In recent years, in order to develop strategic emerging industries, China has designated medical devices and scientific‑research instruments as key areas for prioritized growth, providing robust policy support to drive sectoral development. Against the backdrop of ensuring independent and controllable industrial chains, the upstream segments of the medical device value chain and manufacturers of scientific‑research instruments are particularly worthy of attention.

　　The pandemic has highlighted weaknesses in China’s medical device industry chain, and the 14th Five-Year Plan is driving its optimization and upgrading. In December 2021, the Ministry of Industry and Information Technology and nine other departments jointly issued the “14th Five-Year Plan for the Development of the Medical Equipment Industry,” encouraging domestic brands to achieve independent R&D of core components at the upstream end of the value chain. Self‑development and in‑house production of core components constitute a company’s core competitive advantage; they not only ensure supply‑chain security but also enhance bargaining power within the industry, accelerate the localization process, and enable domestic brands and international manufacturers to compete on an equal footing in the global market.

　　From 2016 to 2019, the overall domestic production rate of large-scale scientific research instruments in China remained below 30%, with a pronounced reliance on imports for certain high-end products. Scientific instruments are complex in design and comprise a large number of precision components. At present, some domestic companies have mastered the design and manufacturing processes for core components of advanced analytical instruments such as mass spectrometers, spectroscopes, and chromatographs; however, a significant portion of critical components, as well as certain high‑end general‑purpose parts, still depend heavily on imported supplies. Furthermore, the key technological barriers in this field lie in product design and the level of precision machining; ensuring the stability of instruments after mass production is also a crucial factor in manufacturing.

　　In recent years, China has introduced a series of industry‑support policies targeting the scientific‑instrument sector, designating related products as key areas for development and providing robust policy backing to foster the industry’s growth.

　　Today, we will primarily examine the current state of the medical equipment and scientific instrumentation industries, as well as the associated investment opportunities.

　　I. Medical Equipment:

　　In-house research and production of core components constitute a company’s core competitive advantage, ensuring the security of the domestic supply chain while granting greater influence and bargaining power within the industry value chain. This accelerates the localization process and enables domestic brands and international manufacturers to compete on an equal footing in the global market.

　　1. Medical imaging equipment: Core components such as high-power CT X-ray tubes face significant technological barriers and remain largely imported; United Imaging Healthcare (688271) boasts strong international competitiveness in areas including 3.0T and 5.0T superconducting magnets, MR power amplifiers, and PET/CT detectors. Meanwhile, domestic upstream suppliers like Yirui Technology (688301) and Kangzhong Medical (688607) hold a robust competitive edge in the field of X‑ray flat-panel detectors.

　　2. Ventilators: Core components such as proportional valves, solenoid valves, turbo blowers, and sensors are predominantly imported; however, domestic brands like Baifeng Technology and Hanwei Technology (300007) have already achieved breakthroughs in certain segments.

　　3. Ultrasound: Domestic manufacturers are capable of independently producing the core component—the ultrasound transducer—while FPGA chips are predominantly imported; however, general-purpose chips and electronic components are available from domestic suppliers.

　　4. Endoscopes: Flexible endoscopes comprise numerous components and rely on a complex supply chain, with most parts manufactured and assembled by hand, demanding highly sophisticated production processes. The rise of CMOS technology has disrupted the Japanese firms’ monopoly in the flexible endoscope market. In the rigid endoscope segment, the domestic brand Haite Xinguang (688677) boasts strong upstream capabilities, independently producing core components such as fluorescent endoscope bodies and light‑source modules, and has successfully integrated into the supply chain of Stryker, the global leader in fluorescent rigid endoscopes.

In the fields of endoscopes, domestically controllable technologies, CT X-ray tubes, X-ray flat-panel detectors, and fluoroscopy rigid endoscopes, domestic “hidden champions” are poised to emerge.

Endoscope: The industry offers substantial room for domestic substitution, and in recent years, leading domestic players have successively launched new products with markedly improved performance, which is expected to sustain the company’s rapid growth. Related companies: Kaili Medical (300633), Auhua Endoscopy (688212).

Autonomous and Controllable: The related industrial chain is receiving increasing attention, and with continued policy support, we recommend focusing on the upstream segment of the medical device industry. Related companies include Haitai Xinguang (688677), Yirei Technology (688301), United Imaging Healthcare (688271), and BGI Genomics (688114), among others.

CT X-ray tubes: United Imaging Healthcare (688271), Maimo Vacuum, Kunshan Yiyuan, Ruineng Medical As domestic brands have already achieved breakthroughs in the mid- and low-end X-ray tube segments, they are expected to gradually expand into the high-end market, improve yield rates, and ultimately achieve import substitution.

X-ray flat-panel detector: According to data from Yole Développement, the global digital X-ray flat-panel detector market is projected to reach US$2.8 billion in 2024. Yirui Technology (688301) It is one of the few companies that simultaneously masters the four major sensor technologies—amorphous silicon, IGZO, CMOS, and flexible substrates—and possesses mass-production capabilities, having already integrated into the supply chains of numerous leading imaging‑equipment manufacturers both domestically and internationally. According to Yole Développement, in 2021, Yirui Technology held a 16.9% share of the global digital X-ray detector market, with significant room for further growth. Meanwhile, its dental CBCT and lithium‑battery inspection businesses are poised to launch a second growth trajectory, while strategic positioning in new core components such as high‑voltage generators, X-ray sources, and CT detectors is expected to create a third growth curve, further expanding its growth potential.

Upstream of the fluorescent rigid endoscope: According to Frost & Sullivan, the global and Chinese markets for fluorescence rigid endoscopes are expected to reach US$3.9 billion and RMB 3.5 billion, respectively, in 2024. Key suppliers of fluorescence endoscope bodies include Germany’s Henke‑Sass‑Wolf and domestic brands. Haitai Xinguang (688677) Meanwhile, the latter has leveraged its high-performance products to gain entry into Stryker’s supply chain—the global leader in fluorescence‑based rigid endoscopes—while also expanding into the downstream complete‑system market, thereby achieving vertical integration across the industry value chain.

II. Scientific Research Instruments:

Innovative development of scientific research instruments has become a key driver of technological progress. At present, China still relies on imports for certain core components and some high-end general-purpose parts used in its research equipment.

Scientific research instruments are complex in structure and comprise a large number of precision components. In China, some companies have already mastered the design and manufacturing processes for core components of high-end analytical instruments such as mass spectrometers, spectroscopes, and chromatographs; however, certain critical components, as well as some high‑end general‑purpose parts, still rely heavily on imported products. Moreover, the primary technological barriers in this field lie in product design and advanced precision machining capabilities, and ensuring the stability of instruments after mass production is equally crucial to the manufacturing process.

The global analytical instruments market is projected to reach US$67 billion, with the Chinese market accounting for approximately 11.7% and emerging as one of the fastest-growing markets for analytical instrument applications worldwide. According to data released by SDI on the global laboratory analytical instruments market, the market size is expected to hit US$67 billion in 2020, with a compound annual growth rate (CAGR) of about 5.5% from 2015 to 2020. Regionally, Europe and North America hold the lion’s share of the analytical instruments industry, while China ranks third globally, contributing roughly 11.7% of the market. As economies in China, India, and other countries continue to expand, demand for laboratory analytical instruments across Asia is steadily rising, making China one of the fastest‑growing markets for such instruments worldwide.

From 2016 to 2019, the overall domestic production rate of large scientific instruments in China remained below 30%, with a pronounced reliance on imports for certain high-end products. According to the “2022 China Scientific Instrument Industry Panorama,” scientific instruments have become the country’s third-largest import category, trailing only petroleum and electronic components, underscoring a significant dependence on foreign sources. Data from the National Network Management Platform for Major Scientific Research Infrastructure and Large Scientific Instruments indicate that, between 2016 and 2019, the overall import share of large scientific instruments in China was approximately 70.6%. Furthermore, analysis of procurement data from the National Development and Reform Commission for high-end scientific instruments priced at RMB 2 million or above during the same period reveals that domestically produced mass spectrometry equipment accounted for only 1.19%, while domestically produced spectroscopy and chromatography instruments represented just 0.24%; all optical microscopes were imported, highlighting a notably strong dependency on foreign supplies for certain high-end research instruments.

The synergy between industrial policy and fiscal policy is driving high-quality development in the scientific‑instrumentation sector. In recent years, to advance industrial transformation and upgrading and to develop strategic emerging industries, China has introduced a series of industry‑specific policies for the scientific‑instrumentation sector, designating related products as key priorities for development and providing robust policy support for the industry’s growth.

In September 2022, the State Council’s Standing Committee proposed providing fiscal interest subsidies for the renewal of instruments and equipment required for research and practical training at universities and higher vocational colleges. This subsidized-loan policy is expected to facilitate the adoption of domestically produced scientific research equipment by universities and research institutes, accelerate enterprises’ expansion into downstream markets, and further enhance brand recognition for China‑made scientific instruments.

Domestic enterprises are increasing their R&D investment in scientific instruments, steadily strengthening their core competitiveness.

Related listed companies:

Juguang Technology (300203): A platform‑based enterprise specializing in high‑end analytical instruments, its subsidiary Puyu Technology is a national high‑tech company dedicated to the R&D and innovative industrial applications of major scientific instruments. Puyu Technology has emerged as a domestic unicorn in the high‑end scientific instrumentation sector.

LiberTech (688056): The company owns well-known industry brands such as LabTech and CDS, and is a leading enterprise in China’s sample preparation sector. Its innovative ICP‑MS/MS product has been recognized by top semiconductor manufacturers.

Hesin Instruments (688622): Leveraging its established brand reputation in the environmental monitoring sector, the company is actively expanding into application areas such as healthcare and food safety.

Other related scientific instrument companies include Tianrui Instrument (300165), Wanyi Technology (688600), and Gangyan Nake (300797), among others.