Investment Rating - The report maintains an "Overweight" rating for the industrial software industry, driven by domestic localization and intelligent transformation [1]. Core Insights - The domestic industrial software market is experiencing rapid growth, with a compound annual growth rate (CAGR) of 13.20% from 2019 to 2023, significantly outpacing the global market [10][25]. - The localization rate in the research and design software segment is currently low at around 10%, indicating substantial room for domestic manufacturers to replace foreign competitors [10][31]. - External pressures, such as U.S. export restrictions on key software, are accelerating the need for domestic self-sufficiency in industrial software [11][41]. - The integration of AI into industrial software is expected to drive significant advancements, with the AI+ industrial software market projected to grow at a CAGR of 41.4% from 2024 to 2029 [47]. Summary by Sections 1. Rapid Growth of Domestic Industrial Software Market - The industrial software sector is crucial for China's industrial transformation, enhancing efficiency and product quality while reducing costs [20]. - The market share of research and design software is currently only 8.5%, highlighting a significant gap compared to embedded software, which holds a 57.4% share [21][23]. - The domestic industrial software market size is expected to reach approximately 3,390 billion yuan by 2025 [25]. 2. Localization and Intelligent Transformation 2.1 External Pressures and Policy Support - U.S. restrictions on industrial software have highlighted the urgency for China to develop its own capabilities [11][41]. - The Chinese government has introduced various supportive policies to bolster the industrial software sector, including targets for software updates and technology upgrades [43][44]. 2.2 AI Integration - AI technologies are increasingly being integrated into industrial software, enhancing development efficiency and creating new market opportunities [47]. - The penetration rate of AI in industrial software is expected to rise from 9% in 2024 to 22% by 2029 [47]. 3. Key Companies in the Industry 3.1 Huada Jiutian - Huada Jiutian is a leading domestic EDA company, providing a comprehensive suite of EDA tools for integrated circuit design, manufacturing, and packaging [59]. - The company is the only domestic provider of a complete EDA tool system for analog circuit design, filling a critical gap in the market [59].

Core Viewpoint - The article discusses the significant rise of China's industrial software sector, highlighting its transition from reliance on foreign imports to a growing domestic market with increasing innovation and market share [2][11]. Group 1: Current State of Industrial Software - In 2019, 95% of R&D design industrial software in China relied on imports, indicating a significant dependency on foreign technology [2]. - As of 2024, domestic software's market share in the PLM sector has reached 30%, with plans to replace 200,000 sets of industrial software with domestic alternatives by 2027 [3][12]. - The industrial software market is crucial for enhancing product development, production efficiency, and resource optimization in various sectors, including manufacturing and aerospace [7]. Group 2: Historical Context - China's industrial software industry faced a decline over the past 20 years due to competition from foreign giants and the prevalence of pirated software [9][10]. - The 1990s saw the emergence of several domestic software companies, but the market share of domestic software continued to decrease, with EDA software's domestic rate at only 5% by 2020 [9][10]. Group 3: Recent Developments and Opportunities - The demand for domestic software has surged due to geopolitical factors and government policies promoting local innovation [12]. - Many state-owned and private enterprises are increasingly willing to collaborate with domestic software providers, creating new opportunities for growth [12][13]. - The rise of AI technologies is accelerating the development and adoption of domestic industrial software, allowing for more flexible and efficient solutions [30]. Group 4: Investment Strategies - Companies like 汇川技术 (Inovance Technology) are actively investing in the industrial software sector, having invested in eight companies since 2021 [3][18]. - The investment strategy focuses on long-term growth, with a typical industrial software company requiring 5-10 years to establish a sustainable business model [19][21]. - Successful investments are characterized by teams with deep industry knowledge and a commitment to long-term development [21][23]. Group 5: Future Outlook - The integration of AI into industrial software is expected to enhance product development processes and improve operational efficiency [30][31]. - The article emphasizes that the future of China's industrial software industry will be shaped by its ability to innovate and adapt to new technologies, positioning it as a key driver of the manufacturing sector's transformation [37].