I. Analysis of the Upstream and Downstream Industrial Chains

The industrial chain of the wire and cable manufacturing industry consists of upstream raw material suppliers, wire and cable manufacturers, and downstream customers from various industries represented by the power industry.

Ii. Industry Characteristics

The wire and cable industry is mainly led by the national power department and its affiliated regional units in terms of grid construction and renovation investment, and it has certain cyclical, seasonal and regional characteristics.

(1) Cycle

The main demand for wires and cables comes from the state's investment in power grid construction and renovation, and the demand for power grid construction and renovation is mainly driven by the demand for electricity. Electricity demand, as an important indicator for measuring the development of the national economy, directly reflects the macroeconomic cycle.

Therefore, the overall revenue situation of the wire and cable industry is closely related to the macroeconomic cycle and is more sensitive to it.

(2) Seasonality

The downstream customers of the wire and cable industry are mainly represented by State Grid, power companies, power supply bureaus and their affiliated units in the power industry, as well as engineering commercial customers classified by projects, among which customers from the power industry are the majority. Therefore, the bidding time and project construction time of the power department will directly affect the revenue recognition time of wire and cable manufacturers.

Generally speaking, the power department conducts tenders in the second and third quarters of each year, wire and cable manufacturing enterprises deliver goods in the second half of the year, and large-scale engineering projects mainly start in the second half of the year. Therefore, the revenue of wire and cable manufacturing enterprises in the second half of the year is often better than that in the first half, and the industry shows a certain degree of seasonality.

(3) Regional

The main demand in the wire and cable industry comes from investment in power grid construction and renovation. The differences in power grid construction and renovation plans among various regions lead to regional characteristics in the market demand for wires and cables. From the perspective of industrial layout, the phenomenon of industrial clusters in China's wire and cable industry is quite obvious. The sales output is mainly concentrated in Jiangsu, Guangdong, Shandong, Zhejiang, Anhui and other places, with distinct regional characteristics.

Iii. Industry Development Trends

(1) Horizontal mergers and acquisitions within the industry to optimize the industry organizational structure

The large number of enterprises, small scale and low concentration in the industry have become the bottleneck restricting the healthy development of China's wire and cable industry. As a necessary measure to break through this bottleneck, "strengthening and expanding enterprises and optimizing the industrial organization structure" has been included in the key goals of the "12th Five-Year Plan" for the development of the wire and cable industry, laying a foundation for the medium and long-term development trend of China's wire and cable industry.

With the increase in processing costs, the deterioration of the sales environment and the fluctuation of copper prices, many small and medium-sized cable enterprises are facing production suspension or bankruptcy. Especially for enterprises that produce low-end products, their originally limited profit margins have been significantly compressed. On the other hand, leading enterprises in scale can effectively reduce costs, increase market share, leverage their financial advantages to promote new product development and horizontal mergers and acquisitions, and rely on brand and network advantages to ensure smooth marketing channels. Driven by the construction of industrial clusters, the horizontal mergers and reorganizations of enterprises in the industry will transform the wire and cable industry from decentralized manufacturing to centralized manufacturing, and the industry concentration will continue to increase. It is expected that by the end of the 12th Five-Year Plan, more than 10 large enterprises with sales exceeding 10 billion yuan and certain international competitiveness will be formed. Form a number of regional cable industrial clusters with distinct product features, strong professional manufacturing capabilities, complete supporting facilities and differentiated development. Form a number of small and medium-sized wire and cable manufacturing enterprises with professional production characteristics and regional competitive advantages.

(2) The industrial policy orientation is clear, and high-end cable products are in short supply

Following high-speed railways and expressways, the National Development and Reform Commission has planned "ultra-high voltage and ultra-high voltage power grids" as the next "high" target. According to the judgment of the State Grid Corporation of China on the overall development trend of China's power grid construction, it will shift from low voltage to high voltage - ultra-high voltage - ultra-high voltage. Change from a small cross-section to a large cross-section or an extra-large cross-section; From analog power grids to smart grids (fiber to the home), the construction of national urban and rural power grids and rural electrification projects will enter the second stage of a thorough transformation, upgrading from standardized requirements to higher demands of high precision, high standards and high technology.

(3) The application of high-voltage and ultra-high-voltage cables and energy-saving conductors is becoming increasingly widespread

From the perspective of the technological development trends of the wire and cable industry in major global economies, its development path and direction feature "large capacity, ultra-high voltage, oil-free, short-circuit resistance, high reliability, and maintenance-free". At present, with the continuous improvement of power transmission capacity, cross-linked cables of various voltage levels have gradually replaced traditional pure oil-paper insulated power cables, and the application of high-voltage and ultra-high-voltage cross-linked cables is becoming increasingly widespread.

Energy-saving conductors, as an important pilot project in the field of high-voltage and ultra-high-voltage transmission lines, will be fully promoted starting from 2014, with ordinary steel-cored aluminum stranded wires replacing energy-saving conductors. According to Document No. 99 of State Grid Corporation of China [2013], the research and operation of 30 pilot projects for energy-saving aluminum alloy conductors for transmission lines initiated in 2012 have achieved remarkable energy-saving effects. In 2013, 450 pilot projects for the use of aluminum alloy energy-saving conductors in 110-kilovolt, 220-kilovolt, 500-kilovolt and 1,000-kilovolt transmission lines will be carried out in 27 provinces across the country, with an output value of nearly 10 billion yuan. Low-cost, high-energy and highly efficient energy-saving wires will usher in a long golden development period.

(4) The market for special cables is gradually accelerating

Benefiting from the continuous improvement of the country's safety requirements for various types of projects, special cables characterized by "safe and green cables" have become a new growth point in the wire and cable industry, with broad market prospects. From the perspective of the industry landscape, the competitive environment for special cables is relatively mild, and there are few enterprises that own special cable products.