Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the **Chinese economy**, focusing on various economic indicators and trends, particularly in the **retail, property, and investment sectors**. Core Insights and Arguments 1. **Retail Sales Performance**: - Retail sales growth slowed to **1.3% YoY** in November, down from **2.9% YoY** in October, which was weaker than market expectations of **2.9%** [110] - Sales of household appliances and automobiles contracted significantly, with household appliances down **19% YoY** and autos down **8% YoY** [110] - The overall consumption growth is expected to remain soft in 2026 due to high base effects and ongoing property downturn [110] 2. **Fixed Asset Investment (FAI)**: - FAI growth remained weak, with a **YoY decline of -11.1%** in November, slightly better than the previous month [85] - Manufacturing FAI saw a modest improvement, narrowing its decline to **-4.5% YoY** [85] - Infrastructure FAI continued to contract sharply at **-11.9% YoY** [85] - The deployment of special financing tools from policy banks may provide some support for FAI components in the future [85] 3. **Property Market Dynamics**: - The property market continues to face challenges, with property sales growth falling by **17.3% YoY** in November and new starts down **27.6% YoY** [70] - The average new home sales price in 70 cities declined by **0.4% MoM** in November, indicating ongoing price pressures [70] - The government has implemented various measures to support the property sector, but the recovery is expected to take time [70] 4. **Economic Growth Projections**: - Q4 GDP growth is anticipated to decelerate to around **4.2% YoY**, with full-year 2025 GDP growth averaging **4.9%**, aligning with the target of "around 5%" [4] - The Central Economic Work Conference (CEWC) is expected to set a GDP growth target of **4.5-5%** for 2026, although achieving this may be challenging due to anticipated slowdowns in exports and the property market [6] 5. **Monetary and Fiscal Policy**: - Modest policy easing is ongoing, with expectations of a **20bps cut in policy rates** by the end of 2026 [5] - The government plans to increase consumption subsidies to **RMB 400 billion** in 2026 from **RMB 300 billion** in 2025, aiming to support consumer spending [110] Other Important Insights - **Inflation Trends**: - November CPI inflation increased to **0.7% YoY**, driven by a rebound in food prices, while PPI recorded a slight decline of **-2.2% YoY** [125] - The inflation outlook suggests a potential rebound in CPI to **0.4%** in 2026, while PPI may only turn positive by late 2026 or early 2027 [125] - **Credit and Liquidity Conditions**: - Total social financing (TSF) growth stabilized at **8.5% YoY** in November, with new RMB loans totaling **RMB 390 billion** [140] - The PBC is expected to continue accommodative monetary policy, with further RRR cuts anticipated [150] This summary encapsulates the key points discussed in the conference call, providing insights into the current state and future outlook of the Chinese economy, particularly in retail, property, and investment sectors.

December 16, 2025 10:00 PM GMT The Robot Almanac Authors (1/2) Ariana.Salvatore@morganstanley.com Gary.Yu@morganstanley.com Source: Morgan Stanley Research Vol. 3: Humanoids & Industrial Robots Morgan Stanley Global Embodied AI Team December 2025 The content addressing private companies is being provided for informational purposes only and does not constitute a solicitation or imply future research coverage if the company goes public. Content is based on unaudited information. No investment recommendation i ...

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Global Manufacturing - **Company**: Morgan Stanley Asia Limited Core Insights and Arguments 1. **China's Dominance in Global Manufacturing**: China accounts for 15% of global exports and 28% of global manufacturing GDP, maintaining a trade surplus with 177 out of 225 economies [2][111] 2. **Projected Export Market Share**: China's global export market share is projected to increase to 16.5% by 2030, up from 15% currently, driven by its strengths in advanced manufacturing and emerging sectors like EVs, batteries, and robotics [1][4][92] 3. **Export Growth in Key Segments**: From 2019 to 2024, China's export growth outpaced global growth in 11 out of the 15 fastest-growing export segments, capturing 19% of the incremental export market revenue in these categories [2][23] 4. **Geopolitical Concerns and Diversification Efforts**: Trade partners are concerned about China's dominance, leading to efforts to diversify supply chains away from China, particularly by the US and EU [3][4] 5. **China's Strategic Industrial Policies**: China's industrial policy is characterized by robust execution, financial backing, and regulatory support, enabling rapid scaling of new industries [9][10] 6. **Talent Pool and Education**: The number of university graduates in China has increased by 42% from 2019 to 2024, with a significant share in STEM fields, enhancing the country's manufacturing capabilities [10][18] 7. **Automotive Sector Evolution**: China has transformed from a net importer of auto parts to the world's largest exporter of autos, with a trade surplus in this sector growing from US$40 billion in 2017 to US$116 billion in 2025 [56] 8. **Innovation in EVs**: Chinese companies are leading in EV production and battery manufacturing, with over 50% of global EVs sold being from China [56][57] 9. **Impact of Global Industrial Policies**: A resurgence in global industrial policies has been noted, with 75% of major economies implementing trade and industry-oriented interventions [58][59] Additional Important Insights 1. **China's Export Market Share Dynamics**: While China's share in US imports has decreased, its global export market share (excluding the US) has risen from 13.2% in 2017 to 17% currently [75][111] 2. **Challenges and Risks**: Risks include persistent deflationary pressures due to overcapacity and the effectiveness of protectionist measures that may hinder China's ability to maintain its market share [106][110] 3. **Regional Implications**: Countries like Japan and Korea face increased competitive pressure, while Vietnam, Malaysia, and India may benefit from supply chain diversification but remain dependent on China for critical inputs [96][98][99] This summary encapsulates the key points discussed in the conference call regarding China's position in global manufacturing and the implications for the industry and other economies.

Investment Rating - The report indicates a bullish outlook on the robotics industry, projecting significant growth in revenues and unit sales through 2050, with a total of $25 trillion in combined robot revenues anticipated by that year [2][38]. Core Insights - The Morgan Stanley Robot Almanac serves as a comprehensive guide to the physical AI sector, detailing the expected adoption of robotics and its impact on the global economy, potentially multiplying the $115 trillion global GDP over time [2][11]. - The report introduces the Global Robot Model (GROM), which forecasts the total addressable market (TAM) for robotics, including unit sales and revenue across various form factors such as autonomous vehicles, industrial robots, and drones [11][37]. - The report emphasizes the importance of AI-enabled robotics in driving the 3rd Industrial Revolution, with projections of 1.4 billion annual robot unit sales by 2050 [35][38]. Summary by Sections Overview of Robotics - The report outlines the dynamic nature of physical AI and its integration into various sectors, highlighting the potential for transformative impacts across industries [2][4]. Market Projections - By 2050, the report estimates that there will be 6.5 billion robots in operation globally, with significant contributions from home robotics, industrial robots, and autonomous vehicles [12][39]. - Revenue estimates indicate a steady increase, with projections of $91 billion in 2024 growing to $25 trillion by 2050, reflecting the expanding market for robotics [41][42]. Robotics Adoption and Demand - The GROM model provides detailed projections for robotics demand across key components, including cameras, lidar, and semiconductors, essential for the development of various robotic applications [11][37]. - The report categorizes robotics into several verticals, including autonomous cars, drones, humanoids, and industrial robots, each with distinct growth trajectories and market dynamics [7][13]. Regional Insights - The report highlights regional differences in robotics adoption, with the USA, China, and the Rest-of-World showing varying growth patterns and market sizes [42][43]. - Specific revenue and unit sales forecasts are provided for each region, indicating a robust growth outlook particularly in China and the USA [42][43].

Core Insights - The article discusses the pivotal moment for China's robotics industry as it transitions from a phase of introduction and expansion to a period of deep cultivation and strength by 2025 [4][5] - It emphasizes the importance of identifying key players and emerging stars in the industry to guide future development and resource allocation [6][8] Group 1: Industry Characteristics - The robotics industry is characterized by a dual structure: mature market competition in industrial and service robots, and an impending technological breakthrough in humanoid robots and embodied intelligence [5][11] - The competition has shifted from incremental growth to a mix of stock and incremental competition, necessitating leadership from major enterprises to drive high-quality growth [5][6] Group 2: Significance of the Rankings - The LeadeRobot rankings aim to systematically identify and value the core forces in the robotics industry, serving as a guide for current and future developments [3][6] - The rankings consist of two lists: the "Top 50 Leading Enterprises" and the "Top 50 Emerging Stars," each fulfilling distinct roles in the industry [3][11] Group 3: Leading Enterprises - The "Top 50 Leading Enterprises" list identifies industry giants that have established systematic advantages and overcome initial uncertainties [8][10] - These leading enterprises are not only market leaders but also technology innovators, market educators, ecosystem builders, and benchmarks for sustainable business models [9][10] Group 4: Emerging Stars - The "Top 50 Emerging Stars" list focuses on companies with transformative potential in embodied intelligence, showcasing their unique technological advancements and innovative applications [11][12] - Key traits of these emerging stars include forward-looking technology, innovative scene definitions, exceptional team execution, and verifiable commercial potential [12][13] Group 5: Call to Action - The article invites industry leaders and innovative newcomers to participate in the rankings, emphasizing the importance of showcasing their strengths and contributions to the industry [16][17]

Summary of China Industrials Update Industry Overview - **Industry**: China Industrials - **Current Cycle**: The industry is in an upcycle driven by industrial upgrades and replacement cycles [6][4][3] Key Long-term Drivers - **AI Technology**: Diffusion of AI technology into intelligent manufacturing and equipment [6][4] - **Advanced Equipment Localization**: Focus on localizing advanced equipment production [6][4] - **Global Expansion**: Companies are increasingly going global [6][4] Robotics Sector - **Booming Era**: The robotics sector is entering a new booming era, with significant growth expected [6][4] - **Market Growth**: The robot industry in China is projected to double by 2028, with drones, mobile robots, and collaborative robots (cobots) leading the growth [57][66] - **Localization**: High localization rates are expected, with the ranking from high to low being drones, service robots, mobile robots, cobots, and traditional industrial robots [72][66] Subsector Insights - **Automation and Robotics**: - **Outperforming Stocks**: Inovance, Geekplus, Han's Laser, Shuanghuan, Hongfa, and Neway Valve are recommended as outperformers [6][4] - **Market Performance**: The automation market is in a mild recovery stage, with flat sales year-on-year in 9M25 compared to a decline in 2024 [26][32] - **Future Outlook**: Positive outlook for 2026-27 recovery driven by replacement demand and AI applications [27][32] - **Construction Machinery**: - **Growth Factors**: Domestic and overseas growth supported by large-scale infrastructure projects and electrification [142][138] - **Sales Performance**: Heavy-duty truck sales increased by 22% year-on-year in 10M25, but a decline is anticipated in 2026 due to front-loaded demand [143][144] - **Lithium Battery Equipment**: - **Demand Growth**: Expected growth of 54% in 2025, driven by capacity expansions and the first major replacement cycle starting in 2025 [174][181] - **Market Dynamics**: Global demand for lithium battery equipment is projected to grow at approximately 30% in 2026-27 [176][181] - **Solar Equipment**: - **Cyclical Low**: The solar equipment sector is expected to remain at a cyclical low in 2026 due to global overcapacity and single-digit growth in installations [182][186] - **Shift to Semi Equipment**: Companies are diversifying into non-solar lineups to mitigate downturns in solar demand [183][186] Financial Metrics - **Return on Equity (ROE)**: Mixed trends across subsectors, with improvements expected in automation and lithium battery equipment, while solar equipment shows erosion [19][21] - **Price-to-Earnings (P/E) Multiples**: Most subsector valuations are above the five-year median, particularly in automation and solar equipment [13][12] Conclusion - **Investment Opportunities**: The China Industrials sector presents various investment opportunities, particularly in automation, robotics, and lithium battery equipment, while caution is advised in solar equipment due to expected downturns [6][4][182]

Core Insights - The Chinese industrial robot industry is experiencing significant growth, with production reaching 595,000 units in the first three quarters of 2025, a year-on-year increase of 29.8%, surpassing the total production for 2024 [1] - Domestic brands are gaining market share over foreign brands in the industrial robot sector, with exports of industrial robots increasing by 54.9% [1] - The localization of key components such as controllers, servo systems, and reducers is enhancing cost efficiency and supply chain stability [1][3] Policy and Market Drivers - Multiple factors, including policies and demand, are driving the growth of the Chinese industrial robot industry, with initiatives like the "Robot+" application action plan promoting automation solutions [2] - The demand for automation solutions is increasing due to higher requirements for quality consistency and flexible manufacturing in the context of industrial upgrades [2] Rise of Domestic Robot Manufacturers - The success of domestic robot manufacturers is attributed to breakthroughs in core component technologies and a deep understanding of the local market [3] - Leading companies are enhancing their service strategies and responsiveness to customer needs, providing personalized technical support [3] - Acquisitions by top firms, such as Estun's purchase of UK-based TRIO and Germany's CLOOS, are strengthening their capabilities in high-end motion control and welding robots [3] Diverse Downstream Demand - The automotive sector remains a traditional market for industrial robots, driving demand for welding, handling, and painting processes [4] - The lithium battery manufacturing sector is increasingly utilizing robots for various tasks, including handling, assembly, and coating [4] - The electronics industry is also a significant area for robot applications, with rising automation needs in the 3C industry, particularly in chip and display manufacturing [4] AI Integration in Manufacturing - The integration of AI with components like vision systems and motion control algorithms is enhancing the spatial awareness and efficiency of industrial robots [5] - Generative AI is aiding in robot programming, making operations more flexible [5] - Competition in the industrial robot sector is shifting from individual device performance to overall cost-effectiveness of integrated hardware and software solutions [5] Performance Disparities in the Robot Sector - Leading companies are improving performance through technological advancements and cost control, while smaller firms face operational pressures [6] - Price competition in the existing market is impacting profitability for some manufacturers, leading to selective order management [6] - Companies with high technical barriers in the components sector are benefiting from increased market share due to domestic substitution [6] Investment Recommendations - The competitiveness of the Chinese industrial robot industry is improving through differentiated strategies and continuous innovation, with a focus on leading companies like Huichuan Technology and Estun, as well as component firms like Greentech Harmonic [7]

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the Chinese economy, particularly the industrial production, fixed asset investment, and retail sales sectors, as well as GDP growth forecasts for 2025 and 2026. Core Insights and Arguments 1. **GDP Growth**: China's Q3 GDP growth moderated to 4.8% year-on-year (yoy) from 5.2% in Q2, slightly above market consensus of 4.7% but in line with forecasts. Sequentially, GDP growth showed a slight acceleration to 1.1% quarter-over-quarter (qoq) non-annualized in Q3 from 1.0% in Q2 [1][10][20]. 2. **Industrial Production**: Industrial production (IP) growth rose significantly to 6.5% yoy in September, exceeding expectations, driven by stronger exports and increased auto output. Sequentially, IP gained 1.4% month-over-month (mom) non-annualized in September [3][13][20]. 3. **Fixed Asset Investment (FAI)**: FAI growth remained depressed at -0.5% year-to-date (ytd) yoy in September, with a notable single-month decline of -6.7% yoy. This was attributed to ongoing "anti-involution" policies and a prolonged downturn in the property sector [8][14][20]. 4. **Retail Sales**: Retail sales growth slowed to 3.0% yoy in September from 3.4% in August, impacted by weaker offline sales and the fading effectiveness of the consumer goods trade-in program. Online sales showed slight improvement [9][15][20]. 5. **Services Sector**: The Services Industry Output Index remained stable at 5.6% yoy in September, indicating resilience in the services sector despite challenges in retail sales [16][20]. 6. **Property Market**: The property market continued to show weakness, with significant year-on-year declines in new home starts (-14.4%) and property sales (-10.5% in volume) [11][18][20]. 7. **Unemployment Rates**: The nationwide unemployment rate decreased slightly to 5.2% in September from 5.3% in August, although youth unemployment remains a concern at 18.9% for the 16-24 age group [19][20]. Adjustments to Economic Forecasts - Full-year real GDP growth forecasts for 2025 and 2026 have been raised to 4.9% and 4.3%, respectively, reflecting adjustments based on Q3 GDP outcomes and historical data revisions. The growth target of "around 5%" for the year remains on track despite US-China tensions [1][20][37]. Additional Important Insights - The effectiveness of existing easing measures is diminishing, necessitating targeted easing to ensure stable growth and employment in the coming quarters [20]. - The majority of recent easing measures' growth impulses are expected to materialize in late 2025 or early 2026 [20]. This summary encapsulates the key points from the conference call, providing a comprehensive overview of the current state of the Chinese economy and its outlook.

Summary of China Industrials Update Industry Overview - **China Industrials** is currently experiencing an upcycle driven by industrial upgrade and replacement cycles [6][6][6] - Key long-term drivers identified include: - AI technology diffusion into intelligent manufacturing and equipment - Advanced equipment localization - Global expansion [6][6][6] - The robotics sector is entering a new booming era, with significant growth anticipated [6][6][6] Subsector Insights - **Automation, Robotics, and AIDC Equipment**: - Rated as Overweight (OW) with key stocks including Inovance, Geekplus, Han's Laser, Shuanghuan, Hongfa, and Neway Valve [6][6][6] - **Construction Machinery**: - Rated as Overweight (OW) with key stocks including Sany, Hengli Hydraulic, and Zoomlion [6][6][6] - **Lithium Battery Equipment**: - Rated as Overweight (OW) with key stocks including Wuxi Lead and Hangke [6][6][6] - **Heavy Duty Trucks and Railway Equipment**: - Rated as Equal Weight (EW) with key stocks including Weichai, Sinotruck, and CRRC [6][6][6] - **Solar Equipment and Infrastructure E&C**: - Rated as Underweight (UW) with key stocks including SC New Energy and CSCEC [6][6][6] Market Performance - The automation market showed a mild recovery with a 1% year-on-year increase in sales for 1H25, indicating a less intense competitive environment compared to the previous year [28][28][28] - Anticipated recovery in 2026-27 driven by: - Replacement demand from equipment sold during the 2020-21 capex upcycle - New capex demand from AI applications - Continued benefits from overseas capacity expansion [28][28][28] Financial Metrics - **Return on Equity (ROE)**: Mixed trends observed across subsectors, with growth in ROE for lithium battery equipment, automation, and construction machinery, while solar equipment and E&C show eroding ROE [20][20][20] - **Sector P/E Multiples**: Most subsector valuations are above the five-year median, particularly in automation, solar equipment, and lithium battery equipment [13][13][13] Robotics Market Insights - The Chinese robotics market is expected to double by 2028, with significant growth in drones, mobile robots, and collaborative robots (cobots) [62][62][62] - Localization in robotics is increasing, with domestic players gaining market share [76][76][76] - The market for robot components is projected to reach a total addressable market (TAM) of US$40 billion by 2024, with a 23% CAGR anticipated from 2025 to 2028 [86][86][86] Conclusion - The China Industrials sector is poised for growth, driven by technological advancements and increasing localization. Key subsectors such as automation and robotics are expected to lead this growth, with significant investment opportunities identified in specific companies. The overall market dynamics suggest a favorable environment for both established players and new entrants in the industrial landscape [6][6][6][62][62][62]

Core Insights - The Guangdong-Hong Kong-Macao Greater Bay Area (GBA) is experiencing significant economic growth, with a projected GDP of approximately $1.89 trillion in 2023, making it the second-largest bay area globally, just behind the Tokyo Bay Area [2] - The GBA's nine inland cities are expected to see their economic output rise from 8.04 trillion yuan in 2018 to 11.5 trillion yuan by 2024, representing a substantial increase in economic activity [2] - The GBA is home to over 71,000 high-tech enterprises, indicating a strong focus on innovation and technology development [3] Economic Performance - The GBA accounts for 5.6% of the national population while generating 8.6% of China's total economic output, showcasing its economic significance [2] - The combined GDP of Guangzhou and Shenzhen is expected to maintain a share of over 5% of the national GDP in recent years, with Shenzhen and Guangzhou ranking 3rd and 5th among Chinese cities by GDP in 2024 [2] Innovation and Technology - The "Shenzhen-Hong Kong-Guangzhou" innovation cluster has surpassed the "Tokyo-Yokohama" cluster, becoming the world's leading innovation hub [3] - R&D expenditure in Guangdong has exceeded 510 billion yuan, with an R&D intensity of 3.6%, indicating a strong commitment to research and development [3] Industrial Development - Guangdong produces one out of every three industrial robots globally, highlighting its manufacturing prowess [4] - The GBA has established nine trillion-yuan industrial clusters, including electronics, green petrochemicals, and new energy, positioning itself as a leader in several emerging industries [4] Infrastructure and Connectivity - The GBA has developed extensive transportation infrastructure, including 7 cross-river and cross-sea passages, with a total highway length of approximately 5,459 kilometers [4] - Major cities within the GBA have achieved basic one-hour connectivity, enhancing regional integration and accessibility [4]