for laboratory analytical instruments and electronic measuring instruments in China reached $38 billion and $37.8 billion respectively in 2023, but the localization rate is still relatively low, providing ample room for substitution. 1) Analytical Instruments: According to the China Instrumentation Society, 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 lower, for example, the market share of domestically produced mass spectrometers in 2023 was only 11.2%. 2) Electronic Measuring Instruments: Based on revenue data from Rigol Technologies, Siglent Technologies, and Uni-Trend Technology in 2024, the sales scale of leading domestic electronic measuring instrument companies is only 5.5% of the import scale. The report asserts that high-precision scientific instruments as essential measuring equipment for research and industrial production must upgrade independently controllably. Leading companies cultivate global competitiveness, and supply chain collaboration aids domestic growth. 1) Analytical Instruments: Focused Photonics and Anhui Wanyi Science And Technology possess core technologies in mass spectrometry, chromatography, and spectroscopy, with penetration gradually increasing in the energy, manufacturing, and pharmaceutical industries. 2) Electronic Measuring Instruments: According to the Chinese Electronics Technology Standardization Institute's "Research Report on the Electronic Measuring Instrument Industry and Standardization (2024)," Rigol Technologies' high-speed digital oscilloscope equipped with self-developed software addresses the "bottleneck" issue in physical layer signal testing of digital interfaces; Siglent Technologies' new RF and microwave products have entered the world's leading position, driving a 30% year-on-year growth in orders in January-February 2025; Uni-Trend Technology's DC resistance tester is industry-leading in accuracy, providing a domestic testing solution for automated patch production lines; Chengdu KSW Technologies' wireless channel simulator reaches international advanced levels in frequency, bandwidth, dynamic range, and multi-channel processing capabilities. In terms of the supply chain, the chip is a core component, with its Bill of Materials (BOM) cost accounting for 35%-45% of electronic measuring instruments. The iterative upgrade of domestically produced ADC, DAC, and FPGA chips will lay a solid foundation for domestic manufacturers to compete in the mid-to-high-end market. Risk factors: Shortages of key components leading to cost increases; Immaturity of domestic supporting supply chains leading to slow delivery; Dumping of mature foreign products intensifying market competition; Slow economic recovery leading to lower-than-expected downstream demand.