The hardware industry is highly competitive in the mid-end market

**Abstract** The machinery industry is currently facing significant challenges, including a slowdown in demand, overcapacity, rising costs, and declining prices. These issues are unlikely to improve in the short term. Although the industry has made some progress in restructuring, upgrading operations, and improving management, profit margins have not yet recovered. The ongoing decline highlights the urgent need for faster industrial transformation and upgrading. Companies must focus on enhancing production efficiency and reducing resource consumption to reverse the downward trend. At the 2013 National Machinery Industry Economic Situation Report held in mid-November, Cai Weici, executive vice president of the China Machinery Industry Federation, emphasized that since the "Twelfth Five-Year Plan," the operational difficulties of the machinery sector have significantly increased, and the pressure to shift from traditional growth models has become more urgent. While this year has brought many challenges, the market’s self-regulating mechanism has accelerated industry restructuring and transformation. Cai predicted that the machinery industry will maintain a relatively stable and low growth rate in the coming year. Production and sales are expected to grow by 10% to 15%, with profit growth around 10%, and export revenue likely to increase by 5% to 10%. **Mid-End Competition** According to the performance of main business income and profits in the first three quarters, industries closely linked to consumption, informatization, and automation are growing faster than traditional investment-driven sectors. For example, the automobile industry, which makes up a large portion of the total growth, has seen stronger growth this year, driving the overall machinery industry forward. Similarly, sub-sectors like agricultural machinery, instruments, and basic components have also outperformed the broader industry. Conversely, typical investment product industries—such as construction machinery, hardware, heavy machinery, and power generation equipment—are struggling. Some may not see a drop in output, but their main business income and profits have declined sharply. As one manufacturer put it, “There’s no shortage of work, but profits have plummeted.” This situation stems from excessive capacity expansion. When the market cools down, competition intensifies, leading to sharp price drops and severe profit declines. Interviews with several hardware manufacturers revealed that while order volumes and sales have dropped, the real concern is the sharp decline in corporate profits. Looking at the entire hardware industry, the low-end market offers minimal profit, while high-end imports remain substantial. Given the sluggish overall market demand, hardware companies are pushing for transformation under downward pressure. The mid-end market has become a key battleground for competition. Both domestic enterprises and new entrants are focusing on this segment, as it allows for easier mass production. International brands are also accelerating their presence in the Chinese market. **Not Easy** While the reasons behind these trends are clear, gaining a foothold in the competitive mid-end market and maintaining profitability remains a challenge. Recently, a meeting of the China Automotive Manufacturing Equipment Innovation Alliance (CIAME) was held in Shanghai, with representatives from major automotive companies in attendance. Cars are a major consumer of hardware, with at least 50% of Jinchao's customers coming from the automotive sector. However, domestic hardware companies rarely participate in key areas such as engine production lines. Most of the equipment needed for the four major processes in Chinese automakers is still imported. It’s important to note that this isn’t about the absence of high-end hardware, but rather the lack of a large number of industrialized, market-oriented, and competitive high-end products. While recent achievements show promising technological advancements, they often fall short in terms of commercialization and market acceptance. If mid-end products cannot achieve scale, they will struggle to gain market credibility. This is the only path for mid-end products to move upward. However, there is still a gap between capability and execution. Just because a company can produce something doesn’t mean customers are willing to pay for it. Therefore, the ability of Chinese hardware manufacturers to succeed in the mid-end market is crucial for the industry’s transformation. It was reported that a factory has been using two German-made stamping lines. This time, Ford chose to manufacture them in China. In the face of international competition, China’s domestic CNC hardware is still lacking in certain aspects, which weakens its cost-effectiveness in the high-end market. Performance is more than just technology. There have been breakthroughs in various fields, such as five-axis linkage systems, which were once difficult to master but are now widely available. But the real challenge lies in craftsmanship. As observed in documentaries, the spirit of excellence and professional work habits are invaluable. If the manufacturing process is still lacking, even the best technology will be undermined, leading to repeated quality issues. Ultimately, reliability becomes a problem. When users buy domestically produced high-end CNC hardware, they are essentially hoping for a luxury experience. But until the reliability of these products improves, true replacement of imported equipment remains a distant dream. Doing well is not easy. However, if Chinese hardware companies can establish themselves in the mid-end market, they can lead the industry’s transformation and upgrade. It’s not just about quickly improving performance, but also about raising alarms about product reliability.

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