The main difference between machine tools and other machines is that machine tools are machines that manufacture machines, and they are also machines that manufacture machine tools themselves. Therefore, machine tools are also known as "mother machines of industry" or "machine tools".

Machine tools provide production equipment for the equipment manufacturing industry. Any parts with high processing precision requirements and fine surface roughness requirements need to be processed by machine tools. Therefore, machine tools play a pivotal role in manufacturing and national economic development.

With the development of electronic information technology, the current machine tool industry has entered the era of mechatronics represented by CNC machine tools.

A CNC machine tool is an automated machine tool equipped with a program control system. It effectively solves the problems of processing complex, precise, small-batch, and multi-variety parts. It is a flexible and high-efficiency automated machine tool, representing the development direction of modern machine tool control technology.

The structure of domestic CNC machine tool products mainly consists of CNC metal cutting machine tools, CNC metal forming machine tools, and CNC special processing machine tools. Among them, CNC metal cutting machine tools have the largest scale, accounting for 53.20% of the total product scale, while CNC metal forming machine tools and CNC special processing machine tools account for 28.50% and 16.80% of the total product scale, respectively.

According to the "Made in China 2025 Plan", by 2025, the domestic market share of China's high-end CNC machine tools and basic manufacturing equipment will exceed 80%, and the overall high-end CNC machine tools and basic manufacturing equipment will Enter the ranks of world powers.

The machine tool industry has obvious cyclical characteristics. The general product life of machine tools is about 10 years, so the industry has a business cycle of approximately 7-10 years. A new cycle began in 2009, and global machine tool consumption and output value reached their peak in 2011 before falling. In 2019, global machine tool consumption was US\$82.1 billion, a year-on-year decrease of 13.8%, and the global industry is currently still at the bottom of the cycle.

In recent years, although the overall profitability of China's CNC machine tool industry has declined somewhat, the industry scale is still showing an upward trend. The China Machine Tool Industry Association predicts that the scale of China's CNC machine tool industry will grow by 5% in 2021, meaning it will exceed 340 billion yuan.

Currently, China is in the stage of adjusting and upgrading its industrial structure. Advanced manufacturing will gradually replace traditional manufacturing, and the market demand for high-performance CNC machine tools, as the mother machines of industry, will greatly increase.

Compared with traditional machine tools, CNC machine tools have multiple advantages, including high precision, high speed, compound, intelligence, and environmental protection, and they shoulder a special mission of industrial modernization.

CNC machine tools are not ordinary industrial investment products. High-end CNC machine tools and systems, such as five-axis linkage machine tools, are still listed on the trade restriction list of developed countries and are restricted as strategic materials related to national economic, military, and industrial security.

Currently, the world machine tool industry is a perfectly competitive industry, and the main major machine tool countries include Germany, Japan, the United States, and China.

China's machine tool industry started late, but its overall development has been rapid. In recent years, there has been significant growth in technology and market scale. However, compared with Germany, Japan, and the United States, there is still considerable room for optimization in China's machine tool structure. Increasing the CNC rate is a major trend in the industry, and the overall market is huge and has broad development prospects.

CNC Machine Tool Industry Chain

The upstream, midstream, and downstream of the machine tool industry chain are clear, including upstream basic materials and component manufacturers, midstream machine tool body manufacturers, and downstream end users.

Upstream basic materials and component manufacturers mainly provide machine tool manufacturers with structural components (cast iron, steel parts, etc.), CNC systems, drive systems (drive motors and drive devices), transmission systems (guides, screws, spindles, etc.), tool magazines, etc. The midstream is the machine tool body manufacturer, responsible for providing end users with various machine tools or integrated products that meet their requirements; the downstream Applications are very wide, and end users are mainly in various fields such as automobiles, military industry, aerospace, shipbuilding, petrochemicals, engineering machinery, and consumer electronics.

Upstream: Core Components

Upstream equipment components, as basic components of CNC machine tools, are an important guarantee for the performance and quality of intelligent manufacturing equipment products such as CNC machine tools.

Among them, the market structure of precision parts, functional components, and CNC systems is stable, and Price fluctuations are small. The sheet metal and casting market is fully competitive, and Price fluctuations mainly come from the push of raw material costs such as pig iron and steel.

The development of China's functional component industry is relatively slow, and the degree of industrialization and specialization is low. Although electric spindles, ball screws, CNC tool holders, CNC systems, and servo systems have formed a certain production scale, they are limited by technology and can only meet the supporting needs of mid-to-low-end CNC machine tools. Domestic high-end CNC machine tools still heavily rely on imports for functional components. Optical machines and sheet metal machine tool components have become relatively mature domestically.

Due to factors such as the high Price and long delivery time of imported machine tools, the Price of domestic high-end CNC machine tools remains high, seriously affecting their market competitiveness.

Supply Pattern of Key Components for CNC Machine Tools:

Structural Components

In structural components, cast iron and cast steel parts are formed into machine bodies, pillars, etc. through fine machining, accounting for about 25% of the cost.

Castings and sheet metal components mainly include machine tool inner and outer protective covers, telescopic protective covers, chip conveyor precision sheet metal welding parts, and other sheet metal small accessories.

CNC System

The CNC system, or CNC system, realizes metal cutting through programming to generate and convey commands, accounting for 25-30% of the cost.

In 2020, the market size of CNC systems in China reached 11.6 billion yuan, a year-on-year increase of 33%. From 2021 to 2022, China's CNC systems are expected to maintain steady growth.

Under the evolution of computer technology, global CNC systems have experienced the NC and CNC eras. Currently, the "CNC" referred to in the industry is all computer numerical control.

The complex spatial modeling know-how of high-end CNC system algorithms, optimization compensation technology, reliability, and application extension capabilities constitute important thresholds for CNC systems. In addition, chips and fiber optic communication also play a key role in improving system performance.

China's high-end CNC systems have long been monopolized by foreign companies such as Fanuc, Mitsubishi, Siemens, and Heidenhain. These leading companies all use dedicated chips and have multiple types of output signals for different user needs. They can control the host, robots, and the actions of various parts of the online logistics.

Domestic manufacturers such as Keda CNC and Beijing Jingdiao use self-produced five-axis linkage CNC systems, leading the way in domestic production. Huazhong CNC and Guangzhou CNC specialize in producing CNC systems for use in machine tools, robots, and other fields.

Drive System

The drive system converts the control signals of the CNC system into corresponding mechanical displacements, divided into hydraulic drive (hydraulic pump valves, cylinders) and electric drive (such as servo drives and stepping motors), with a cost accounting for approximately 15%.

Transmission System

The transmission system is the carrier of the movement of machine tool components and directly affects the machining accuracy. China's machine tool enterprises mainly rely on external sourcing for spindles and ball screws, accounting for approximately 15%~20% of the cost.

The machine tool spindle is one of the most important core components of CNC machine tools, integrating high speed, high precision, high efficiency, and high reliability. Its technological level and quality directly determine and affect the quality of the machine tool.

Spindles are divided into mechanical spindles and electric spindles. Mechanical spindle bearings generally require ultra-precision of P4 and above; domestic bearing manufacturers still have a large gap in processing capabilities. Electric spindles are a combination of cross-industry comprehensive technologies, including precision manufacturing technology, bearing technology, motor speed regulation technology; those above 40KW rely on imports.

In China, the Luoyang Bearing Research Institute is the most representative manufacturer of electric spindles. Private companies such as Haozhi Electric have replaced imported shares in 3C CNC milling electric spindles.

In the long run, high-performance electric spindles overcome the shortcomings of traditional mechanical spindles, and replacing mechanical spindles is a general trend.

The position and working status of the electric spindle in the CNC machine tool:

The image shows a ball screw used in CNC machine tools, with features such as high efficiency, precise positioning, precise guidance, and rapid response to CNC instructions. Domestic screw manufacturers have characteristics such as small output scale and irregular operation, lacking well-known enterprises comparable to NSK, THK, and Rexroth.

Functional Components

Functional components include tool magazines (cost accounting for 5%), gratings (cost accounting for 2%), and gearboxes, etc.

China's serious reliance on imported cutting tools is concentrated in the aerospace, military, and automotive engine fields. The entry barriers for high-end cutting tools include the research and development of new base materials, the development and application of coating technology, and innovative structural design.

Currently, China's machine tool cutting tool market is quite fragmented. Leading foreign companies include Sandvik Coromant, Kennametal (USA), Kyocera (Japan), and Iscar, while domestic brands include Zhuzhou Diamond (ZCC), Xiamen Jinlu, Huarui Precision, and Oukeyi.

Midstream: Main Body Manufacturing

As a typical mechatronics product, CNC machine tools are a combination of mechanical technology and CNC intelligence, which can be divided into metal cutting (turning, milling, boring, drilling, grinding, etc.), forming machine tools (presses, shearing machines, bending machines, etc.), special processing (electrical discharge wire cutting machine tools, electrical discharge forming machine tools, etc.), machining centers (multi-axis linkage, flexible processing units), and other products.

In terms of market structure, the first echelon is multinational companies and foreign-funded enterprises. Due to advantages in Brand and technology, they dominate the high-end market. The second echelon includes state-owned enterprises or private enterprises with independent research and development capabilities and mastery of core technologies. The third echelon is enterprises focusing on the low-end product market.

Currently, the global machine tool market is still dominated by machine tool manufacturers in Germany, Japan, and the United States. According to the "2019 CNC Machine Tool Industry Data" released by CCID Consulting, the top ten companies in terms of operating income are all occupied by companies from these three countries. Among the top ten, three are from Germany, four from Japan, two from the United States, and one is a German-Japanese joint venture.

In the list, Yamazaki Mazak ranks first with US$5.28 billion in revenue, followed by Germany's Trumpf with US$4.24 billion, and DMG Mori Seiki in third place.

In recent years, domestic private enterprises have gradually grown into the main force, and each machine tool factory's products have their own focus, forming a highly dispersed competitive landscape.

From the perspective of the domestic market, some manufacturers have already formed a certain scale and have formed their own advantages in specific machine tool products.

Currently, China has more than ten listed host manufacturers, including Haitain Precision, Genesis, Guosheng Zhike, Keda CNC, and Zhejiang Haideman. Among them, Genesis has drill tap centers and vertical machining centers as its advantageous products; Qin Chuan Machine Tool has advantages in the lathe market; Haitain Precision focuses on producing various machining centers; and Yawei Co., Ltd. occupies a strong advantage in the forming machine tool market.

Comparison of Major Machine Tool Manufacturers in China in 2020

From the perspective of the entire market, Genesis, Qin Chuan Machine Tool, Haitain Precision, Nuwei CNC, and Yawei Co., Ltd. rank among the top five in market share, with 2.85%, 1.57%, 1.47%, 1.06%, and 0.98%, respectively. The predicted market share of the top five listed companies is only 7.81%, less than 10%, indicating an extremely fragmented industry concentration.

Downstream: Strong Demand from Electronics and Military Industries

From the perspective of the downstream field of CNC machine tools, the demand from the electronics and military industries is strong, coupled with the acceleration of domestic substitution after the optimization of the market structure.

On the one hand, under the background of the US-China trade war, imports of high-end machine tools are restricted, creating opportunities for private machine tool enterprises such as Genesis, Haitain Precision, and Runxing Technology, accelerating domestic substitution. On the other hand, the strong demand for machine tools in the aerospace and military industries, 3C electronics (5G+Apple), engineering machinery, and molds (driven by the pandemic) has become a growth highlight of the cyclical recovery. In addition, the automotive industry, the largest downstream application of machine tools, has also quickly recovered after the pandemic, driving demand for machine tools.

Industry Development Trend: High-end and Independent Domestic Substitution Accelerates

China's CNC machine tool industry has rapidly developed since the late 1990s, and has transitioned from past incremental development to the current optimization of existing stock. For example, in recent years, the automotive, aerospace, and mold industries, which account for the largest proportion of CNC machine tool demand, are developing towards lightweight, multi-configuration, and low-cost manufacturing. The use of new materials is becoming increasingly widespread, and higher requirements are being placed on the processing capabilities of CNC machine tools.

However, China's CNC machine tool industry has a significant supply-demand contradiction, mainly manifested in the overcapacity of low-end CNC machine tools and the insufficient supply of high-end CNC machine tools, leading to a structural imbalance on the supply side.

According to statistics from the China Industry Research Institute, China has basically achieved domestic substitution of low-end CNC systems and components, but mid-to-high-end machine tools still have gaps in stability, processing efficiency, and lifespan. The domestic substitution rate of high-end CNC machine tools in China is only 6%, while the domestic substitution rate of mid/low-end machine tools has reached 65%/82%.

With the continuous upgrading and development of downstream industries, the requirements for machine tool processing accuracy and precision stability are becoming increasingly higher, and the demand for mid-to-high-end products is becoming increasingly prominent, with a large demand for updates and upgrades. The upgrading of China's machine tool market structure will move towards automation, customer customization, and universal upgrading, with products upgrading from ordinary machine tools to CNC machine tools, and from low-end CNC machine tools to mid-to-high-end CNC machine tools. It is expected to further develop towards high-end, integrated, service-oriented, and independent directions.

Against the backdrop of the stock update, import substitution, and the booming downstream industries of domestically produced mid-to-high-end CNC machine tools, the industry as a whole is expected to experience accelerated development.

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