Subsides drive demand + profit protection, core targets of consumer electronics welcome dual catalysis.

On December 30th, the National Development and Reform Commission and the Ministry of Finance issued a notice on the implementation of large-scale equipment updates and the policy of replacing old consumer goods with new ones in 2026. The notice stated that it supports the replacement of old household appliances. Individual consumers who purchase refrigerators, washing machines, TVs, air conditioners, computers, and water heaters with 1st level energy efficiency or water efficiency standards will receive a subsidy of 15% of the product's sales price. Each consumer can receive a subsidy for one product in each category, with each subsidy not exceeding 1500 yuan. It also supports the purchase of new digital and smart products. Individual consumers who purchase mobile phones, tablets, smart watches, smart glasses, etc. with a single sales price not exceeding 6000 yuan will receive a subsidy of 15% of the product's sales price. Each consumer can receive a subsidy for one product in each category, with each subsidy not exceeding 500 yuan. It also supports subsidies for the purchase of new smart home products (including elderly-friendly home products), with specific subsidy categories and standards to be independently and reasonably determined by local authorities based on actual conditions. Industry analysts believe that from an economic perspective, this policy undoubtedly serves as a dual engine to activate consumption and drive industry upgrade. Specifically, the subsidy policy is biased towards 1st level energy-efficient products and smart terminals, which will push companies to increase their investment in research and development. For example, appliance companies will need to improve the efficiency of core components such as compressors and chips to meet energy efficiency standards, while digital manufacturers will need to make breakthroughs in AI algorithms, sensor integration, and other areas to enhance product competitiveness. This virtuous cycle of "subsidies-innovation-market expansion" will drive the transformation of Chinese manufacturing towards higher-end and intelligent products. The Changjiang Electronics team believes that the recent price increase in storage has had a negative impact on the sales and profitability expectations for the consumer electronics sector in 2026. The continuation of the subsidy policy will boost terminal demand on one hand and provide brand customers with price adjustment space on the other hand, which is beneficial for safeguarding profits in the component sector. Key recommendations: Terminal brands: Xiaomi Corporation (01810), LENOVO GROUP (00992), Shenzhen Transsion Holdings Co., Ltd. (688036.SH) AI glasses: Goertek Inc. (002241.SZ), Shanghai Longcheer Technology (603341.SH), Bestechnic (Shanghai) Co., Ltd. (688608.SH), Biwin Storage Technology (688525.SH), Shenzhen Highpower Technology (001283.SZ) Fruit chain innovation: Luxshare Precision Industry (002475.SZ), Lens Technology (06613), Lingyi Itech (002600.SZ), BYD ELECTRONIC (00285), Shenzhen Sunway Communication (300136.SZ)