Why is the domestic substitution of cemented carbide cutting tools now?
At present, domestic enterprises are different from overseas enterprises in terms of product types, sales channels, and application fields. Considering that domestic enterprises are currently undergoing a round of capacity expansion. While increasing the output of CNC blades, they are also expanding into the field of non-standard and special-shaped blades, and adding new products such as cermet blades and solid carbide tools. It is expected that CNC blades will The average price is expected to continue to increase.
1. Domestic substitution: why now
After more than 60 years of development, the gap between the overall technical strength of China's cemented carbide cutting tool enterprises and the international level is constantly narrowing. The cutting tool performance of leading enterprises has not fallen behind in many fields. At present, domestic enterprises have domestic alternatives for production equipment, and the equipment end is not There is a "stuck neck" link, but mid-to-high-end downstream customers lack the motivation to change suppliers. Under the dual challenges of trade friction and the epidemic, the current downstream application fields such as aerospace and military industry have significantly increased their enthusiasm for trying domestic knives, creating a golden age of domestic substitution, and giving domestic knives companies the opportunity to enter the mid-to-high-end market.
Domestic cemented carbide cutting tools have been developed for more than 60 years, and leading companies have gradually become competitive with overseas companies.
China's cemented carbide industry started about 20 years later than developed regions such as Europe and the United States. The official commissioning of the original 601 factory (now Zhuzhou Cemented Carbide Group) built by the Soviet Union in 1958 can basically be regarded as the beginning of China's cemented carbide industry. After 60 years of development, through technology introduction and independent research and development, the gap between the overall technical level of China's cemented carbide industry and the international level has gradually narrowed, and domestic leading enterprises have the strength to directly compete with overseas leading enterprises.
The performance of domesticcarbide cutting tools has caught up with Japan and South Korea, and some products are close to the same level in Europe and the United States.
According to the announcement data, the cutting force, chip breaking effect, wear performance, and surface roughness that determine the cutting performance of the current domestic cutting tools are different from those of Japanese and Korean companies such as Teguk, Toshiba, and Mitsubishi. As a result, some blades can reach the level of European and American knives. At present, the domestic cutting tool technology level of leading enterprises has reached the par with Japan and South Korea, catching up with Europe and the United States. From the perspective of domestic substitution, there is no technically insurmountable gap.
The continuous impact of trade friction and the epidemic has made domestic enterprises realize the necessity of ensuring the safety of the supply chain, and began to actively try domestic carbide cutting tools, which has promoted the acceleration of the localization of high-end carbide cutting tools.
For the sake of supply chain security, high-end manufacturing fields such as aerospace and military industry have begun to actively try domestic carbide cutting tools. European and American companies mainly provide overall cutting solutions and occupy the domestic aerospace, military, automotive and other high-end cutting tool markets. Domestic cutting tool companies lack opportunities to enter the high-end market. However, under the influence of supply chain challenges brought about by trade frictions and the epidemic, ensuring supply chain security has been put on the agenda. While OEMs are promoting the localization of production equipment, the demand for localization of carbide inserts is also imminent.
2. Comparison of domestic and foreign companies: pay attention to the growth of the dimension of price
The differences in product types, sales channels, customer structure and other aspects make the current average product price of domestic cemented carbide tool companies far from that of Japanese, Korean, European and American companies. At present, domestic companies are undergoing a round of capacity expansion. In addition to the improvement, the positioning is also more targeted at mid-to-high-end application fields, and the category has expanded cermet blades, solid carbide tools, etc. We believe that price is expected to become the core driving point for the growth of domestic tool companies.
(1) The income gap is gradually narrowing, and domestic enterprises maintain high profitability
Chinese knives are a global market. International companies have basically set up offices in China or sell through agents. Knives companies participating in the domestic market can basically be divided into three echelons:
First echelon: European and American foreign brands
The brand representatives of the first echelon are mainly European and American foreign-funded brands Sandvik, SECO, Kennametal, etc. European and American foreign-funded companies mainly provide overall solution services, processing design solutions, etc. Most of the tools are high-efficiency tools and advanced coated blades , high-precision toolholders, etc., mainly used in high-precision and efficient CNC machining centers and CNC machine tools
Second echelon: Japanese and Korean brands
The tool companies in the second echelon are mainly Japanese and Korean brands such as Mitsubishi, Toshiba Tungaloy, and Hitachi. They are mainly oriented to batch processing, with good general performance and moderate prices. Solutions or processing solutions, and have unique advantages in certain fields, and also pose a certain threat to first-tier products.
The third echelon: domestic leading enterprises
The cutting tool brands of the three echelons are dominated by domestic leading cemented carbide enterprises such as Zhuzhou Diamond and Xiamen Jinlu. Most of their products are used in the machining of mid-end CNC machine tools. The product structure is adjusted, the research and development results are verified in the market competition, the technical strength of the products is continuously improved, and the high-end market is gradually explored. However, it has not changed the current situation that domestic enterprises started late and the supply capacity of high-end cutting tools is relatively insufficient.
There is still a large gap in income volume, but the gap is gradually narrowing.
In 2021, Sandvik's global cutting tool business revenue will be about 28 billion yuan, while Zhuzhou Diamond, a cemented carbide cutting tool company with high domestic income, will have a revenue of 1.989 billion yuan in 2021. There is still a big gap between domestic companies and overseas leaders in terms of revenue . However, in recent years, domestic enterprises have generally experienced a high growth rate of income, and are currently actively expanding production, and are expected to maintain high income growth in the future. The income growth rate of overseas enterprises is relatively low, and there will generally be a decline in 2020. It is expected that the income between domestic and foreign enterprises will continue to grow The gap will continue to narrow.
Domestic companies have maintained higher profitability.
At present, domestic cutting tool companies still have a certain gap compared with European, American, Japanese and Korean companies in terms of product stability and brand influence. They mainly use differentiated product strategies and price advantages to tap market segments. The unit price of imports is nearly four times that of exports. In the case of a large price gap between domestic and foreign tool companies, domestic companies have maintained high profitability by relying on cost advantages.
(2) Future prices will become an important growth driver for domestic companies
At present, there is an obvious gap in price between domestic and foreign cemented carbide cutting tool enterprises. According to our industrial chain research data, there is still a big gap between domestic CNC blades and Japanese, Korean, European and American companies. The product categories, sales channels, and downstream applications of domestic cutting tool companies are different from those of overseas companies, resulting in large price differences.
The product prices of domestic cutting tool companies will usher in an inflection point, and the current round of capacity expansion will be the growth of "both volume and price". The new production capacity of domestic cutting tool companies is basically aimed at the expansion of mid-to-high-end fields, increasing special-shaped and non-standard cutting tool products, expanding cermet and solid carbide cutting tools, improving product layout and strengthening the ability to provide solutions, and increasing the average price of new production capacity is expected to improve.
The progress of domestic substitution is not as good as expected: The technical barriers of CNC blades are relatively high. If no reasonable arrangement or breakthrough is made in the technical research route, it may lag behind European, American, Japanese and Korean companies in key technologies, resulting in the progress of domestic substitution falling short of expectations.
The increase in the average price of CNC blades is lower than expected: domestic cutting tool companies are currently adding new capacity for more high-end applications, and the average price of products is expected to increase in the future, but changes in market competition may lead to price cuts for some products, resulting in an increase in the average price of CNC blades that is lower than expected .