Guotai Haitong: Accelerating the localization process of supporting scientific research instruments, policies continue to promote independent and controllable research and development efforts.

Guotai Haitong released a research report stating that mass spectrometry, chromatography, electron microscopes, etc. are the main branches of laboratory analytical instruments, with high detection accuracy. China encourages the acceleration of the localization of high-end scientific instruments by deploying high-end scientific instruments and core components for R&D, and has made initial progress in the domestication of medium and low-end scientific instruments. One of the focuses of building a strong country in science and technology is the independent controllability of the supply chain, with scientific research instruments being one of the key areas. With the strengthening of basic scientific research in China, it is believed that the localization process of supporting scientific research instruments may be further accelerated. China has already achieved the localization of some scientific instrument product lines, with policies continuing to support efforts in independent and controllable research and development. The continuous increase in US tariff rates exacerbates technological blockades, and the localization process of scientific instruments is expected to further accelerate. Guotai Haitong's main points are as follows: Due to their high detection accuracy and certain barriers, laboratory analytical instruments have a global market concentration on leading companies overseas. In the field of laboratory analytical instruments, life science and surface science account for 26% and 13% respectively, making up the major downstream application areas. Mass spectrometry, spectrometers, and chromatographs have a penetration rate of 37% and are important product branches. According to SDI, the global market size of scientific instruments exceeded $69 billion in 2021, and is expected to increase to $102 billion by 2026. Overseas scientific instrument technology research and development started early, with leading companies such as Thermo Fisher, Danaher, Agilent, and Shimadzu dominating the global market for analytical instruments. China's localization rate of core components for high-end scientific instruments is relatively low, and there are restrictions on the export of core components from overseas, leading to a relatively low rate of localization for high-end scientific instruments. In 2024, there was a $2.1 billion deficit in imports and exports of chromatography and mass spectrometry, indicating a high dependence on imports. China has achieved localization of some scientific instrument product lines, with ongoing policy support for independent and controllable research and development efforts. China is aiming to accelerate the localization of high-end scientific instruments by deploying high-end scientific instruments and core components for R&D, with medium and low-end scientific instruments having already begun to be localized. The goal of building a strong country in science and technology focuses on the independent and controllable supply chain in areas such as scientific research instruments, and China's efforts to strengthen basic scientific research are expected to further accelerate the localization process of supporting scientific research instruments. The escalation of tariff policies exacerbates technological blockades, emphasizing the urgency of promoting independent and controllable supply chains for domestic instruments. 1) The US has implemented retaliatory tariffs, raising the rate to 125%. China has increased the tariff rates on imported goods from the US by 125% year-on-year. 2) Looking back at the tariff measures imposed by the US on Chinese goods in 2019, including scientific instruments, as a response to tariffs on goods originating from the US. In August 2019, the US government announced a 10% tariff on approximately $300 billion worth of goods imported from China, to be implemented in two phases starting from September 1 and December 15 of 2019 respectively. The State Council Tariff Commission decided to impose tariffs on 5078 tariff lines originating from the US, amounting to around $75 billion worth of imports (third batch), including a 5% tariff on chromatographs and mass spectrometers originating from the US. It is believed that the escalation of tariff policies exacerbates technological blockades, further highlighting the importance of independent and controllable scientific instruments. Risk warning: Risks of technological advancements and lower-than-expected financial investment in basic research.