Industrial software is so rolled, what should be rolled?

So far in 2023, the development of the industrial software field has been rapid.

On the one hand, the entry of new giants, such as the public debut of Huawei MetaERP after many years of internal research and development, not only stimulated UFIDA, Kingdee, Inspur and other manufacturers to innovate technology simultaneously, but also made great strides from management software to decision-making analysis, production management, equipment control, and production execution, and deeply cultivated various subdivided scenarios.

On the other hand, the state-owned digital technology company has shifted from serving only the parent company of the central enterprise to being a technology exporter, continuously expanding the influence of the industrial chain and the network of partners, and developing in the direction of a digital solution provider for the whole industry.

In the capital market, in 2023, Suochen Technology and Aerospace Software will land on the Science and Technology Innovation Board, Xinxiang Technology, Grayly, Saimet, etc. will receive a new round of financing, and Jialichuang is currently in the IPO queue.

From the other side, we can also get a glimpse of the strong atmosphere of domestic industrial software "volume". Just ended, SEMICON China 2024 is extremely hot. During the three-day conference, nearly 90,000 square meters of exhibition hall, 1,100 exhibitors, and 4,500 booths attracted nearly 130,000 people to participate. A number of companies revealed to Yiou that many booths in 2025 were sold out. The industrial software industry is so rolled, so what should the core be rolled?

What is the core competitiveness of industrial software?

Industrial software does not float independently outside the industry, but develops synchronously with the industrial system, and is the core thing that has been precipitated by countless key technologies, processes, processes, knowledge, and data in decades of industrial production. Therefore, without the accumulation of deep industrial technology, it is difficult for industrial software to make customers comfortable and satisfied.

Industrial software involves a variety of categories, from operation management, R&D and design, production control to embedded industrial software, and operation and maintenance service software. No matter what kind of industrial software, it can be recognized by the market because of mature technology, easy to use products, excellent cases, high cost performance, timely after-sales and so on. At present, the first step to achieve domestic industrial software is to replace global industrial software giants such as IBM, Applied Materials, and Siemens.

Taking manufacturing industrial software as an example, Yiou Think Tank found that from the demand side, the vast majority of mid-to-high-end production lines still have concerns about the project delivery and after-sales maintenance of domestic software. From the supply side, the overall scale of domestic manufacturers is still small, and the products are mainly concentrated in the mid-end and below products. However, some manufacturers have gradually built their own leading edge in the vertical segmentation track.

Objectively speaking, the development of domestic industrial software started late, so the vast majority of the market (especially the high-end market), about 70% is still occupied by international giants. However, due to multiple factors such as the domestic market, policy, industry, and international competition, domestic industrial software is accelerating to catch up and surpass.

There is an industrial consensus that China is already an industrial power, but it is not yet an industrial power. The development logic of China's manufacturing industry chain has switched from simple processing and manufacturing to high-tech, intelligent, service-oriented, collaborative and green direction. In particular, the transfer of manufacturing to high-tech fields has made the value distribution of the entire industrial chain of the manufacturing industry rapidly concentrated on the industrial chain links with higher technology content and higher added value.

While these changes help to improve the quality and competitiveness of the manufacturing industry, they also need all kinds of industrial software to promote the high-quality development of the manufacturing industry.

Throughout China, the industrial software ecology with a hundred flowers should make concerted efforts to deepen the business, concentrate on research and development, and serve the market.

Looking at the world, there is a huge potential market waiting for solutions from China, and there are more high-end technologies and products that require Chinese wisdom.

Discussion of the problems existing under the white-hot competition of domestic industrial software

A number of industrial software manufacturers revealed to Yiou that the current domestic competition situation is very volatile, but it is not to "Cushman & Wakefield", but to "kill 1,000 enemies and lose 800". After the closing of SEMICON China 2024, some industry practitioners revealed to Yiou, "This year is the year with the most appearances of domestic industrial software service providers. In the open, everyone fights the booth, and behind the scenes, everyone fights bayonets. ”

"Low-price bidding, exaggerated publicity, bidding rankings, and endless tricks. Judging from the bidding ranking, some companies in the industry have bought keyword advertisements from multiple peers and even international giants at once. Everyone in this industry knows that industrial software is a pure TO B business. It is not easy to obtain customers for To B, but enterprises must not use the simple and crude logic of To C business to set up To B business. To C is price-sensitive, and To B is value-sensitive. There's nothing wrong with doing traffic marketing, but you can't use tactical 'tricks' to cover up strategic laziness. The barriers of industrial software service providers are not established by buying "keywords". In TO B's business, pure drainage is not the way to win. Practitioners in the industry said.

During the SEMICON China conference, a senior project manager in the investment circle said in an interview with Yiou that the current industrial software is one of the directions that investors pay close attention to. Its core investment logic is mainly due to the urgent need for the transformation and upgrading of the manufacturing industry, the resonance of policy support and market demand, the requirements of industrial chain security and independent control, the economic benefits and competitive advantages brought by scale, and of course, more importantly, new technologies such as AI, big data, cloud computing, and large models bring greater imagination to industrial software.

"Now the pan-industrial software track is very wide, but the subdivision field is very crowded. There are indeed many projects, and many excellent projects also have a large number of excellent VC blessings. Due to the special nature of industrial software, we are cautious about new projects and feel that the valuation of mature projects is too high. As far as we know, most companies are still laying a solid foundation step by step, but there are also companies rushing to the capital market, and there will be some bubbles. In the past two years, some manufacturers have done mergers and acquisitions and investments through the 'golden finger' of capital, hoping to tell new stories in the primary and secondary markets. In our view, investment and M&A is a double-edged sword. It is not only a shortcut for the enterprise to become bigger and stronger quickly, but also a burden and risk for the enterprise to fall into the quagmire. Relying only on the power of capital may not be able to turn the physical industrial chain. ”

Ni Guangnan, an academician of the Chinese Academy of Engineering, once publicly stated that China's software industry started late, the development path is tortuous, and the erroneous idea of "it is better to buy than to build, and it is better to rent than to buy" once affected the development of China's local software industry. The software industry is one of the fastest-growing industries in recent years, but compared with other industries, investment is still low, and there is still a problem of "wearing vests" in industrial research and development.

Through data analysis, it is easy to benchmark against global industrial giants.

According to the statistics of Yiou think tank, Siemens' revenue in fiscal 2023 will reach 77.8 billion euros, R&D investment will be about 6.2 billion euros, both up 11% year-on-year, and business profit will be 11.4 billion euros. Among them, the digital industry segment (with revenue dominated by industrial software) grew rapidly, with revenue of 21.92 billion euros and business profit of 4.95 billion euros, accounting for almost half of Siemens' total profit.

At the beginning of the 2024 fiscal year, the order backlog in the Digital Industries segment was EUR 11 billion, of which EUR 8 billion is expected to be converted into revenue in the 2024 fiscal year. Although this means that the growth of the Siemens industrial software market is at least guaranteed, Siemens also predicts in the financial report that factors such as supply chain rebalancing, trade conflicts, the impact of geopolitical tensions, prudent consumer spending and inventory reduction in distribution channels will affect Siemens' market growth. And these many factors mean that even the digital industrial sector that contributes the most profits is not easy at every step, and it also needs to invest heavy resources in R&D, manpower, market, channels, etc.

At the same time, in fiscal year 2023, Applied Materials achieved revenue of $26.52 billion, net profit of $6.856 billion, and R&D investment of $3.1 billion. As stated in the annual report, the increase in R&D engineering expenditure in fiscal year 2023 was mainly due to an increase in the number of employees, depreciation expenses related to ongoing product development, and an increase in consumables and equipment costs. Applied Materials is also a R&D investment enterprise.

IBM's full-year 2023 revenue was $61.9 billion, up 2% year-over-year, and net profit was $7.5 billion. And in 2023, it will spend $7 billion on research and development, and spend more than $5 billion on nine acquisitions. Although IBM divested chip manufacturing as a heavy asset in 2014, IBM is still hardly an asset-light company.

To sum up, it has never been easy to establish core competitive barriers in the field of industrial software and become a sustainable enterprise. Shan Zhongde, an academician of the Chinese Academy of Engineering, once summed up the attitude of doing good things, that is, to develop good software with the tenacity of "sharpening a sword in ten years and accomplishing one thing in a lifetime".

Countless practitioners who are working in the front line of industrial software know that if they do not master the R&D and design capabilities, no matter how strong the channels and sales capabilities are, they will not be able to obtain pricing power, and can only obtain thin industrial chain profits. On the long journey of China's industrial software to climb the global industrial peak, Yiou calls on the industry to take the right path, do the right thing, promote righteousness, jointly maintain the good order of the industry, be a respectable opponent, and truly support the domestic industrial software.