Group 1 - The domestic software sector is experiencing significant activity, with industrial software and Xinchuang direction leading the gains, as stocks like Rongji Software, China Software, and Yingjianke hit the daily limit, while Chengmai Technology, Dameng Data, Kingsoft Office, and Kirin Information Security also saw substantial increases [1] - The Ministry of Industry and Information Technology and six other departments recently issued a plan for promoting service-oriented manufacturing innovation from 2025 to 2028, highlighting key productive service industries including technology services, industrial design, software and information services, financial services, intellectual property services, and energy-saving and environmental protection services [1] - The potential for domestic software to replace foreign products is vast across various fields, with industrial software being crucial for enhancing China's manufacturing autonomy and global competitiveness [1] Group 2 - The average stock price of domestic software concept stocks has risen by 31.15% this year, with Huasheng Tiancai and Dongtu Technology leading the gains at 170.85% and 135.19% respectively [2] - Zhongke Shuguang, Kingsoft Office, and Inspur Information are among the three domestic software stocks with market capitalizations exceeding 100 billion [1][2] - Kingsoft Office has received the highest net buy amount in financing, totaling 643 million since October, with its WPS Office software suite being a key product [3]

Investment Rating - The report maintains a "Positive" investment rating for the software and services industry [7]. Core Viewpoints - The U.S. is set to impose a 100% tariff on Chinese goods and export controls on all critical software starting November 1, 2025, which is expected to accelerate the domestic software replacement process in China [2][5]. - The report highlights the importance of focusing on domestic chip supply chains, operating systems, and Huawei's supply chain as key investment opportunities due to the anticipated acceleration in the domestic software industry [2][10]. Summary by Sections Event Description - On October 10, 2025, U.S. President Donald Trump announced additional tariffs and export controls on critical software, impacting electronic design automation, industrial software, and foundational software [5]. Event Commentary - The U.S. has previously implemented export controls on EDA software, indicating a trend of increasing restrictions on technology exports to China. This latest move is seen as a further escalation in the U.S.-China tech rivalry, necessitating a shift towards domestic alternatives in critical technology sectors [10]. - The report emphasizes that the domestic software industry has made significant progress in terms of technology, policy, and market development, achieving compatibility with international standards and widespread application in key sectors such as government, finance, and energy [10]. - The upcoming policy assessment years of 2025 and 2027 are expected to drive further acceleration in the industry, with a focus on investment opportunities in domestic chip supply chains, operating systems, and Huawei's ecosystem [10].

Summary of the Conference Call on the Xinchuang and Industrial Software Industry Industry Overview - The Xinchuang industry in China is set to achieve complete replacement goals for party and government systems by 2027, with a target to narrow the gap in basic software and hardware levels with international standards to within two years [1][4] - The industry is expected to establish domestic production capabilities for Anke CPU chips [1] - In 2025, state-owned enterprises are required to procure over 80% of new infrastructure from domestic sources, with clear indicators for replacing existing systems [1] Key Points and Arguments - The Xinchuang industry faces challenges due to the diversity of technology paths, including multiple operating systems and CPUs, leading to resource wastage [1][5] - A potential unification of operating systems is proposed, with Euler for servers and Harmony for non-server applications [6] - The U.S. industrial software market holds a monopoly globally, and any supply disruptions could severely impact Chinese manufacturing [7] - The next phase of the Xinchuang industry will focus on promoting self-controllable and AI-integrated manufacturing, with a clear emphasis on domestic production rates [7][8] Progress and Achievements - Significant progress has been made in the Xinchuang industry, with notable achievements in domestic software market share exceeding 50% in certain areas, such as DCS and small PLCs [22] - Companies like Zhongsoft, Dameng, and Taiji have reported impressive revenue and profit growth, indicating a strong growth trajectory for the industry [4] Challenges and Solutions - The primary challenge remains the technical diversity, which leads to inefficiencies in adaptation processes [5] - A unified operating system approach is suggested to streamline processes and enhance productivity [6] Industrial Software Importance - The importance of industrial software is underscored by the U.S. restrictions, which highlight the need for China to maintain its manufacturing edge [7] - The promotion of AI in manufacturing is seen as a critical step for the Xinchuang industry, with a focus on establishing clear domestic production rates [7][9] Policy and Strategic Directions - China is leveraging policy guidance to support domestic AI frameworks and promote the use of local operating systems [8] - The "14th Five-Year Plan" may include significant projects for lighthouse factories, presenting major opportunities for service providers [9] Company Performances - Nengke Technology is positioned as a leader in the industrial software sector, with a low valuation and significant growth potential [10] - Dongtu Technology is recognized as a key player in the industrial operating system space, recently securing large orders [11] - Rongzhixing excels in the PHM field, showcasing strong market positioning [12] - Zhongwang, as a leader in the CAD industry, is expected to benefit from policy support [14] Cloud Computing and Software Development - Domestic cloud computing foundational software is crucial for resource management and virtualization, with major players including Alibaba, Tencent, and Huawei [15] - U.S. restrictions on key software exports are anticipated to accelerate the domestic software development process [16] Industrial AI Development - Industrial AI is gaining traction, with significant advancements in large models and intelligent agents, emphasizing customization and automation in production processes [19] - The global market for industrial AI is projected to reach $150 billion by 2030, with applications in various sectors [17] Conclusion - The Xinchuang and industrial software sectors in China are poised for significant growth, driven by domestic policy support, technological advancements, and a focus on self-sufficiency in the face of external pressures [20][21]

Summary of Key Points from Conference Call Records Industry Overview - The conference call discusses the **domestic software industry** in China, particularly focusing on the **localization of key software** and the **信创 (Xinchuang) industry** which is expected to accelerate by 2026 due to government mandates [1][4][3]. Key Software Localization - The **localization rate** of domestic operating systems in the government sector has reached **65%**, but the overall rate is only **4.55%**. By the end of 2025, the localization rate in the government sector is expected to exceed **80%**, with a market size of over **1 trillion yuan** [1][6]. - The **localization rate** for databases is low across various industries, with financial non-core systems at **40%**, energy at **15%**, and many sectors below **5%**. The domestic database market is projected to reach **668 billion yuan** by 2025, growing to over **800 billion yuan** by 2027, with a compound annual growth rate (CAGR) of approximately **12%** [1][9]. - Middleware localization has increased to **45%**, with financial, telecommunications, and government sectors exceeding **70%**. The middleware market is expected to reach **160 billion yuan** by 2025, with a year-on-year growth rate of **17%** in 2023 [1][11]. Market Dynamics - The **Office software** localization rate in the government and civilian B-end is around **40%-50%**, with Kingsoft WPS holding a significant market share. The government sector has achieved **100% localization** [1][14]. - The **ERP market** has the highest localization rate among industrial software, exceeding **70%**. The market size is expected to be around **500-600 billion yuan** by 2025, growing at **10%-15%** annually [1][17]. - The **R&D design software** sector, including EDA, CAD, and CAE, has low localization rates of **10%-15%** for EDA and CAE, and **25%-30%** for CAD. The market space for these segments is significant, with EDA alone estimated at **120-140 billion yuan** [1][19]. Company Performance and Valuation - Representative companies in the **database sector** include **达梦数据 (Dameng Data)**, with a projected PS ratio of **22x** in 2025, and **太极股份 (Taiji Co.)**, with a PS ratio of **1.9x** [1][10]. - In the **middleware sector**, companies like **宝兰德 (Baolande)** and **普元信息 (Puyuan Information)** are highlighted, with PS ratios of **8.94x** and a competitive market landscape [1][12]. - The **R&D design software** companies are experiencing varied growth rates, with **华大九天 (HuaDa JiuTian)** expected to grow by **20%** due to reliance on a single client, while others like **广立微 (Guangliwei)** are expanding rapidly [1][21]. Regulatory Impact - The **79th document** from the State-owned Assets Supervision and Administration Commission mandates that state-owned enterprises complete the localization of information systems by **2027**, which is expected to drive significant growth in the domestic software market [1][4]. Conclusion - The conference call emphasizes the rapid development and localization of key software in China, driven by government policies and market demand. The potential for growth in various software sectors, particularly in databases, middleware, and ERP systems, presents significant investment opportunities. The performance of leading companies in these sectors indicates a robust market environment, despite challenges in localization rates across certain software categories.

Investment Rating - The report maintains a "Recommended" rating for the industry [4] Core Insights - The report highlights the significant impact of U.S. tariffs and export controls on Chinese products, particularly in the software and hardware sectors, emphasizing the need for domestic innovation and self-reliance [1] - The Chinese government is actively promoting domestic products through favorable procurement policies, including a 20% price deduction for local products in competitive bidding [1] - The report indicates that the domestic chip industry is gaining traction, particularly in the financial sector, with major projects like the Industrial and Commercial Bank of China's procurement of Huaguang chip servers valued at approximately 3 billion yuan [1] - The report notes a substantial increase in domestic server procurement by China Unicom, with 90.1% of the servers being domestically produced, reflecting a strong trend towards localization [2] - The report anticipates a turning point for the domestic innovation industry (Xinchang) driven by supportive policies and improving performance of listed companies in the sector [2][3] Summary by Sections - **Policy Support**: The government emphasizes high-level technological self-reliance as a key development focus, aiming to enhance core technology research and innovation capabilities [2] - **Market Performance**: Several listed companies in the Xinchang sector have shown improved performance compared to the previous year, indicating a positive outlook for the industry [3] - **Investment Recommendations**: The report suggests focusing on key players in the Xinchang sector, including China Software, Dameng Data, and others, as well as leaders in specific sub-sectors like industrial software and the Harmony OS ecosystem [3]

Group 1 - DeepSeek officially released the DeepSeek-V3.2-Exp model on September 29, which is an experimental version aimed at optimizing training and inference efficiency for long texts [1] - The new model introduces DeepSeek Sparse Attention, a sparse attention mechanism, building on the previous V3.1-Terminus version [1] - The development of the new model utilized TileLang, an open-source AI operator programming language developed by a team led by Associate Professor Yang Zhi from Peking University [1] Group 2 - The 信创 ETF (159537) tracks the 国证信创指数 (CN5075), which selects listed companies in the semiconductor, software development, and computer equipment sectors from the Shanghai and Shenzhen markets [2] - The index focuses on reflecting the overall performance of the information technology innovation theme, with a significant emphasis on semiconductor and software development industries [2] - The average market capitalization of the index constituents is large, showcasing a diversified development pattern within the 信创 industry [2]

Group 1 - The State Council issued a notice on September 30, 2023, regarding the implementation of domestic product standards in government procurement, effective from January 1, 2026 [1] - The notice specifies that domestic products must be produced within China and meet a certain cost ratio for components produced domestically, with additional requirements for key components and processes [1] - A 20% price evaluation discount will be granted to domestic products compared to non-domestic products during government procurement activities, enhancing the price competitiveness of domestic products [1] Group 2 - Changjiang Securities noted that the 20% price evaluation discount acts as an "invisible subsidy," potentially altering the existing market competition landscape [1] - The introduction of domestic product standards is expected to improve the fairness and transparency of government procurement policies and promote the localization of supply chains in key industries [1] - Key sectors such as the domestic chip industry, domestic operating systems, and Huawei's supply chain are anticipated to benefit from this policy [1] Group 3 - China Software has a complete business chain covering operating systems, middleware, security products, and application systems across important sectors of the national economy [2] - Kirin Trust's operating system is based on the domestic openEuler community and has received recognition from national and industry authorities, ensuring compliance with government procurement standards [2]

Investment Rating - The report maintains a "Positive" investment rating for the software and services industry [7] Core Insights - The State Council issued a notice on September 30, 2023, regarding the implementation of domestic product standards in government procurement, effective from January 1, 2026. This aims to create a unified and competitive government procurement market, enhancing fairness and transparency in procurement policies, and is expected to accelerate the domestic substitution trend in key industries [2][5] - The notice provides a 20% price evaluation advantage for domestic products in government procurement, which may significantly alter the current market competition landscape. For instance, if a domestic product quotes 100,000 yuan, it will be evaluated at 80,000 yuan, giving it a competitive edge over foreign products [11] - A transition period of 3-5 years is established to gradually implement the domestic product standards, allowing companies to initially meet domestic production requirements before increasing the domestic component cost ratio [11] - The notice emphasizes that key components and processes must be completed domestically for certain products, ensuring that core manufacturing remains within the country and promoting self-sufficiency in the supply chain [11] - The introduction of domestic product standards is expected to enhance the domestic substitution trend, particularly benefiting the domestic chip industry, domestic operating systems, and the Huawei supply chain [2][11] Summary by Sections - **Government Procurement Policy**: The new policy aims to create a fair and transparent procurement system, enhancing the participation of various business entities [2][5] - **Price Evaluation Advantage**: Domestic products will receive a 20% price evaluation advantage, significantly impacting market competition [11] - **Transition Period**: A 3-5 year transition period will allow gradual implementation of domestic standards, facilitating the domestic production process [11] - **Key Manufacturing Requirements**: Specific products must have key components produced domestically, ensuring core manufacturing is retained within the country [11] - **Investment Focus Areas**: The report suggests focusing on industries benefiting from domestic substitution, particularly in the chip and operating system sectors [2][11]

Group 1 - The consumer electronics sector is experiencing empowerment from AI technology, with traditional smart terminals upgrading their functions through AI and new smart hardware creating incremental demand, leading to significant opportunities for technological innovation in the supply chain [1] - In the semiconductor industry, the demand for AI computing power remains high, with a notable increase in overseas demand, while domestic ASIC development accelerates, and various SoC solutions are emerging [1] - AI is accelerating the process of "intelligent driving equality," driving revenue growth for companies in the supply chain, and the overall electronics industry benefits from AI-driven technological advancements and market demand [1] Group 2 - The Xinchuang ETF (159537) tracks the Guozhen Xinchuang Index (CN5075), which selects listed companies in the semiconductor, software development, and computer equipment sectors from the Shanghai and Shenzhen markets, reflecting the overall performance of the information technology innovation theme [1] - The average market capitalization of the index constituents is relatively large, with a primary focus on semiconductor and software development, while also covering computer equipment and IT services, showcasing the diversified development pattern of the Xinchuang industry [1]

Investment Rating - The investment rating for the industry is "Positive" and maintained [10]. Core Viewpoints - The update of the procurement standards for desktop and portable computers by the central government is expected to benefit the domestic chip industry chain, domestic operating system industry chain, and Huawei's industry chain [2][14]. - The updated standards aim to enhance the hardware performance of domestic PCs, reduce procurement and operational costs, and improve market competitiveness [14]. - The new procurement standards will likely guide local procurement and accelerate the adoption of domestic products, with significant updates expected by 2025 and 2027 [14]. Summary by Relevant Sections Event Description - On September 22, 2025, the central government procurement website released a notification updating the procurement configuration standards for desktop and portable computers [7]. Event Commentary - The updated standards include adjustments in CPU models, CPU frequency, memory read/write speeds, and graphics card types, aiming to improve the performance of domestic PCs [14]. - The standards emphasize the need for compliance with security and reliability assessments for CPUs and operating systems during procurement [14]. - The restrictions on non-domestic configurations are expected to increase the domestic product adoption rate, with the shipment of domestic PCs projected to rise significantly [14].