Analysis of the competitive pattern of China's valve manufacturing industry in 2018 Industry transformation is imminent

1) From export to domestic sales

Under the circumstance of decreasing foreign demand, export-oriented enterprises are currently exploring the domestic market, from export-oriented to domestic-export-oriented market. Twice as many companies are transforming than not being inclined to transform. 32% of companies have begun to lead the transformation of enterprises to domestic sales. Enterprises believe that export enterprises have certain drawbacks in their business models, such as relatively low profit margins and excessive dependence on certain needs of a single industrial chain, which will make the business risk even greater. Therefore, the current successful enterprises are starting from the beginning from new brands, innovative channels, market integration, and the corresponding domestic sales after-sales.

Figure 1: Transition options of export-oriented enterprises from export to domestic sales (unit: %)

Source: Foresight Industry Research Institute

2) From OEM to independent brand

At present, more than 75% of domestic foundry manufacturers have begun or are ready to transform to independent brands. The transformation of OEM production to independent brand operation requires more upfront investment and time, enterprises lack transformation experience, enterprises need to invest a lot of money in the early stage, need to establish R&D capabilities, need to change business operation mode, need to re-establish sales channels and networks. Enterprises have great uncertainty about the return on investment, but the interviewed enterprises have learned from the experience of peer brand management, and can achieve independent brand management in a short period of time with lower investment and faster time. And these efforts are already paying off.

Figure 2: Choices for enterprises to transform from OEM to independent brands (unit: %)

Source: Foresight Industry Research Institute

3) From low-end to high-end

As can be seen from the figure below, according to the survey, 48% of enterprises have begun to upgrade their products to the high-end, 26% of the enterprises have a clear plan and time plan for upgrading the high-end, and more than 75% of the enterprises have made clear choices and concrete measures. This percentage is very high. Especially in some mechanical and electrical industries, enterprises have relatively clear intentions. Upgrades from low-end to high-end include both product and service upgrades. Product service upgrading is first of all to improve the profit margin of products and services, but also an important way to explore new market opportunities. The upgrading of the industrial chain enhances the status and discourse power of enterprises in the industrial chain and improves the ability of enterprises to resist risks, which is a key strategic measure for Chinese enterprises to break through the crisis and develop in the long run.

Chart 3: Choices for enterprises to upgrade from low-end to high-end (unit: %)

Source: Foresight Industry Research Institute

4) From manufacturing to service

In order to realize the value-added of all stakeholders in the manufacturing value chain, service-oriented manufacturing achieves an efficient and innovative manufacturing model through the integration of products and services, the participation of customers throughout the process, and the mutual provision of productive services and service production by enterprises.

Chart 4: Choices for companies to transition from manufacturing to services (in %)

Source: Foresight Industry Research Institute

The above data and analysis are from the "2018-2023 China Valve Manufacturing Industry Production and Marketing Demand Forecast and Transformation and Upgrading Analysis Report" released by the Prospective Industry Research Institute.