If the manufacturing is strong, the country will be strong.
Advanced manufacturing is an important engine of economic growth. With the deepening of a new round of scientific and technological revolution and industrial transformation, the role of advanced manufacturing in promoting the transformation and upgrading of traditional industries and enhancing the added value and competitiveness of industries has been further highlighted.
As the ballast stone of the national economy, what new changes and new opportunities will the advanced manufacturing industry usher in?
In the 12th class of Huangpu, Li Shouyu, vice president and course instructor of Shenzhen Innovation Investment Group Co., Ltd., shared investment strategies with the students. In this veteran investment institution, which has been listed in the "Top 30 Investment Institutions in China's Advanced Manufacturing Field" for three consecutive years, we see the heritage and responsibility of China's largest venture capital company.
01 Background and general logic of the advanced manufacturing industry
The importance of manufacturing is reflected in many aspects: it is the foundation of the real economy, the foundation of industrial development, and the platform for technology landing, which has a far-reaching impact on economic growth, structural optimization, employment, etc., and new products and technological innovation rely on the manufacturing industry. From the development of new quality productivity to the pursuit of high-quality development, all emphasize the core role of the manufacturing industry. Through cutting-edge technologies such as AI and informatization, the manufacturing industry is driving a high-quality transformation of the economy.
The geographical reorganization of the global manufacturing industry has also brought a lot of food for thought. In the past, the relocation of industries from some developed countries led to the hollowing out of industries, and China has become a manufacturing powerhouse. However, despite being among the world's largest in terms of scale, the problem of "big but not strong" in China's manufacturing industry is still prominent. How to transform China's manufacturing industry from large to strong and become a solid cornerstone to support the development of new quality productivity is the key task we are facing at present and in the future. Investing in advanced manufacturing is not only an economic act, but also a far-reaching investment in the future of the country and the destiny of the nation.
China used to be in the middle of the global industrial chain, that is, at the bottom of the smile curve, facing the dual challenges of high-end technology patents at one end and terminal design, system integration, and brand services at the other end. In order to break through this situation, China is committed to industrial upgrading through upstream technology development in manufacturing and assembly, as well as into terminal design and brand operation.
Looking back on history, we can see that the dividends of great power have laid a solid foundation for China's manufacturing industry, and at the same time promoted the improvement of the technology and quality of human resources. However, compared with the developed countries in Europe and the United States, we are still in the latecomer stage and face huge challenges. In the past few decades, the demographic dividend, market dividend and the advantages of global industrial transfer in the early stage of reform and opening up are gradually changing. Despite the rapid growth of emerging industries, most of the core technologies are still in the hands of developed countries, and we need to further enhance our own innovation and master the patented technology of terminal design.
At present, in the face of the dual pressure of developed countries in Europe and the United States on the mainland's manufacturing and export products, especially in terms of technology and trade blockade, the challenges are increasing day by day. Major industrialized countries are focusing on the real economy and implementing "re-industrialisation" strategies to accelerate competition. With the rise of anti-globalization and the restructuring of the WTO system, China's manufacturing industry has ushered in unprecedented squeezes and challenges.
In the face of international blockade and competitive pressure, China's manufacturing industry is in a critical period of transformation and upgrading. This is not only due to external challenges, but also from internal pressures caused by the slowdown in sectors such as infrastructure and real estate. At present, we are witnessing the development of China's manufacturing industry, including Taiwan, towards high-end manufacturing of components, middleware, integrated circuits and semiconductor components.
The transformation and upgrading of the manufacturing industry has become an unavoidable choice. In order to participate more deeply in global competition and improve the level of advanced manufacturing, the transformation of China's manufacturing industry mainly points to intelligence. This transformation involves increasing the degree of industrial automation and unmanned, as well as improving the overall quality and level of products.
According to the McKinsey report, the global manufacturing value chain is shortening, and the global ratio of multinational corporations is adjusting, which reflects the trend of de-globalization. This provides an opportunity for China's manufacturing industry to transform from "Made in China" to "Made in China", prompting us to move from a manufacturing country to a manufacturing power.
In order to cope with rising wages and an aging population in the economy, we must further increase industrial added value and capacity utilization. This means that the manufacturing industry will have to transform from the relatively extensive development model of the past to a higher economy and production efficiency. This is the key to boosting manufacturing capabilities.
At the policy level, we have put forward action plans such as "Made in China 2025", but the implementation of these policies still needs to be further implemented.
At present, the transformation and upgrading of the manufacturing industry is more urgent, which involves the change of global trade rules, the upgrading of technological competition, and the transformation of the internal demand of China's manufacturing industry. Historically, comparative advantage and free trade have promoted the development of international division of labor and trade, and after China's accession to the WTO, it has enhanced its national strength through free trade, and has developed from the bottom of the manufacturing industry to a higher level of technical capacity demand. However, as China transitions to the higher end of the value chain, the competition for global technology dominance has intensified, leading to the erosion of comparative advantage and the hindrance of free trade.
China has put forward a strategy to develop cutting-edge and disruptive technologies to promote industrial upgrading through technological innovation. This includes the development of emerging industries such as intelligent robots, drones, 3D printing, and machine vision, as well as applications in industrial software, big data, and the Internet, providing new opportunities for industrial upgrading.
All in all, the future development of China's manufacturing industry should not only rely on the expansion of low-end production capacity, but also through independent research and development and technological innovation, combined with the world's advanced technology, to achieve high-end, intelligent transformation, and open up new development space and competitiveness.
At the heart of the development of the manufacturing industry lies in several key aspects:
First of all, cost leadership. We need to continuously improve our product innovation capabilities to achieve cost leadership and enhance competitiveness by simplifying design, saving material and labor costs, improving production automation, and optimizing industry-standard products and equipment.
Second, differentiation. In the face of homogeneous competition, we must achieve the ultimate in products, and at the same time achieve price advantages, we must also pay attention to the improvement of product quality and functions to make them different.
Third, focus. By focusing on specific market segments, leveraging specialized equipment and technology, we can create small, beautiful, leading-edge products that meet specific needs.
The development of the manufacturing industry is inseparable from the long-term polishing and the craftsman spirit of continuous trial and error. Every step of innovation, from process to industrial software, is based on a deep understanding of the manufacturing industry's long-standing accumulation. For example, the piston design and the improved properties of special steels are the result of numerous trials and improvements.
Integration capabilities are the hallmark of an international leader. It is not only necessary to master a single technology, but also to be able to integrate various technologies horizontally and vertically to form an optimal solution. This requires not only R&D and innovation, but also the ability to quickly turn prototypes into profitable mass production products, which is based on our many years of manufacturing experience and deep foundation.
Earlier this year, my team and I visited Southeast Asia and witnessed the high-level operation of many Chinese factories in Vietnam and Thailand. This not only shows the great progress of China's manufacturing industry, but also highlights the maturity of relevant enterprises in terms of management capabilities, infrastructure and large-scale production. Compared with 20 or 30 years ago, the production and manufacturing level of Chinese enterprises has made a qualitative leap, and today's enterprises have comparable scale and management capabilities to European and American countries in the production of end products and intermediate products.
In the past, we used to envy the level of large-scale industrialization in Japan, South Korea, and even in Europe and the United States, but now, our own enterprises have reached such heights. In the past, many enterprises in Shenzhen relied on management talents and engineers brought in from Hong Kong, Japan, South Korea, Taiwan and other places to upgrade their products and technologies. However, now China has a large number of local engineers, and their abilities have also been fully demonstrated and recognized overseas, especially in Vietnam and Thailand, where our engineers have fully demonstrated their technical and managerial skills.
This ability is not achieved overnight, but is the result of many years. As a big manufacturing country, China has a large, backbone and excellent team of engineers, which is one of our core competitiveness. Their hard-working and accurate grasp of technical details constitute a solid foundation for China's manufacturing industry, enabling us to occupy a place in the global manufacturing competition and show hard power. This backbone is the key for China's manufacturing industry to fight a tough battle and win respect on the global stage.
We have the confidence and ability to upgrade China's manufacturing industry, not only to show our strength overseas, but even compared with world-renowned enterprises, our production level is not inferior. More importantly, the diligence of the Chinese, the strength of research and development and the ability to respond quickly to product needs have demonstrated our unique advantages.
To achieve the upgrading and development of the manufacturing industry, continuous R&D and capital support are crucial. By producing high-quality products into the high-end market, we are able to achieve better profits, which in turn drives the further improvement of the manufacturing industry. In this process, capital support and investment pull, especially equity investment and venture capital, play an indispensable role. This is also in line with the country's strategic orientation.
02 Investment strategy of advanced manufacturing: taking the robot segment track as an example
The investment strategy of advanced manufacturing is based on two main lines:
The first line is the transformation and upgrading of the manufacturing industry
In the face of low-cost competition in the process of global industrialization, we must find effective strategies to build our own advantages and break through the dilemma. At the micro level, challenges such as rising labor costs and an aging population require us to continuously innovate in the diversification and personalization of products, optimize product design, R&D, production and sales processes, and promote intelligent equipment and digitalization of production and operation to improve production efficiency and flexibility.
The second main line is domestic substitution under the dual circulation strategy
First of all, relying on the strong domestic consumer demand, we should improve the response speed and service quality of the domestic market, and at the same time meet consumers with more favorable prices.
Secondly, it is very important to solve the "bottleneck" problem, which includes the independent research and development and production of key components, raw materials, core equipment and industrial software.
Finally, we should build a sustainable manufacturing competitive advantage with the help of China's leading industries such as new energy vehicles, photovoltaics and high-speed rail, and go global through production capacity, equipment and digitalization to achieve deep integration with the international market.
In the process of exploring the investment logic of advanced manufacturing, we identified five key sub-industries: industrial Internet, intelligent equipment, robotics, intelligent networked vehicles, and precision instruments. These areas represent the sectors and investment directions that we have focused on in recent years in the current situation.
In the process of globalization competition and industrialization, it is very important to choose the right investment track. We will focus on the robot segment and take this as an example to delve into the logic and strategy of manufacturing investment.
The reasons why we have paid special attention to the robotics industry in recent years are mainly based on the following points:
1. Intelligent manufacturing and automation needs: The development of high-end manufacturing is increasingly dependent on automation technology, and robotics is the key to achieving this high-end automation. This field is not limited to "robots" in the traditional sense, but also includes a variety of advanced automation equipment that can replace manual operations. The application of these technologies not only improves production efficiency, but also ensures the accuracy and quality control of the manufacturing process.
2. Market demand and development trend: The market demand of the robot industry continues to grow, showing a strong development trend. The increasing demand for automation and intelligence in the market has promoted the continuous progress of technology and application in the robot industry, and also made the market performance of this industry increasingly good.
3. Industrial policy support: In view of the important role of robotics in promoting industrial automation, solving labor shortages and population aging problems, policies in many countries and regions have begun to strongly support the development of the robotics industry. The policy support not only provides funding for R&D and marketing, but also creates a favorable environment for the development of the industry.
4. Long-term investment value: Investing in emerging industries such as robotics, especially those that represent new quality productivity, can avoid the problem of overcapacity in traditional industries. This investment promises high returns as it meets the growing market demand for high-tech and automation solutions.
The development of the robotics industry can be divided into 4 key stages, each of which reflects the advancement of technology and the deepening of applications:
1. Automation - Replace low-precision repetitive labor: Originally, robots were primarily designed to replace low-precision, repetitive human labor on the production line, such as simple assembly and packaging work. The core advantages of this application are to improve operational efficiency and production quality, and reduce labor costs and error rates.
2. Automation - Replacing high-precision repetitive work: As technology advances, robots are beginning to take on tasks that require more precise control, such as welding and painting. These tasks often require a high degree of precision and consistency, and robots are able to maintain uniform product quality and improve productivity through standardized procedures and precise control.
3. Machine Intelligence - Intelligent and High-Precision Sensing: At present, robot technology has entered a new stage, that is, the intelligent stage. Robots at this stage are not just performing repetitive tasks, but are performing more complex operations through high-precision mechanical movements, sophisticated feedback and perception systems, such as advanced sensors and machine vision. This includes the 3C (computer, communication, consumer electronics) industry, where robots can perform high-precision inspection and product quality control, and even realize flexible customization of products.
4. Artificial Intelligence - High Precision Mechanical/Sensory Capabilities + Deep Learning: This hierarchical technological advancement not only improves the generalization and human-machine integration of robots, but also enables robots to quickly and autonomously learn to adapt to manufacturing needs, expanding their application range in various industrial fields, making robot technology an indispensable part of modern manufacturing and high-tech industries.
As technology continues to evolve, we can expect robots to play an important role in more high-tech fields, such as performing more complex surgical assistance, deep-sea exploration, and disaster relief tasks.
The robotics industry is transforming from simple automation applications to complex intelligence and high adaptability, and the evolution of technology and the needs of the industry are mutually driving in this process. We can observe that from the initial stationary robot to the current mobile robot and humanoid robot, the technical difficulty is gradually increasing, and the application scenarios are also gradually expanding. The development of robots is not only limited to the manufacturing industry, but also involves the progress of materials science, artificial intelligence chips, sensors, control algorithms and other fields, making the robot industry actually an integration of multi-industry technologies.
Specific to the types of robots, we see that from wheeled robots to legged robots, each robot combines complex components such as the machine body, intelligent AI, system perception layer, decision-making layer, AI chip, structural unit, power system, and energy battery system. This high degree of technology integration cannot be accomplished by a single enterprise, but requires the collaborative improvement of the entire manufacturing industry.
From an investment perspective, there are different considerations for different branches of the robotics industry. Stationary robot technology has a deep accumulation, which is more suitable for team development with university background. Wheeled robots require independent research and development in terms of positioning, navigation and algorithms, while requiring a high degree of product integration and cost control, and a team with a background in an intelligent hardware company like DJI is more suitable. Legged robots have a higher threshold in terms of software algorithms, and are expected to attract the participation of various forces, including autonomous driving and artificial intelligence companies, in the future.
Although we still need to make breakthroughs in some basic technologies, domestic enterprises have performed well in innovation, especially in the application of automation scenarios. With the continuous advancement and innovation of technology, robots will undoubtedly have a profound impact on the way we produce, live and consume.
Unitree Technology, which we have invested in, is a leading start-up in the field of legged robots, focusing on the research and development of high-performance robots for consumer and enterprise levels. Unitree Technology not only has independent intellectual property rights at the technical level, its product performance is comparable to international brands, and has many patents in the field of footed robots. In addition, Unitree has established cooperation with top AI companies at home and abroad, and is conducting in-depth research and development in the field of embodied intelligence. In terms of team, the founder and team members of Unitree Technology have deep technical accumulation and many patents in the robot industry. We made our first investment in Unitree in 2021 and additional investment in 2024.
Our investment in Yuejiang Technology is an intelligent collaborative robot company, mainly serving the field of industrial manufacturing. The company's technical strength and products are widely used, especially in industries such as 3C manufacturing, auto parts, new energy, and metal processing. Yuejiang Technology's robot products are favored by many large customers, including Foxconn and BYD, for their high precision and wide application.
Our placement of these investments demonstrates a deep understanding and forward-looking understanding of industry development trends, laying a solid foundation for future market leadership.
03 The investment strategy of Shenzhen Capital Group
Whether in the field of manufacturing or venture capital, the core logic of investment includes a deep understanding of manufacturing processes, legal policies, and accounting knowledge. Venture capital is not only the accumulation of knowledge, but also an art, which depends on the accumulation of experience and continuous practice honing. Just like the spirit of craftsmanship, "ten years of sharpening a sword", it is key to deeply understand and practice the essence of venture capital.
As investors, we need to fully grasp the sustainable development ability of the enterprise and the market competitiveness of the product. Currently, we focus on venture capital investments that have an ongoing business model and growth potential.
From the perspective of policy opportunities, the comprehensive registration system of the Science and Technology Innovation Board and the establishment of the Beijing Stock Exchange have brought new opportunities to our capital market. However, the current state of the secondary market has also had a significant impact on our return on investment, leading to an increasingly competitive venture capital market and an increasing scarcity of high-quality projects. In this environment, we must constantly improve our cognitive skills and master how to reap the benefits through a deep understanding of the market.
In the future, our investment strategy needs to be further extended to the earlier stage, as well as to the later stage. At the same time, we need to rely on our own resources and experience accumulated in specific sub-sectors to form in-depth investment in these industries and further enhance our core competitiveness. This strategy alignment is a direct response to current market conditions and aims to maximize the return on investment through specialization and segment focus.
We must continue to improve our investment capabilities, professional capabilities, and cognitive capabilities in order to find more valuable projects that will generate more revenue for LPs.
When looking for investment opportunities, we should adhere to the core competitiveness of enterprise technology, and look for potential stocks and industry leaders. Our judgment and choice are like cultivating a person, the innate genes determine the lower limit of growth, and the acquired choices and efforts determine the upper limit of success.
Therefore, in the selection of projects, we need to consider the product, technology, business model, and the capabilities of the management team. We are looking for founders must have the spirit of entrepreneurship, excellent entrepreneurs must first be honest, loyal and trustworthy, have great ambitions, have the desire to become a leading enterprise, rather than a small fortune is safe, have a vision, have a certain ability to foresee, be keen and resolute, have a strong belief, have good communication skills, do not drill the horns, have a sense of teamwork, and be physically and mentally healthy.
Our investment strategy is to minimise uncertainty and look for certainty and comparative advantage. We choose businesses with advanced nature, high product recognition, large patent reserves, sufficient orders and high gross margins. We should also pay attention to the development potential and competitive advantages of the industry.
Although the scale of some sub-industries is small, enterprises with core technologies and industry status are also our investment targets. As long as companies can stay on top of technology and continue to expand, there's a lot of room for growth. In this niche, hidden champions are one of the focuses of our investment.
In the venture capital industry, our core mission is to drive the development and growth of companies, help them become industry leaders, and ultimately achieve public and establish a good image in the capital markets. A successful public company not only enhances its image and financing capabilities, but also enhances its ability to collaborate, which are key factors in becoming a leader in the industry.
Through financial support, we not only enhance the image of our portfolio companies, but also strengthen their governance practices, revalue them, and further strengthen their financing capabilities. In this way, we support technological innovation and optimize the financial environment, thereby enhancing the capital operation capacity of enterprises and enabling them to grow and expand.
As venture capitalists, our responsibility is to help companies build their core competitiveness, improve their sustainable profitability, and enhance their brand impact. This includes improving the corporate environment, optimizing the shareholder structure, and providing adequate value-added services.
Therefore, when choosing where to invest, we prefer companies that have a humanistic spirit, as well as entrepreneurs who are honest and have the ambition to create great businesses. We are looking for a leadership team with vision, sharp judgment, boldness, open-mindedness, a strong sense of teamwork and good physical condition, as these qualities are the keys to the success of the business.
Venture capital is not only an important force to promote scientific and technological innovation, but also the key to promoting the high-level development of enterprises. Through the blessing of capital, it supports the continuous research and development of enterprises, which helps to improve the overall level of enterprises. In this process, it is our important mission to identify and support promising companies and help them grow into competitive and excellent enterprises.
It is in this context that Shenzhen Capital Group is committed to discovering and achieving great enterprises, and through our efforts, helping these companies grow and become leaders in the industry. This is not only a support for enterprises, but also a contribution to the transformation and upgrading of the entire manufacturing industry and the national innovation-driven development strategy.
Dune Investment Research Institute 2024 (Huangpu Phase 14) registration