Investment Logic of Key Tracks Under the 15th Five-Year Plan and Analysis of Alpha Returns from Domestic Substitution

Based on the latest policy developments, China is formulating the 15th Five-Year Plan (2026-2030), which is a follow-up to the “Made in China 2025” strategy [1]. Core policy directions include:

• New productive forces
  : Cultivate and expand emerging industries and future industries, focusing on innovation-driven development, real economy, and the construction of a domestic circulation system
• High-level technological self-reliance
  : Prioritize support for key technologies and equipment such as semiconductors
• Manufacturing power goal
  : Maintain a stable share of manufacturing in GDP (currently around 25%)

Based on policy documents and brokerage research reports, the 16 key tracks include [1][2]:

• Next-generation information technology
  : AI computing power, optical communication, cloud computing
• Semiconductor entire industry chain
  : Design, manufacturing, packaging and testing, equipment and materials
• High-end equipment manufacturing
  : Industrial mother machines, robots, aero-engines
• New energy industry
  : Photovoltaics, wind power, energy storage, hydrogen energy
• New materials
  : Semiconductor materials, high-temperature alloys, composite materials
• Biomedicine
  : Innovative drugs, high-end medical devices, vaccines
• Aerospace
  : Commercial aircraft, satellite navigation, launch vehicles
• New energy vehicles
  : Intelligent electric vehicles, power batteries, charging facilities
• Digital infrastructure
  : Data centers, 5G/6G, industrial internet
• Green low-carbon technology
  : Carbon capture, energy conservation and environmental protection, carbon management
• Quantum technology
  : Quantum computing, quantum communication
• Low-altitude economy
  : Unmanned aerial vehicles (UAVs), eVTOL, general aviation
• Deep sea and deep earth exploration
  : Deep sea equipment, geothermal energy development
• Brain-computer interface
  : Neural regulation, brain-computer integration
• Embodied intelligence
  : Humanoid robots, autonomous driving machines
• Future networks
  : Satellite internet, air-space-ground integration

According to Bloomberg reports, China is preparing a semiconductor industry incentive plan of up to $70 billion [1], which will bring huge financial support to the industry chain. The investment logic has shifted from simple “localization rate” improvement to:

• Entire industry chain breakthrough
  : Systematic breakthroughs from design to manufacturing, packaging and testing, equipment and materials
• Mature process first
  : Form global competitiveness in mature processes of 28nm and above
• Equipment and materials breakthrough
  : Focus on breaking through “chokepoint” links such as lithography machines, etching machines, and thin film deposition equipment

The global semiconductor industry will show the following trends in 2026 [3]:

• AI chip demand surge
  : Demand for data center AI accelerators and edge AI chips will surge, and the demand for edge computing power chips is expected to grow 40,000 times
• Advanced packaging technology
  : 2.5D/3D packaging becomes key to performance improvement; China’s YSEMI has developed 128-core 2.5D packaging technology
• Heterogeneous computing architecture
  : In-memory computing and near-memory computing technologies break through the “memory wall” and “power wall”
• Automotive-grade chip market
  : Chinese enterprises are accelerating breakthroughs in automotive-grade MCU, adapting to extreme working conditions from -40°C to 150°C

• From “having it or not” to "being good or not
  : Initially solving the 0-to-1 breakthrough, now focusing on 1-to-N competitiveness improvement
• From single link to ecosystem construction
  : Emphasize the collaborative development of EDA tools, IP cores, materials and equipment
• From policy-driven to market verification
  : Focus on the actual adoption of products at customers and yield performance

Semiconductor materials are the weakest link in domestic substitution but have the largest alpha returns:

• Photoresist
  : Domestic rate of ArF photoresist is less than 5%, KrF photoresist less than 10%, and high-end EUV photoresist is completely dependent on imports. Every 10 percentage points increase in domestic rate corresponds to a market space of billions of yuan
• CMP polishing materials
  : Domestic rate of polishing slurry and pads is about 15-20%, but high-end products are still monopolized by Japanese and American enterprises
• Electronic specialty gases
  : Domestic rate of high-purity electronic specialty gases is less than 30%, and high-end etching gases are almost entirely dependent on imports
• Target materials
  : Domestic rate of basic target materials such as copper targets and aluminum targets is high, but that of high-end products like high-purity tantalum targets and titanium targets is less than 20%

• High-temperature alloys
  : Materials for aero-engine blades; domestic rate is about 50%, but core materials like single-crystal blades are still constrained by others
• Carbon fiber
  : T300/T400 grades have achieved mass production, but the yield of T700/T800 high-performance carbon fiber still lags behind international advanced levels
• Special engineering plastics
  : Special plastics like polyimide and PEEK are widely used in semiconductors and aerospace, with a domestic rate of about 30-40%

The largest alpha in new materials comes from 0-to-1 technological breakthroughs:

• High technical barrier segments
  : Photoresist, electronic specialty gases, high-end target materials, etc.
• Long verification cycle application scenarios
  : Materials requiring long-term certification such as aerospace and automotive-grade
• Single import-dependent “chokepoint” links
  : EUV photoresist, high-purity tantalum targets, etc.

According to Morgan Stanley’s “Robot on Earth” report, the market size of embodied intelligence will surge from $100 billion in 2025 to $25 trillion in 2050, with a CAGR of 25% [2]. Segments include:

• Humanoid robots
  : $7.5 trillion (China’s market is expected to account for 30-40% of the global market, with annual sales exceeding 50 million units)
• Autonomous driving vehicles
  : $5.6 trillion (China’s L4 autonomous driving vehicle ownership will reach 1.5 million in 2030 and 160 million in 2050)
• Service robots
  : $5 trillion
• UAVs/Aircraft
  : $4.7 trillion
• Industrial robots
  : $2.2 trillion

• Supply chain integration capability
  : Chinese enterprises already account for more than 60% of the global market share in core components like Tesla Optimus
• Complex scenario data
  : China has the world’s most complex road condition data, providing high-quality datasets for autonomous driving training
• Cost control advantage
  : China is expected to reduce the cost of humanoid robots from the current hundreds of thousands of dollars to a target price of $20,000

Morgan Stanley’s report emphasizes that the growth potential of “shovel-selling” component manufacturers far exceeds that of complete machine manufacturers [2]:

• Reducer demand
  : Expected to grow 590 times
• Battery demand
  : Expected to grow 1,400 times
• Edge computing power chips
  : Expected to grow 40,000 times

The 2025 Humanoid Robot Annual Conference pointed out that the current industry faces the following main challenges [4]:

• Dexterous hand operation capability
  : Fine operations still need breakthroughs
• Large model and hardware collaboration
  : The real capability of embodied large models remains to be verified
• Power system
  : High-energy density batteries and high-efficiency motors are key
• Commercialization path
  : The order of landing in industrial, special, and commercial scenarios is not yet clear

• Five-axis linkage CNC machine tools
  : Core equipment for aero-engine blades and precision mold manufacturing; domestic rate is less than 10%
• High-precision grinders
  : Key equipment for processing precision parts like bearings and gears; the high-end market is mainly occupied by Japanese and German enterprises
• Gantry machining centers
  : Necessary for large part processing; domestic equipment still lags in precision and stability

• Strong policy promotion
  : “Industrial mother machines” have been elevated to a national strategy with strong policy support
• Long verification cycle
  : Once imported into the customer’s supply chain, the stickiness is strong, and customers will not easily change suppliers
• Large import substitution space
  : Annual imports of high-end machine tools exceed $5 billion, with broad domestic substitution space

• Data center computing power
  : With the surge in large model training demand, the construction of intelligent computing centers is accelerating
• Edge computing power
  : Scenarios like embodied intelligence and autonomous driving require edge AI chip support
• Communication networks
  : Construction of new infrastructure like 5G/6G, optical communication, and satellite internet

Forbes analysis points out that China’s AI strategy has significant differences from the West [5]:

• Energy priority
  : Focus on solving AI energy consumption issues, deeply integrating with renewable energy
• Application-driven
  : Emphasize the landing of AI in real economy fields like manufacturing and energy
• Computing power independence
  : Develop domestic AI chips (Huawei Ascend, Cambricon, etc.)

China has leading advantages in the global low-altitude economy:

• EHang
  : Manned autonomous flying vehicles have obtained the world’s first airworthiness certification
• DJI
  : Occupies more than 70% of the global consumer UAV market share
• Logistics application
  : UAV delivery has achieved commercial operation in some areas

• Urban Air Mobility (UAM)
  : Alleviate ground traffic congestion
• Logistics delivery
  : Remote areas, emergency material delivery
• Agricultural plant protection
  : Precision agriculture, intelligent spraying
• Emergency rescue
  : Disaster rescue, medical material delivery

• Lithography machines
  : EUV lithography machines are embargoed, DUV lithography machines are restricted; domestic enterprises like SMEE are accelerating breakthroughs. Each breakthrough in a process node corresponds to a market space of tens of billions of yuan
• Photoresist
  : Domestic rate of ArF/KrF photoresist is less than 5-10%, and the verification cycle is as long as 2-3 years; once broken through, it will form a strong barrier
• CMP polishing materials
  : High-end CMP polishing pads are monopolized by Dow Chemical, with large domestic substitution space

• Five-axis linkage CNC machine tools
  : The price of a single device can reach tens of millions of yuan, with annual imports exceeding 10 billion yuan
• High-precision measurement equipment
  : Domestic rate of high-end measurement equipment like coordinate measuring machines and roundness meters is low
• Core components
  : Key components like CNC systems, spindles, and screws are dependent on imports

• Semiconductor materials
  : Electronic specialty gases, target materials, packaging materials, etc.
• High-temperature alloys
  : Materials for aero-engine blades; single-crystal blade technology is extremely difficult
• High-performance composite materials
  : Carbon fiber-reinforced composite materials are widely used in aerospace

1. Lower domestic rate, larger space
   : Focus on segments with domestic rate below 20% or even below 10%
2. Longer verification cycle, higher barrier
   : Fields requiring long-term certification like automotive-grade and aerospace will form strong barriers once entering the supply chain
3. Stronger policy promotion
   : Fields included in the “new productive forces” and “chokepoint” technology lists have strong policy support
4. More rigid market demand
   : Fields related to national security like semiconductors, new energy, and aerospace have high demand certainty
5. Higher technical threshold
   : Fields requiring long-term R&D accumulation are difficult for competitors to enter

• Localization rate
  : The proportion of domestic substitution achieved in a link; focuses on progress
• Domestic rate
  : The global market share of domestic enterprises in the link; focuses on competitiveness

• Photovoltaic industry: Localization rate is close to 100%, but domestic rate (global share) also exceeds 80%, already having global competitiveness
• Semiconductor equipment: Localization rate is about 20%, but domestic rate is less than 10%, still having large room for improvement
• Photoresist: Localization rate is less than 10%, domestic rate is almost zero, which is the largest alpha source

• Fields with high localization rate but low domestic rate: Have room for global competitiveness improvement (e.g., photovoltaics, lithium batteries)
• Fields with low localization rate and low domestic rate: 0-to-1 breakthroughs bring the largest alpha (e.g., photoresist, high-end machine tools)

• Some “chokepoint” technologies (e.g., EUV lithography machines) involve global supply chains and are difficult to fully break through in the short term
• New materials have long R&D cycles and high failure rates, requiring long-term investment

• Countries like the US continue to tighten technology export controls on China
• Some fields may face further sanctions

• Some technologies have breakthroughs, but yield and cost still cannot compete with international giants
• Customer import cycle is long, requiring long-term verification

• Some popular tracks (e.g., humanoid robots, quantum computing) have high current valuations
• Technology maturity and commercialization progress may fall short of expectations

Hard tech investment requires a long-term perspective; R&D and capital expenditure being higher than current returns for a long time is the norm in industrial evolution. Investors should:

• Focus on the proportion of R&D investment to revenue of enterprises
• Emphasize core technical teams and patent accumulation
• Tolerate short-term performance fluctuations and focus on long-term competitive position

-

: Semiconductor equipment and materials, high-end machine tools (low domestic rate, strong policy promotion)
-: Embodied intelligence (humanoid robots, autonomous driving), AI computing power infrastructure
-: New materials, aerospace, low-altitude economy
-: High dividend, low valuation sectors to balance fluctuations

• Technological breakthrough capability: Whether it masters core technologies or is breaking through key bottlenecks
• Customer verification progress: Whether there are leading customers imported or under verification
• R&D investment intensity: Whether the R&D expense ratio is higher than the industry average
• Policy support intensity: Whether it is included in the national key support list
• Valuation rationality: Whether the current valuation fully reflects expectations

The 15th Five-Year Plan (2026-2030) will be a key five years for China to move from a “manufacturing large country” to a “manufacturing power”. Policy resources will be highly concentrated on 16 key tracks like semiconductors, new materials, and embodied intelligence; investors should focus on:

:1. (fields with domestic rate below 10% like photoresist, lithography machines, electronic specialty gases)
2. (high-end products like five-axis linkage with domestic rate below 10%)
3. (semiconductor materials, high-temperature alloys, high-performance composite materials, etc.)

:

• From “localization rate” to “domestic rate”: Focus on the improvement of Chinese enterprises’ global market competitiveness
• From “having it or not” to “being good or not”: From simple breakthroughs to having global competitiveness
• From policy-driven to market verification: Focus on the performance of technology in actual application scenarios

:

• New productive forces are the core main line running through the 15th Five-Year Plan and even 2035
• Embodied intelligence (25 trillion US dollar market) will be the next trillion-dollar track after the Internet
• China, with its supply chain integration capability and market scale advantages, is expected to form global competitiveness in multiple fields

Investors should adopt a long-term perspective, tolerate short-term fluctuations, focus on core technological breakthroughs and global competitiveness improvement, and seize the historical opportunity of China’s manufacturing industry upgrade.

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[1] Bloomberg - “China Prepares as Much as $70 Billion in Chip Sector Incentives” (https://www.bloomberg.com/news/articles/2025-12-12/china-prepares-as-much-as-70-billion-in-chip-sector-incentives)

[2] Yahoo财经(香港) - “1保險商受矚!大摩揭示未來25年投資密碼” (https://hk.finance.yahoo.com/news/1保險商受矚-大摩揭示未來25年投資密碼-具身智能等三大-黃金賽道-擁25兆美元產值-041513762.html)

[3] Yahoo财经(香港) - “2026年全球半導體產業趨勢:AI、5G、物聯網與永續製造引領產業重構” (https://hk.finance.yahoo.com/news/2026年全球半導體產業趨勢研究報告-ai-5g-物聯網與永續製造引領產業重構-140002095.html)

[4] Yahoo财经(香港) - “直擊產業深水區!2025高工人形機器人年會登場六大亮點” (https://hk.finance.yahoo.com/news/直擊產業深水區-2025高工人形機器人年會登場-六大亮點-次看-0710033