The machine tool has been upgraded to a more advanced and intelligent version.

Recently, the State Council issued the "Action Plan for Promoting Large-Scale Equipment Renewal and Consumer Goods Trade-In" (hereinafter referred to as the "Plan"), which proposes to focus on implementing four major actions: equipment renewal, consumer goods trade-in, recycling and reuse, and standard enhancement. The Plan supports energy conservation and carbon reduction, ultra-low emissions, safe production, digital transformation, and intelligent upgrades of equipment from a policy perspective, bringing significant benefits to the machine tool industry.

From the current development situation of the machine tool industry, what impact will the Plan bring? How can we unblock the bottlenecks in the machine tool "trade-in"? How can domestic machine tool companies seize this opportunity?

　　Stimulating industry vitality

In the past year, the machine tool industry has been affected by international environments, geopolitical factors, and weak downstream equipment investment, leading to a year-on-year decline in total operating revenue and profit. Data from the China Machine Tool Industry Association shows that in 2023, the machine tool industry achieved an operating revenue of 1,097.4 billion yuan, a year-on-year decrease of 10.3%, and a total profit of 113.2 billion yuan, a year-on-year decrease of 35.8%.

Against this backdrop, the release of the Plan undoubtedly injects a "shot in the arm" for the machine tool industry.

Mao Yufeng, president of the China Machine Tool Industry Association, stated that each equipment renewal action plays an important role in the establishment and development of China's machine tool industry and consumer market. The 2009 equipment renewal action made China the world's largest machine tool producer and consumer, laying the foundation for the CNC machine tool industry and nurturing a group of enterprises and industrial clusters focused on CNC machine tools. This round of the Plan is launched against the backdrop of the central government's proposal to develop new quality productivity and promote high-quality development, and it will undoubtedly play a greater role, which can be said to be an upgraded and enhanced version. It is expected that by the end of 2027, there will be at least an additional cumulative demand of 100 billion yuan for machine tool products.

Specifically, the four major actions will all affect the operation and development of the machine tool industry. Mao Yufeng analyzed that the equipment renewal action is the most direct and effective, involving large-scale procurement of machine tool products; the consumer goods trade-in action is a new driving force on the demand side, and it is foreseeable that as consumer goods sales increase, the upstream manufacturing links of related consumer goods will also generate new equipment renewal or procurement demands, thereby driving an increase in machine tool industry sales.

He stated that the role of the recycling and reuse action is relatively indirect, mainly involving a small number of old machine tool products in the previous two actions that are related to transformation and secondary use; the standard enhancement action is both a guarantee measure and a development goal, ensuring that this round of equipment renewal and trade-in is an endogenous driving action aimed at high-quality development.

Machine tools are the equipment for producing industrial equipment and components, realizing the modernization of manufacturing technology and equipment, and serving as the "industrial mother machine" and "technical cornerstone" for the new quality productivity that supports Chinese-style modernization. Tan Xiaodong, director of the Beijing Biao Yan Technology Development Center, believes that currently, the precision and CNC levels of China's traditional machine tool industry are relatively low, which to some extent restricts the high-quality development of China's industry. Promoting large-scale equipment renewal and the iteration and replacement of the machine tool industry is not only a prerequisite and important means but also an important foundation for improving the quality and production capacity of industrial products.

The capital market is also very optimistic about the effects brought by the Plan. Zhongtai Securities analysis states that the last peak of machine tool consumption in China was from 2011 to 2015. According to an 8 to 10-year renewal cycle, a large number of existing machine tools will enter the replacement cycle from 2019 to 2025. It is judged that the central policy will gradually introduce detailed rules in the future, which is expected to encourage domestic manufacturing to purchase domestic machine tools. Under the overlapping of the renewal cycle and policy catalysis, domestic "industrial mother machine" companies are expected to benefit fully.

　　Unblocking bottlenecks and difficulties

The Plan deploys a package of policy arrangements to solve the difficulties and bottlenecks in enterprise equipment renewal, providing guarantees for promoting the acceleration of industrial updates to form scale effects.

Currently, although the demand for updating old machine tools in China is at a turning point, the willingness of machine tool companies to participate in trade-ins is still not strong enough. Guo Feng, director of the National Machine Tool Product Quality Inspection and Testing Center (Shandong), analyzed that on the one hand, the benefits of participating in trade-ins are significantly lower than the profits from manufacturing new products; on the other hand, there is a lack of professional service platforms, which leads to significant uncertainties in the evaluation of the residual value of old machine tools, procurement of old specification spare parts, control of repair costs, and sales after transformation/remanufacturing of old machine tools, resulting in considerable risks.

To address the above issues, Guo Feng suggested strengthening policy guidance, quickly formulating relevant policy implementation details, and improving supporting measures such as tax reductions, financial subsidies, and finance, so that the concepts of trade-in and remanufacturing can form a consensus in the machine tool industry. At the same time, a service platform that integrates functions such as residual value assessment of old machine tools, procurement of old specification spare parts, logistics transportation, testing platforms, and financial subsidy fulfillment should be established to reduce the risks of trade-ins.

"Unlike consumer goods trade-ins, large-scale equipment renewal of machine tools requires a longer industrial cycle, greater social investment, and higher marketization capabilities." According to Jiang Shilin, assistant to the chairman of Dalian Guangyang Technology Group, as common production tools for different application fields and processing objects, large-scale equipment renewal of machine tools must revolve around the industrial demand of their downstream markets. Diverse market demands will inevitably require diverse renewal routes, but how to define renewal, how to incentivize renewal, and how to evaluate renewal are all urgent issues that need further research and clarification in the future.

Mao Yufeng stated that as an upgraded version, the Plan must arrange relevant policies around the main line of building new quality productivity aimed at high-quality development, solve the problem of bad money driving out good, make good use of and strengthen the high-end CNC machine tool technological transformation management policies and measures that have received good industry feedback, upgrade product standards, and improve the bidding system. At the same time, during implementation, attention must be paid to investment direction, efficiency, and capacity conditions to avoid blind investment, false investment, and repeated construction.

　　Increasing the proportion of high-end machine tools

From the perspective of machine tool companies, seizing this renewal opportunity is crucial to finding the right direction for renewal. Equipment renewal is not simply a replacement of similar products, but an upgrade in demand for higher-end, smarter, and more environmentally friendly products, which is an important part of new quality productivity.

"In the future, enterprises focusing on CNC machine tools will generally benefit, with high-end CNC machine tools benefiting even more. Enterprises that master core technologies, have a complete industrial chain supply chain ecosystem, and have a high degree of autonomy will become the main force in participating in this round of the Plan." Mao Yufeng said that the Plan proposes that "the popularization rate of digital R&D design tools and the CNC rate of key processes in industrial enterprises above designated size should exceed 90% and 75%, respectively," indicating that the scale increment of CNC machine tools has more than doubled.

"We must adhere to market-oriented development, respect the laws of industrial development, solidly assess downstream industrial opportunities, design a package of landing methods and policy toolboxes for large-scale equipment renewal of machine tools, and stabilize and enhance the development confidence of different operating entities," Jiang Shilin suggested.

Mao Yufeng stated that in conjunction with the implementation of quality requirements, the main products of the machine tool industry are expected to achieve a significant transformation from CNC machine tools to high-end CNC machine tools, greatly improving supply capacity. Capable enterprises can strive to increase the proportion of high-end CNC machine tool products under the conditions that are already in place.

In this regard, Guo Feng also expressed strong agreement. He stated that the implementation of the old-for-new policy will further activate technological innovation in the machine tool industry, accelerate the high-end, intelligent, networked, and flexible development process of domestic machine tools, and thus enhance the precision retention, reliability, and reparability of domestic machine tools. It is important to note that during this process, efforts should be made to accelerate the improvement of the machine tool standardization system, formulate and revise a batch of standards in areas such as intelligence, digitization, and remanufacturing, align with international standards, fill in the gaps, and improve the conversion rate of international standards, using a high-standard machine tool manufacturing system to support technological innovation and lead the high-quality development of the industry.

To achieve high-quality development, machine tool industry enterprises must increase their innovation efforts. Tan Xiaodong stated that promoting the iterative upgrade of China's machine tool industry is an urgent task that requires combining the development characteristics and trends of the machine tool industry, strengthening basic research in the machine tool sector, and fully mobilizing the various elements of "government, industry, academia, research, application, and finance" to jointly tackle common key technologies related to machine tool precision, intelligence, and low energy consumption. There should be an increase in the tilt of research project approvals in national major research plans and major R&D projects. On this basis, there should also be an increase in policy and financial support, as well as the cultivation of compound talents, to provide solid support for large-scale equipment updates.

Source: Economic Daily