Drivers and trends

Driver – policy support

In recent years, the state has issued a series of industrial development policies to encourage and support the development of the UAV and aviation optoelectronic pod industry. For example, "Made in China 2025" proposes to strengthen the research and development and manufacturing of aerospace equipment, and enhance the independent innovation ability of core components such as aviation optoelectronic pods; The "Guiding Opinions on Accelerating the Construction of New Industrialization Industry Demonstration Bases" proposes to strengthen the construction of new industrialization industry demonstration bases such as aviation optoelectronic pods to promote industrial agglomeration and development.

Drivers – Patterns of warfare

With the continuous advancement of the mechanization, informatization, unmanned and intelligent process of China's national defense equipment, under the influence of the transformation of the national defense strategy, the army will be promoted to increase the procurement of weapons and equipment, and then bring certainty to the development of the industry, and the establishment of new military arms, the acceleration of the installation of new models and the continuous promotion of the informatization process will also promote the development of the military optoelectronic reconnaissance equipment industry.

The importance of military optoelectronic reconnaissance equipment has been fully demonstrated in typical modern wars in modern times, such as the Gulf War, the Kosovo War, the Afghanistan War, the Iraq War, and the recent Russia-Ukraine War and the Palestinian-Israeli War. After years of development, military photoelectric reconnaissance equipment has become more and more complete in variety, more advanced in performance, and more widely used. At present, military optoelectronic reconnaissance equipment has been widely used in various platforms such as individual soldiers, combat vehicles, aircraft, and ships.

Driver - Expansion of military spending

According to the data released by the Ministry of Finance, China's national defense budget in 2022 has reached 1,450.450 billion yuan, with a growth rate of 7.1%. According to the disclosure of "China's National Defense in the New Era", China's national defense military expenditure is composed of personnel living expenses, training and maintenance expenses, and equipment expenses, of which the proportion of equipment expenses has increased rapidly in recent years, from 33.2% in 2010 to 41.1% in 2017, reaching 428.835 billion yuan. In recent years, China's national defense and military spending are as follows:

Driver – Civilian

On the other hand, the demand for aviation optoelectronic pods in the civilian field is growing rapidly, especially with the outbreak of the industrial-grade UAV market, the demand for aviation photoelectric pods in this field has increased rapidly, and the UAVs are more and more widely used in public security monitoring, emergency rescue, aerial photography, industrial operations, environmental monitoring and agricultural surveys, etc., greatly expanding the use of the UAV itself.

Data show that the size of China's civil UAV market increased from 7.9 billion yuan in 2017 to 36.1 billion yuan in 2020, with an average annual compound growth rate of 65.9%, and it is expected that by the end of the "14th Five-Year Plan", China's industrial-grade UAV market will exceed 150 billion yuan, accounting for more than 50% of the global market size. In the future, with the gradual rise of the industrial-grade and consumer-grade UAV market, China's photoelectric pod civilian market will usher in a new round of growth.

Development trend: scale effect, Matthew effect is significant, the strong are always strong

The development of the optoelectronic pod industry relies heavily on the continuous upgrading of core components, which requires high R&D investment, a long R&D cycle and high risk.

On the other hand, in the Russian-Ukrainian war, cutting-edge technologies such as the all-in-one machine are more used for monitoring and deterrence because of the high price, and the cost-effective products such as suicide small UAVs and cruise missiles are widely used.

Development trend: low-end to see the volume, high-end to see the differentiation

At present, the domestic photoelectric pod market presents many characteristics such as many manufacturers, independent of each other, significant differences in products, and relatively convenient access to the market. However, although there are certain differences between products in the same industry, a certain degree of substitutability makes for fierce competition among manufacturers.

In the future, the photoelectric pod market will gradually differentiate, and the stability requirements of civil industrial-grade UAV products for the stability of the photoelectric pod are relatively low, the access standards are relatively relaxed, and there are many competitors, which will become a fully competitive market, and the price war will be fought involution. However, it is extremely difficult for start-ups in the industrial chain to grow into giants (the pattern is similar to drones but different from drones, and the scale of the drone segment market will be considerable in the future, while the pod market is limited).

In contrast, the more high-end military optoelectronic system equipment market barriers are higher, can take more subdivision and differentiation routes, in the context of the increasingly accelerated pace of localization of military equipment and the increasingly urgent demand for independent and controllable core technology, those optoelectronic pod manufacturers that can meet the needs of high-end military applications will emerge, and gradually realize the upgrading of the application field, and then obtain the rich returns brought by market space and profit space.

Businesses and investment opportunities

Engaged in related enterprises - foreign representative companies

Overseas representative companies include FLIR and Raytheon; Israel Raphael & Co., etc.

Industry-related enterprises - military industrial institutes

Military institutes are the main participants in China's optoelectronic pod market, with 613 representative institutions (AVIC Optoelectronic Research Institute), 205 institutes, 717 institutes, etc.

Engaged in related enterprises - listed companies

Domestic listed companies engaged in photoelectric pod related business include Jingpin Special Equipment, Jiuzhiyang, Xingwang Yuda, etc.

Engaged in related enterprises - non-listed companies

Representatives of domestic non-listed companies include Changchun Tongshi, Guanzhong Jingyi, Pinling Electronics, Shangbo Zhixiang, Haofu Technology, etc.

Investment opportunities

The civilian market has low barriers, poor pattern, many participants, small and scattered downstream applications, small and scattered customers, poor growth of start-up enterprises, and difficult integration, so it is recommended not to pay attention to it.

There are opportunities for military-civilian integration and localization to supplement the chain in the military market, focusing on the two major markets of domestic armaments and overseas military trade, and the core team entrepreneurship of domestic military industrial institutes and the core team entrepreneurship of leading companies in the upstream of the industrial chain.