According to a research report from Shenwan Hongyuan Group, demand in the industrial automation sector is stabilizing in 2025, with significant divergence across different industries. Sectors such as lithium batteries, 3C products, semiconductors, machine tools, and AI-related equipment show positive demand trends. The HMI market is expected to grow by 4.2% in 2025, with most industries experiencing positive growth. For the full year 2026, the outlook is favorable for pro-cyclical sectors, AI equipment, and robotics. Embodied intelligence is entering its first year of commercialization, with core components beginning to contribute revenue and performance. Shenwan Hongyuan's key views are as follows:
Demand in the industrial automation industry is stabilizing in 2025, with significant divergence across sectors. Data from Rui Industry indicates that China's overall industrial automation market will decline by 1.00% year-on-year in 2025, a narrower drop compared to 2023-2024. Industry divergence is evident, with project-based markets declining by 2.55% and OEM markets growing by 1.88%. Demand is favorable for lithium battery, 3C, semiconductor, machine tool, and AI-related equipment sectors. Overseas expansion demand from companies has significantly increased, driving exports of related products, equipment, and services.
By product category, inverters, servos, and PLCs show differentiated characteristics. The HMI market is projected to grow 4.2% in 2025, with most industries in positive territory. Small PLCs are expected to grow 7.8%, medium PLCs 7.4%, with higher growth rates in battery, logistics, and semiconductor industries. PC-based motion controllers are forecast to increase 6.96% year-on-year, supported by solid demand from downstream electronics, semiconductor, and machine tool sectors. General servo systems are anticipated to grow 8.6%, with battery and logistics industries showing higher growth rates. Low-voltage and medium/high-voltage inverters are expected to grow 1.3% and 2.8% respectively, though demand remains weak in some real estate and traditional industries.
Outlook for full-year 2026: Favorable for pro-cyclical sectors, AI equipment, and robotics. 1) Demand side: Overall industrial control demand continues to recover. The automation market grew 2.26% in Q1 2026, with OEM markets up 6.64% and project-based markets up 0.73%. Concentrated demand release is seen in battery, robotics, electronics, and semiconductor industries. 2) Price side: Since 2026, companies including Inovance, Siemens, ABB, and Schneider have implemented frequent price increases (servo/PLC/inverter hikes of 2%-20%), with high downstream acceptance reflecting solid demand. 3) High-growth sectors: AI development is driving substantial capital expenditure growth in downstream industries like consumer electronics, semiconductors, optical modules, and robotics, leading to explosive demand for related equipment and components. Domestic manufacturers also benefit from import substitution opportunities due to extended supply cycles from foreign suppliers. 4) Embodied intelligence: Technologies in industrial automation such as motors, drives, and sensors are highly transferable to humanoid robot components. Embodied intelligence is entering its commercialization元年, with core components beginning to contribute revenue and performance.
Recommended stocks to watch include Inovance Technology (benefiting from improved industrial control demand and focus on embodied intelligence & AI industrial software); Leadshine Technology (volume growth in downstream semiconductors and optical modules); Xinje Electric (PLC leader, with robotics and semiconductor businesses scaling up); Zhongchen Technology (an undervalued reducer play); V&T Technology (diversified robotics layout); Invt (in strategic transformation, potential in power supplies and liquid cooling); Googol Technology (deep expertise in motion control, expanding into high-end equipment); and Hichain Technology (downstream demand recovery, earnings at trough).
Risk warnings include slower-than-expected industry recovery, slower-than-expected new business development, and intensifying competition.