Soochow: Industry cycle reversal + independent controllable AI-related processing drive machine tool sector demand.

Soochow released a research report stating that the current machine tool industry has entered the demand recovery phase. In the first quarter of 2026, downstream demand for machine tools showed a general recovery, with the electronics industry leading in growth, and demand for sectors such as automotive and precision molds significantly improving compared to the first quarter of 2025. The market share of domestic industry leaders is steadily increasing; the market share of the top 10 CNC machine tool manufacturers has increased from 33% in 2025 to 37% in the first quarter of 2026, with industry consolidation driving market share towards the top. The main points of Soochow are as follows: The machine tool industry has entered the demand recovery phase, with this cycle expected to continue Since 2022, the machine tool industry has been affected by weak demand from traditional downstream sectors such as automotive, real estate, and engineering machinery, resulting in the industry being in a downturn cycle overall. From 2025, the electronics industry has started to recover, and in the first quarter of 2026, there has been marginal improvement in the manufacturing industry's business climate, with the machine tool sector's revenue continuing to grow positively. It is judged that the current machine tool industry has entered the demand recovery phase. Downstream demand is expanding from traditional manufacturing to emerging growth tracks, highlighting the structural opportunities for high-end machine tools In the first quarter of 2026, downstream demand for machine tools showed general recovery, with the electronics industry leading in growth, and sectors such as automotive and precision molds showing significant improvement compared to the first quarter of 2025. At the same time, emerging sectors such as AI liquid cooling, humanoid Siasun Robot & Automation, semiconductor, and commercial space are gradually becoming new sources of volume for the machine tool industry. For example, with AI liquid cooling, the processing demand for components such as liquid-cooled connectors, liquid-cooled boards, elbows, brackets, valve seats, and valve cores is increasing. With the increase in heat dissipation power and processing accuracy requirements, traditional core machines are gradually unable to meet the demands of processing some complex components, and high-end equipment such as compound milling machines, turret lathes, and five-axis machine tools are expected to benefit from the dual logic of "demand expansion + equipment upgrade." During the industry's low period, the domestication rate and concentration of the industry are steadily increasing, and the market share of domestic industry leaders continues to increase China's machine tool industry has shifted from a trade deficit to a surplus, but high-end CNC machine tools are still a weakness, with the localization rate of high-end CNC machine tools still at a low level. During the industry's downturn phase, the operating pressures of small and medium-sized enterprises increased, while leading enterprises continued to increase their market share with advantages in product matrix, delivery capability, customer resources, and after-sales systems. From 2023 to 2025, the combined market share of domestic machine tool brands increased from 64% to 71%. Domestic industry leaders such as Guangdong Create Century Intelligent Equipment Group Corporation, Ningbo Haitian Precision Machinery, Neway CNC Equipment (Suzhou) Co., Ltd., and Jirfine Intelligent Equipment have steadily increased their market share; the market share of the top 10 CNC machine tool manufacturers increased from 33% in 2025 to 37% in the first quarter of 2026, with industry consolidation driving market share towards the top. The necessity for the independent controllability of industrial host machines is increasing, opening a window for domestic substitutes for high-end machine tools and core components Industrial host machines are basic equipment in manufacturing, and high-end CNC machine tools have both industrial basic capabilities and strategic attributes. Currently, Japanese machine tool manufacturers still maintain a high market share in China, with strong competitiveness in high-end machining centers, compound milling machines, precision machining, and other areas; at the same time, the level of localization of core components such as CNC systems and lead screws and guideways is still low, with overseas leaders such as Fanuc, Mitsubishi, and Siemens occupying major shares in high-end CNC system sales. Since 2023, there have been a series of support policies for industrial host machines, with more detailed policy objectives, stronger support, and increased uncertainty in external supplies, making it necessary and urgent to substitute high-end machine tools and core components domestically. Investment recommendations: Core recommendations for Wuhan Huazhong Numerical Control, Neway CNC Equipment (Suzhou) Co., Ltd, Ningbo Haitian Precision Machinery, Kede Numerical Control, Guangdong Create Century Intelligent Equipment Group Corporation, among others; recommended to pay attention to Jirfine Intelligent Equipment, Zhe Jiang Headman Machinery Co., Ltd., TSUGAMI CHINA, Nantong Guosheng Intelligence Technology Group Co., Ltd. Risk warning: Downstream recovery of machine tools falls below expectations, domestication process falls below expectations, exchange rate fluctuations.