In the mid-November 2013 National Machinery Industry Economic Situation Report, Cai Weici, executive vice president of the China Federation of Machinery Industry, highlighted that since the "Twelfth Five-Year Plan," the machinery industry has faced growing operational challenges and urgent pressure to shift its growth model. This year has brought numerous difficulties for the sector, yet market forces have accelerated restructuring and transformation efforts.
Looking at the first three quarters of this year, it's clear that industries such as consumption, information technology, and automation are growing faster than traditional investment-driven sectors. The automotive industry, being the largest in terms of volume, has shown strong growth, contributing significantly to the overall machinery industry's performance. Sub-sectors like agricultural machinery, instruments, and basic components are also outperforming the average growth rate of the industry.
Conversely, traditional investment product industries—such as construction machinery, hardware, heavy equipment, and power generation—are struggling. While some of these industries haven't seen a drop in output, their main business revenue and profits have declined sharply. The phrase "there is no shortage of living, but efficiency has fallen" aptly describes the situation.
The root cause lies in overcapacity in these sectors. When the market cools down, fierce competition drives prices down, resulting in a significant drop in profitability. Interviews with several hardware manufacturers revealed that declining profits are more concerning than the drop in orders or sales.
From an industry perspective, low-end hardware markets are profitable, while high-end hardware remains heavily imported. As overall demand remains weak, companies are pushing for transformation under market pressure. The mid-range segment has become the focal point of competition, attracting both domestic giants and new entrants. Foreign brands are also intensifying their presence in the Chinese market.
Although the reasons behind these shifts are complex, the key challenge is how to secure a stable position in this competitive landscape and maintain sustainable profits. Recently, the enlarged meeting of the Council of the Chinese Automobile Manufacturing Equipment Innovation Association (CIAME) took place in Shanghai, with representatives from major automakers in attendance.
As we know, the automotive industry is one of the largest consumers of hardware. It's estimated that at least 50% of Jinche Hardware’s customers come from this sector. However, domestic hardware companies rarely make it into critical areas like engine production lines. Most of the equipment used in China's auto factories is still imported.
It's not that China lacks high-end hardware capabilities, but rather that there's a lack of large-scale industrialized, market-oriented, and competitive high-end products. Although recent achievements show promising results with impressive technical indicators, the issue remains in market adoption and industrialization.
If the mid-range market can’t achieve scale, it will be hard to convince customers. For mid-range products to move upward, they need to establish credibility. But there's still a gap between capability and actual performance. Companies may have the ability to produce, but customers must recognize and value that quality enough to pay for it.
Therefore, the real challenge for China’s hardware manufacturers lies in establishing a solid foothold in the mid-range market. A recent example is Ford Motor Company choosing to manufacture stamping lines domestically, instead of relying on German imports.
Despite improvements in CNC hardware technology, domestic manufacturers still lack confidence compared to international competitors, which weakens their pricing advantage in the high-end market. Technological breakthroughs, such as five-axis linkage, are now achievable, but the real challenge lies in craftsmanship.
As observed in documentaries, the spirit of excellence and professional practices are invaluable. Without proper manufacturing processes, even the best technology can be undermined, leading to reliability issues. If users opt for cheaper alternatives, the dream of replacing imported high-end CNC hardware with domestic options becomes unrealistic.
Doing well in this space isn't easy. However, for China's hardware industry to succeed, it must firmly establish itself in the mid-range market and win the broader industry transformation battle—not just through rapid performance gains, but by addressing the alarm of product reliability.
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