1. Aerospace Industry Overview

1.1 Industry Definition

According to the National Economic Industry Classification (GB/T 4754-2017), the aerospace industry belongs to the special equipment manufacturing industry in the manufacturing industry, mainly including aircraft manufacturing, spacecraft manufacturing, rocket and engine manufacturing, etc. Among them, aircraft manufacturing refers to the equipment that provides manned or non-manned aircraft for navigation activities in the earth's atmosphere, including trunk aircraft, regional aircraft, general-purpose aircraft, helicopters, drones, etc.; spacecraft manufacturing refers to the provision of manned or Non-manned aircraft equipment for navigation activities outside the earth's atmosphere, including satellites, spacecraft, carrier rockets, etc; rocket and engine manufacturing refers to the equipment provided for the design, development, production and testing of rockets and their engines.

1.2 development background

The aerospace industry is a strategic industry that maintains national security and promotes economic and social development. It has the characteristics of high technology content, high added value, and high input-output ratio. In recent years, driven by policy support and market demand, China has accelerated the process of transformation, upgrading and localization of the aerospace industry, and has made a series of major achievements. Mainly in the following aspects:

In terms of national defense construction, my country has successfully developed a variety of advanced military aircraft, such as the J-20 stealth fighter, the Y-20 large transport aircraft, and the J-10C multi-purpose fighter, which have improved the combat capability and deterrence of our air force. At the same time, my country has also accelerated the development and production of rockets and their engines, such as the Long March 5 carrier rocket and the Long March 8 carrier rocket, which have provided strong support for my country's deep space exploration and space station construction.

In the civil field, my country has successfully realized the commercial operation of the independent development of the civil jet regional airliner ARJ21 and the large passenger trunk aircraft C919, breaking the foreign monopoly and enhancing the international competitiveness of my country's civil aviation industry. At the same time, my country has also strengthened the research and development and production of general-purpose aircraft and drones, such as AG600 amphibious aircraft, Rainbow series drones, etc., which provide effective tools for my country to carry out emergency rescue, disaster prevention, agriculture, forestry, animal husbandry and fishery.

In the aerospace field, my country has successfully implemented a number of major space missions such as Chang'e -5, Tianwen -1, and Tianzhou -2, and achieved historic breakthroughs in lunar sampling and return, Mars exploration, and space station construction, demonstrating my country's aerospace industry. Innovative ability and exploration spirit. At the same time, my country is also actively promoting the development of commercial aerospace. Many private enterprises such as Interstellar Glory and Blue Arrow Aerospace have successfully launched launch vehicles and satellites, providing new impetus for the diversification and marketization of my country's aerospace industry.

1.3 development status

According to data from Shangpu Consulting Group, in 2022, China's aerospace industry will achieve revenue of 1.3 trillion billion yuan, an increase of 8.3 percent over the same period last year; total profits of 120 billion billion yuan, an increase of 16.6 percent over the same period last year; and export delivery value of 230 billion billion yuan, an increase of 13.3 percent over the same period last year. In terms of segments, aircraft manufacturing accounted for the highest share of revenue at 57.7 per cent, followed by aero-engine manufacturing at 19.2 per cent, aviation parts manufacturing at 13.8 per cent, and finally airborne equipment and systems manufacturing at 9.3 per cent.

From the perspective of market demand, my country's aerospace industry is driven by both military and civilian needs. In terms of military use, with the acceleration of my country's national defense modernization and the deepening of the military technological revolution, my country's demand for advanced military aircraft, rockets and their engines is increasing. In terms of civil use, with my country's economic and social development and the improvement of people's living standards, my country's demand for civil aircraft, general-purpose aircraft, drones and other equipment is also expanding. At the same time, inUnder the guidance of the "dual carbon" goal, my country's demand for green aviation technologies such as new energy aircraft and low-carbon flight is also increasing.

From the perspective of competition pattern, China's aerospace industry shows the characteristics of high degree of autonomy in military field and low degree of autonomy in civil field. In the military field, AVIC, as my country's largest military aircraft manufacturer, has a monopoly advantage in multiple market segments such as fighters, trainers, and helicopters, and continues to introduce new models to meet different combat needs. In the civil field, Commercial Aircraft Corporation of China (hereinafter referred to as COMAC), as my country's largest civil aircraft manufacturer, competes with foreign giants such as Boeing and Airbus in the regional aircraft and mainline aircraft markets, and is in market share and technology. Gradually narrow the gap in level. In addition, in the general aircraft and drone market, there are also many private enterprises in my country participating in the competition, such as AVIC Hafei, AVIC Changfei, AVIC Jiujiang, AVIC Hongdu, etc., which have strong strength in the field of general aircraft., And Star Glory, Blue Arrow Aerospace, Zero One Space, etc. have high innovation capabilities in the field of drones.

From the perspective of the localization process, my country's aerospace industry has continuously improved its independent research and development and production capacity in raw materials, parts, engines, equipment systems, etc., but there is still a certain technical and quality gap. In terms of raw materials, my country has made breakthroughs in the research and development and production of key materials such as carbon fiber and high-temperature alloys, but the proportion of dependence on imports is still high, and there is a certain gap with the advanced level of foreign countries. In terms of parts and components, my country has continuously improved the production capacity and product quality of fuselage structural parts, spoilers, rudders and other components, but the technical level of shock absorbers, tires and other components still needs to be improved. In terms of engines, China has realized the localization of some models in the field of military aviation development, and is expected to realize the localization of some models in the field of civil aviation development, but there is still a big gap with the advanced level of foreign countries. In terms of equipment and systems, my country has strong independent research and development and production capabilities in the field of military airborne equipment and systems, and is gradually improving the level of autonomy in the field of civil airborne equipment and systems, but it is still in key areas such as avionics and flight control. There are technical bottlenecks.

Market Demand Analysis of 2. Aerospace Industry

2.1 market size

In the next 20 years, the Chinese aviation market will receive 9084 new aircraft, worth about $1.39 trillion, including 6295 single-aisle jetliners. By 2040, China's fleet will reach 9957 aircraft, making it the largest single aviation market in the world. China's civil aviation market has a large scale and strong potential.

The total number of military aircraft in service in our country is 3285, which is still far from the 13246 aircraft of the United States and the 4173 aircraft of Russia. Among them, the number of fighter aircraft is 1581, accounting for 48% of the total number of military aircraft. The number of trainers, helicopters, transport aircraft, drones and other models also needs to be improved. Expected by the end of 2023China's military aircraft market demand will reachAbout 2200 planes, of which the demand for fighter planes is about 900, the demand for trainer planes is about 450, the demand for helicopters is about 700, the demand for transport planes is about 120, and the demand for unmanned aerial vehicles is about 130. According to the average unit price, China's military aircraft market size will reach 1.8 trillion yuan. Among them, the fighter market is about 1.1 trillion yuan, the trainer market is about 150 billion yuan, the helicopter market is about 210 billion yuan, the transport aircraft market is about 150 billion yuan, and the UAV market is about 40 billion yuan.

In the next five years, China Aerospace will implement major engineering tasks such as the fourth phase of the lunar exploration project, the planetary exploration project, and the manned space station project to promote the upgrading of the space transportation system and accelerate the construction of a space power. expectedBy the end of 2023China's spacecraft market demand will exceed1200, of which the demand for satellites is about 900, the demand for spacecraft is about 150, and the demand for launch vehicles is about 150. According to the average unit price, the size of China's spacecraft market will reach 4.5 trillion billion yuan. Among them, the satellite market size is about 3 trillion yuan, the spacecraft market size is about 900 billion yuan, and the launch vehicle market size is about 150 billion yuan.

Based on the above data, the market size of China's aerospace industry is expected to reach 893.3 billion billion yuan in 2023, an increase of 7.11 percent over the same period last year. Among them, the civil aircraft market accounted for the highest proportion, reaching 24.5 percent, followed by the military aircraft market size, accounting for 22.9 percent, and the spacecraft market size, accounting for 52.6 percent. The growth of the civil aircraft market is mainly driven by the development of the domestic economy and the policy of general aviation, the growth of the military aircraft market is mainly driven by the demand for national defense construction and technological innovation, and the growth of the spacecraft market is mainly driven by the vigorous development of commercial aerospace and the expansion of international cooperation.

2.2 growth rate

In 2022, the average annual growth rate of China's civil aircraft market demand will reach 5.5 percent, of which the average annual growth rate of regional aircraft market demand will reach 4 percent, and the average annual growth rate of trunk aircraft market demand will reach 5.6 percent. In the next 20 years, China's civil aircraft fleet will more than double to 9600. Among them, the demand for single-aisle jetliners will dominate, which is expected to reach 6295. In this context, the average annual growth rate of China's civil aircraft market is expected to be higher than the global average. The domestic civil aircraft represented by the C919 large passenger aircraft will effectively promote the development of my country's aviation industry and high-end manufacturing industry, and has broad market prospects.

In 2022, China's military aircraft market demand will maintain a growth trend. Affected by the international situation and geopolitics, the defense expenditure budget will be 1450.45 billion yuan. Among them, the market demand for fighter jets will be dominated by three and a half generations and four generations of aircraft, with an average annual growth rate of 8%; the market demand for trainers will be dominated by J-10B and J-15T, with an average annual growth rate of 6%; the market demand for helicopters will be dominated by armed helicopters, with an average annual growth rate of 7%; the market demand for transport aircraft will be dominated by Yun-20 Yun-9, with an average annual growth rate of 9%; the market demand for drones is dominated by attack drones, with an average annual growth rate of 12%.

China's spacecraft market has maintained a rapid growth trend, and the average annual growth rate is expected to reach 11.26 percent in the next five years. Satellites, spacecraft and launch vehicles are the three pillars of the market, which are expected to grow at an average annual rate of 7%, 10% and 9%, respectively. In 2023, China's space industry will carry out nearly 70 launch missions, setting a new record.

Based on the above data, the average annual growth rate of market demand in China's aerospace industry reached 6.5 per cent, higher than the global average of 5.6 per cent.

2.3 competitive landscape

The competitive landscape of China's aviation equipment industry presents the following characteristics:

Industry concentration is high. Because the aviation equipment industry has the characteristics of high technology threshold, high capital investment and high safety requirements, the number of enterprises in the industry is small, and most of them are state-owned enterprises or military enterprises. China's largest aviation equipment group is AVIC, and its subsidiaries include AVIC Xifei, AVIC Shenfei and Zhongzhi. In 2022, these three companies ranked among the top three in the operating income of listed companies in China's aviation equipment industry, with a total income of 116.355 billion billion yuan, accounting for 53.1 of the entire industry's revenue. Other major aviation equipment companies include COMAC, AVIC Power, Hongdu Aviation and AVIC Heavy Machinery.

Industry differentiation is obvious. Due to the large differences in technical difficulty, production cycle, customer group, etc. in different segments, the degree of competition among enterprises in the industry is different. Generally speaking, the degree of competition in the field of complete machine manufacturing is relatively low, mainly monopolized by AVIC and COMAC, while the degree of competition in the fields of parts, engines, equipment systems, etc. is relatively high, and there are many companies participating, and foreign companies The competitive pressure is greater.

Low degree of internationalization of the industry. As the aviation equipment industry involves national security and strategic interests, the international cooperation of enterprises in the industry is more restricted, especially in the military field. At the same time, due to the technical level and product quality of China's aviation equipment industry and foreign advanced level there is a certain gap, the international market share of enterprises in the industry is low, mainly dependent on domestic market demand.

2.4 localization process

China's aviation equipment industry localization process presents the following characteristics:

Strong demand for localization. As the aviation equipment industry is related to national security and strategic interests, China's demand for the localization of aviation equipment is very strong, especially in the military field. At the same time, due to the technical level and product quality of China's aviation equipment industry and foreign advanced level there is a certain gap, China's demand for the localization of aviation equipment is also very urgent, in order to enhance the independent innovation ability and international competitiveness of China's aviation equipment.

The process of localization was accelerated. Driven by policy support and market demand, the localization process of China's aviation equipment industry has been accelerating and a series of major achievements have been made. In the field of complete aircraft manufacturing, my country has successfully realized the commercial operation of independently developed civil jet regional airliner ARJ21 and passenger trunk large aircraft C919. In the field of military aircraft, it has also successfully developed a variety of advanced models, such as the J-20 stealth fighter, Yun-20 large transport aircraft, etc. In the field of engine manufacturing, China has realized the localization of some models in the field of military aviation development, and is also expected to realize the localization of some models in the field of civil aviation development, such as CJ1000. In the field of equipment and system manufacturing, my country has strong independent research and development and production capabilities in the field of military airborne equipment and systems, and is gradually improving the level of autonomy in the field of civilian airborne equipment and systems, such as Beidou navigation systems and flight control systems. In the field of parts manufacturing, my country has continuously improved the production capacity and product quality of fuselage structural parts, spoilers, rudders and other parts, but the technical level of shock absorbers, tires and other parts still needs to be improved.

Difficulties in localization are prominent. Although the localization process of China's aviation equipment industry is accelerating, it still faces some difficulties and challenges. First, the supply of raw materials is insufficient. Due to the difficulty of R & D and production of key materials such as carbon fiber and high-temperature alloy, China's independent ability in this respect is not strong, and the proportion of relying on imports is still high, and there is a certain gap with the advanced level of foreign countries. Two is the lack of core technology. As the aviation equipment industry involves multiple fields and multiple levels of technology, my country still has bottlenecks in some core technologies, such as high-temperature alloy blades for aero-engines, avionics for airborne equipment, and shock absorbers for parts. Third, the quality standards are different. Due to the difference between the quality standards of China's aviation equipment industry and international standards, the recognition and acceptance of China's aviation equipment in the international market is low, which affects the export and international cooperation of China's aviation equipment.

Development Trend of Aerospace Industry in 3.

3.1 key opportunities

National policy support. InUnder the guidance of the "14th Five-Year Plan" and the "Double Carbon" goal, my country will continue to increase policy support for the aerospace industry, including accelerating military-civilian integration, promoting new energy aircraft, and promoting commercial aerospace, so as to provide for the development of the industry. Favorable environment and conditions.

Market demand growth. With the development of my country's economy and society and the improvement of people's living standards, my country's demand for civil aircraft, general-purpose aircraft, drones and other equipment will continue to expand. At the same time, under the need to maintain national security and strategic interests, my country's demand for military aircraft, rockets and their engines will continue to increase. In addition, inDriven by the "dual carbon" goal, my country's demand for green aviation technologies such as new energy aircraft and low-carbon flight will also increase.

Technological innovation breakthrough. With China's continuous exploration and innovation in the fields of artificial intelligence, 3D printing, new materials and other new technologies, China's aerospace industry is expected to achieve breakthroughs and applications of some key technologies, improve the performance and quality of China's aviation equipment, and narrow the gap with foreign advanced levels.

3.2 Key Challenges

The pressure of international competition is great. Because the aerospace industry has the characteristics of high technology threshold, high capital investment, high safety requirements, etc., there are some foreign giants in the industry, such as Boeing, Airbus, GE, P & W, etc., which have an advantage in the technical level and market share. China's aviation equipment manufacturers pose greater competitive pressure.

Lack of domestic talent. As the aerospace industry involves many fields and levels of technology, it requires high quality and ability of talents, but there is a certain gap in this respect in our country.China's civil aircraft market needs aboutThere are 125000 pilots, 185000 maintenance personnel and 250000 flight attendants. At present, China's ability to train these talents is not enough to meet the market demand.

The domestic infrastructure is inadequate. Because the aerospace industry needs to rely on some infrastructure, such as airports, aviation control, space launch sites, etc., my country still has some shortcomings in this regard. As of November 2022, there will be 251 officially navigable civil airports in China, including 88 first-class airports (large aircraft such as B737-800 that can take off and land), accounting for 35.1 percent, compared with 75.6 percent of first-class airports in the United States. In addition, China's aviation control, space launch sites and other infrastructure also have some bottlenecks and obstacles, affecting the development of the aerospace industry.

4. development direction and suggestions

According to the above analysis, the development direction and suggestions of China's aerospace industry are as follows:

Strengthen policy guidance and support. The government should formulate and improve a series of policies and measures conducive to the development of the aerospace industry, including increasing financial investment, optimizing tax incentives, providing low-interest loans, encouraging military-civilian integration, and relaxing market access, so as to provide strong guarantee and incentive for the development of the industry.

Accelerate technological innovation and breakthroughs. Enterprises should increase R & D investment and innovation, and focus on conquering some key technologies and core technologies, such as high-temperature alloy blades for aero-engines, avionics for airborne equipment, shock absorbers for parts, etc., to improve the performance and quality of my country's aviation equipment, To narrow the gap with foreign advanced levels.

Strengthen personnel training and introduction. Universities and scientific research institutions should strengthen cooperation and exchanges with enterprises, cultivate and transport a group of high-quality and high-ability talents to meet the needs of industry development. At the same time, enterprises should also actively introduce some talents with international vision and experience to enhance their innovation ability and international competitiveness.

Accelerate infrastructure construction and improvement. The government and enterprises should speed up the construction and improvement of infrastructure such as airports, aviation control, and space launch sites to improve the operational efficiency and safety of the industry. At the same time, we should also strengthen the consideration of environmental protection, energy conservation and emission reduction, and promote the development of green aviation.

Champ Consulting Views

In summary, my country's aerospace industry is a strategic industry with high technology content, high added value, and high input-output ratio. It is of great significance in maintaining national security and promoting economic and social development. In recent years, driven by policy support and market demand, my country's aerospace industry has made a series of major achievements, but it still faces some challenges and difficulties. In the future, China should strengthen policy guidance and support, accelerate technological innovation and breakthrough, strengthen personnel training and introduction, accelerate infrastructure construction and improvement, so as to enhance the independent innovation ability and international competitiveness of China's aerospace industry, and contribute to the realization of the Chinese dream of the great rejuvenation of the Chinese nation.