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The power equipment sector has seen significant gains from the rapid expansion of grid investment, particularly in ultra-high voltage (UHV) projects, from January to July. This has allowed the sector to consistently outperform the broader market. While the full-year target remains unchanged, it's clear that investment growth will slow down in the second half of the year. However, this slowdown is expected to shift toward the distribution network, which had underperformed in the first half. Additionally, the wind power industry is approaching a turning point. Meanwhile, the low-voltage electrical appliance industry is benefiting from real estate recovery and falling raw material prices, making it a sector worth watching.
Looking ahead, the peak of distribution network investment may come next year. Grid investment from January to July reached 1,947 billion yuan, a 17% year-on-year increase, largely driven by concentrated UHV project deliveries in the first half. It’s unlikely that such high growth rates will continue in the second half, but the investment structure will remain stable. We anticipate a significant rise in distribution network investment next year, with a substantial increase in its share, which will benefit companies in this space.
Distribution network automation is also set for a major phase of development. The State Council has prioritized smart grids and distribution networks as key areas for future progress. After several years of pilot projects, the technical framework for automation has matured, opening the door for nationwide implementation. Future investments in distribution automation are expected to grow rapidly. For example, the State Grid plans to invest 40 billion yuan in distribution automation by 2015, up from just 2-3 billion annually before. This represents a huge opportunity for market growth.
The wind power industry is now at a critical inflection point. Despite past challenges like grid connection issues and frequent accidents, the sector entered a low point around 2011-2012. However, signs at the end of 2012 and into 2013 suggested a bottoming out, including stabilized capacity, increased tenders, and rising turbine prices. The industry is now poised for steady growth in the coming years.
Meanwhile, the low-voltage electrical appliance industry has benefited from both real estate recovery and declining metal prices. In the first half of 2013, real estate construction area returned to positive growth, and completed housing maintained a steady rate, supporting demand for low-voltage products. Additionally, copper and silver prices dropped sharply from January to August, with expectations of continued weakness in the second half of the year, which should improve gross margins for these companies.
During China’s 12th Five-Year Plan period, the high-voltage switch industry focused on developing intelligent switches, aligning with the broader push for smart grid technologies. The plan emphasized enhancing independent innovation, increasing the level of intelligent switchgear, and promoting environmentally friendly, energy-efficient equipment. Key areas included UHV transmission technology and advanced integration solutions.
In the coming years, high-voltage switchgear is moving toward greater intelligence. Leading global products already feature functions like trip circuit monitoring, action time detection, and contact part diagnostics, forming the basis of intelligent switchgear. Companies are focusing on integrating primary equipment with secondary control systems and developing interface technologies.
As the mobile computing era continues to evolve, power consumption demands have become a key differentiator. Mobile processors, for instance, operate at about 2 watts, while laptops require 50 watts, highlighting the need for more efficient semiconductor designs. This shift is driving the development of new technologies like 16/14nm FinFETs and 3D flash memory, which are expected to boost the semiconductor industry’s growth in 2014.
With the growing demand for affordable smartphones, especially in emerging markets, chipmakers are investing heavily in cost-effective solutions. These innovations are not only improving performance but also creating new opportunities for semiconductor manufacturers, packaging, and design firms. As smartphone sales shift from "households" to "individuals," the demand for semiconductors is set to rise significantly.