Analysis of R&D Expense Ratio and Technical Barriers of Zhongwu Hi-Tech

Based on the collected data, I will conduct an in-depth analysis of Zhongwu Hi-Tech from multiple dimensions including R&D investment, technical barrier construction, and industry competitive advantages.

Based on public data, Zhongwu Hi-Tech’s R&D expenses in 2024 reached

, with R&D personnel accounting for 16.18% of the total workforce. It has accumulated over 1,500 valid patents, with 184 new patents added [1][2]. From an industry comparison perspective, Zhongwu Hi-Tech leads in R&D investment intensity among listed companies in the tungsten industry:

Company	R&D Expense Ratio	Market Share
Zhongwu Hi-Tech	4.7%-11%*	9.2% (cemented carbide cutting tools)
Xiamen Tungsten Industry	Approx. 2.5%	2.5%
Okey	Approx. 2.9%	2.9%
Huarui Precision	Approx. 1.6%	-

*Note: The R&D expense ratio fluctuates within the range of 4.7%-11% due to different statistical calibers [3][4]

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Zhongwu Hi-Tech has built a technological moat through a four-in-one model of

:

• Upstream: Large reserves of entrusted tungsten ore resources, with annual output maintained at around 25,000 tons
• Midstream: APT output of 15,300 tons, with sufficient production capacity for tungsten powder and tungsten carbide powder
• Downstream: Annual production capacity of 14,600 tons of cemented carbide, ranking first globally
• Core Barrier
  : Industrial chain collaboration reduces the risk of raw material price fluctuations and enhances the stability of product gross profit margins

Technical Field	Technical Indicators	Market Significance
Ultrafine-grained cemented carbide	Grain size ≤0.5μm, performance reaches international advanced level	Domestic substitution rate exceeds 70%, applied in aerospace
Photovoltaic tungsten wire process	35μm diameter products have strength exceeding 5000MPa, with a first-pass yield of 85%	Better than the industry average, with a 10 billion-meter production capacity layout
High-purity bismuth preparation	6N-grade products (purity 99.9999%), with monthly production capacity of 60 tons	Accounts for 90% of the global market share, certified by TSMC for 3nm processes

[1][5]

• Accumulated over
  1,500 valid patents
  , leading the industry
• Led the formulation of the International Testing Standard for 6N-Grade High-Purity Bismuth
• National Key Laboratory of Cemented Carbide
  (the only one in the industry) provides a technology verification platform

• Cooperates with the Chinese Academy of Sciences and Tsinghua University to develop cutting-edge projects such as tungsten components for nuclear fusion
• Opens up the transformation channel from basic research to industrial application

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Zhongwu Hi-Tech’s technical barriers are concentrated in

, whose gross profit margins have remained above 30% for a long time:

• Annual production capacity of approximately 130 million pieces, with a domestic market share of over 10%
• Its subsidiary
  Zhuzhou Diamond
  launched the high-end “Zhuzhou Diamond Pangu” series of cutting tools (PG8, PG9, PGMH, PGMS) in 2023
• Application fields: Aerospace, 3C electronics, new energy vehicles
• Successfully won the
  cutting tool general contracting project of Chengdu Aircraft Industry Group
  , entering the high-end aerospace manufacturing field [5]

• Global market share exceeds
  30%
  , firmly ranking first in the world
• Annual production capacity of 550-600 million pieces, with 0.01mm micro-drill technology breaking overseas monopoly
• Its subsidiary
  Kingstate Precision
  has focused on PCB drilling and milling tools for 36 years
• Technical difficulty: The diameter of the 0.01mm drill bit is only 1/8 that of a human hair; the blade is extremely small and prone to breakage, with a complex structure that is difficult to grind [5]

• Established a specialized subsidiary, Great Wall Tungsten & Molybdenum, to accelerate production capacity release
• Production capacity of the 10 billion-meter high-strength photovoltaic tungsten wire project is gradually being released
• Substitutes diamond cutting wires, benefiting from the cost reduction demand in the photovoltaic industry

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• In Q3 2025, operating revenue reached RMB 4.906 billion (year-on-year increase of 34.98%), and net profit attributable to parent company shareholders reached RMB 335 million (year-on-year increase of 36.53%)
• Non-recurring net profit increased by
  407.52%
  year-on-year, reflecting a significant improvement in the profitability of core businesses
• ROE increased from 3.8% in 2021 to 18.97% in 2024 [2][6]

• Ranks first in global cemented carbide production (market share 21.4%)
• CNC insert production accounts for approximately 10% of total domestic production
• 90% global market share of high-purity bismuth

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1. Guaranteed R&D Investment Intensity
   : R&D expenses reached RMB 694 million in 2024, and continuous growth is expected in the future
2. Expected Injection of Tungsten Ore Resources
   : The injection of tungsten ore assets such as Shizhuyuan will strengthen upstream resource guarantees
3. Increased Proportion of High-End Products
   : Shift from “selling products” to “selling services” by providing integrated solutions
4. Domestic Substitution Dividend
   : The localization rate of cemented carbide coated inserts increased from 64.4% in 2019 to 78.3% in 2022 [4]

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Zhongwu Hi-Tech has built a multi-layered technical barrier with an R&D expense ratio of approximately

(including both expensed and capitalized R&D calibers):

1. Resource Barrier
   : Backed by China Minmetals Group + entrusted tungsten ore resources
2. Technical Barrier
   : Core technologies such as ultrafine-grained cemented carbide and photovoltaic tungsten wires
3. Patent Barrier
   : Over 1,500 valid patents + authority to formulate industry standards
4. Production Capacity Barrier
   : World’s largest cemented carbide production capacity + high-end CNC insert production capacity
5. Certification Barrier
   : TSMC 3nm process certification, aerospace general contracting qualification

This three-in-one competitive pattern of “resources + technology + market” enables Zhongwu Hi-Tech to occupy an irreplaceable strategic position in the high-end manufacturing field.

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[1] Caifu Hao - Zhongwu Hi-Tech: Leveraging Full Industrial Chain Layout, Technical Barriers and Resource Advantages (October 29, 2025)
[2] Huayuan Securities - In-Depth Report on Zhongwu Hi-Tech (000657.SZ) (April 2024)
[3] Guoyuan Securities - In-Depth Report on Zhongwu Hi-Tech: From Mines to Intelligent Manufacturing (April 2025)
[4] LeadLeo - 2024 Overview of China’s Tungsten Metal Industry (October 2024)
[5] Huafu Securities - In-Depth Research on Zhongwu Hi-Tech (000657.SZ) (August 2023)
[6] China Securities Journal - Zhongwu Hi-Tech: Building a World-Class Tungsten Industry Group with ESG as Wings (December 2025)