Tianfeng: Refinement of sinking + focus on categories + special funds. Xinchuang 2.0 is expected to accelerate. There is still room for improvement in the localization rate of segmented tracks.

Tianfeng released a research report stating that refinement sinking + focusing on categories + special funds, the acceleration of Xin Chuang 2.0 is expected. Xin Chuang 2.0 has a large incremental space, and there is still room for improvement in the localization rate of segmented tracks. Overseas restrictions are expected to strengthen, and the localization rate of core EDA software is expected to increase. Tianfeng's main points are as follows: Refinement sinking + focusing on categories + special funds, Xin Chuang 2.0 is expected to accelerate. From the review of Xin Chuang, party/government/industry Xin Chuang are all expected to accelerate: party/government Xin Chuang at or above the city level started in 2020, will end in 2022, and in 2023, the industry will enter the 2.0 stage of sinking to counties and expanding industries, and the replacement path will gradually deepen from "key links, partial market" to "full industry chain, full industry", gradually penetrating into the internal core systems. Considering that Xin Chuang tasks are entering the "settlement" stage as a countdown, with special funds overlapping with fiscal funds, funds for information technology, etc. safeguarding, the trend of refinement sinking + focusing on categories is clear, and party/government departments at all levels are beginning to accelerate. Xin Chuang 2.0 has a large incremental space, and there is still room for improvement in the localization rate of segmented tracks. According to CCID CONSULTING, the number of PCs in the government sector is close to 30 million units, and as of early 2023, in the past few years, only about 7 million PCs in the government sector have been replaced. Assuming another 3.6 million PCs will be replaced in 2023, there is a remaining space for replacing nearly 20 million PCs. According to the "2022-2023 China Xin Chuang Ecology and Xin Chuang PC Market Development Research Report," the total number of PCs in the nine basic industries is approximately 28.2254 million units. Among them, the financial sector has 4.54 million units, telecommunications has 0.7742 million units, electricity has 2.1134 million units, the petroleum industry has 1.48 million units, transportation has 0.9304 million units, aerospace has 0.26 million units, education has 14.6974 million units, and healthcare has 3.43 million units. Looking at the localization level of various links in the Xin Chuang industry chain, application software and IT security areas are relatively mature, but the localization of chips, operating systems, and databases is less than 10% (as of 2021), and there is still significant room for improvement. The expected strengthening of overseas restrictions, the localization rate of core EDA software is expected to increase. On November 8th, according to Jijitech, TSMC has sent formal emails to all AI chip customers in mainland China, announced that from November 11th it will suspend the supply of all 7-nanometer (nm) and more advanced chips to Chinese AI/GPU customers, in addition, discussions are also being held in the U.S on further control of advanced processes in the mainland, which may lead to further external controls on China's semiconductor industry. The market share of domestic suppliers in the domestic EDA market is still small, and EDA software as a basic tool of the integrated circuit industry, is still a bottleneck at present, under the expectation of continuous strengthening of overseas restriction policies, the domestic substitution of the EDA link is expected to further accelerate. In addition, in September this year, the China Securities Regulatory Commission issued the "Opinions on Deepening the Market Reform of Mergers and Acquisitions of Listed Companies," encouraging listed companies to strengthen industrial integration, and supporting will be provided through the improvement of lock-up period regulations, substantial simplification of examination procedures, etc., domestic EDA companies are expected to accelerate mergers and acquisitions and expand their product map, while maintaining high research and development investment and continuously promoting technological innovation, through outward expansion and internal growth to continuously enhance product strength and competitiveness. It is recommended to pay attention to core listed companies in the EDA sector, such as Empyrean Technology, Semitronix Corporation, and Primarius Technologies. Recommended focus: OS: China National Software & Service (Kirin Software), Hunan Kylinsec Technology, ArcherMind Technology (Nanjing) Co. (Tongxin Software), etc; Security: Hunan Kylinsec Technology, Beijing Infosec Technologies Co., Ltd. (Unified World Technology), Zhongfu Information Inc., etc; Chips: Hygon Information Technology, Loongson Technology Corporation, China Greatwall Technology Group (Feiteng), etc; PC & Harmony OS: iSoftStone Information Technology, China Greatwall Technology Group, Jwipc Technology (jointly covered with communications), Beijing Oriental Jicheng, Unionman Technology Co., Ltd., etc; Office software: Beijing Kingsoft Office Software, Inc, Fujian Foxit Software Development Joint Stock, etc; Printers: Ninestar Corporation, etc; Server: Dawning Information Industry, Digital China Group, iSoftStone Information Technology, Unisplendour Corporation (jointly covered with communications), Talkweb Information System, etc; EDA: Empyrean Technology, Semitronix Corporation, Primarius Technologies. Risk warning: Policies may not be implemented as expected; Mergers and acquisitions may not meet expectations; Funds may not be implemented as expected."Je suis heureux de vous rencontrer." "I am happy to meet you."Je suis dsol, je ne parle pas franais.