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Investment highlights

Overview of China's Optical Fiber Sensing Market

Under the trend of intelligent manufacturing, the emergence of more automated production lines and existing engineering lifecycle monitoring will generate a large demand for real-time data detection in the future. Especially in fields such as smart cities, power systems, transportation infrastructure, oil and gas energy infrastructure, etc., a technical means that can provide efficient and stable digital asset monitoring will become an industry necessity. In addition, with China's continuous investment in infrastructure construction, in the context of 'big infrastructure', choosing an efficient and economical sensing strategy for asset condition health monitoring, detection, and operation and maintenance will become an important selection factor. This will bring broad development prospects to the optical fiber sensing market.

In 2021, the market scale of optical fiber sensing solutions in China reached 7.29 billion RMB, with a compound annual growth rate of 27.1% since 2017. It is predicted that by 2026, the market scale will reach 20.77 billion RMB. As the industry slowly transitions from a high-speed development stage to a mature one, it is expected that the compound annual growth rate between 2021 and 2026 will slow down compared to the period from 2017 to 2021, which was 23.3%.

Source: Frost & Sullivan report

Key driving factors of fiber optic sensing

• The vigorous development of the Chinese economy

In the past few decades, China's rapid economic development has surpassed Japan to become the world's second-largest economy. In the past five years, China's GDP increased from 7.46 trillion yuan in 2017 to 11.44 trillion yuan in 2021, with an annual compound growth rate maintained at around 8.3%. It is estimated that by 2027, China's GDP will maintain an annual compound growth rate of 5.9% to reach 152.1 trillion yuan. As fundamental and strategic industries of the national economy, the intelligent instrumentation and distributed fiber optic sensor industries play an important role in promoting industrial transformation and upgrading, developing strategic emerging industries, advancing modern national defense construction, ensuring and improving people's living standards. The vigorous development of China's economy will drive rapid growth in industries such as distributed fiber optic sensors and intelligent instruments.

• Industrial policy support

The distributed sensor and intelligent instrumentation industry is a fundamental and strategic industry of the national economy, which has always received strong support from national industrial policies. In 2017, the Ministry of Industry and Information Technology issued the 'Three-Year Action Guide for the Intelligent Sensor Industry', with the main tasks over the three years being to fill in the gaps in key design and manufacturing links and promote the upgrade of intelligent sensors towards mid- to high-end levels. The 'Public Notice on Demonstration Enterprises and Projects of the 'One-Stop' Application Plan for Key Industrial Strengthening Products, Technologies " in 2019" pointed out the important position of sensors in industry. The issuance of this series of policies will strongly promote the development of the distributed sensor and intelligent instrumentation industry and accelerate industrial upgrading.

• The positive and healthy development of downstream application fields drives the development of distributed optical fiber industries.

The petrochemical industry is a pillar industry of the national economy, characterized by a large total economic volume, a long industrial chain, a wide variety of products, and extensive related coverage. Since the 13th Five-Year Plan, China's petrochemical industry has achieved remarkable transformation and upgrading, with steadily improved economic operation quality and efficiency, and further consolidated its status as a major petrochemical country. In addition, with the development of new infrastructure in China, distributed optical fibers are playing an important role in land applications such as high-speed railways, highways, large bridges, underground pipelines, rail transit, oil and gas pipelines, as well as in marine observation, marine resource exploration, and maritime security fields. Benefiting from the huge construction demand in downstream application areas, the distributed optical fiber industry has developed rapidly.

• The maturity and practice of industry safety management systems have been deepened.

Work safety has always been the bottom line for survival and the basic requirement for development in the manufacturing industry. The 'Guiding Opinions on Promoting the High-quality Development of the Petrochemical Industry during the 14th Five-Year Plan Period' clearly states that it is necessary to consolidate the foundation for safe development. With the increasing scale of industrial production and infrastructure construction, how to ensure work safety has become a hot topic of concern. As the concept of safe development gradually takes root in people's hearts, in order to better prevent and control accidents, reduce the harm of accident disasters and natural disasters, government and enterprise safety investments will gradually increase. As the state and local governments successively introduce mandatory standards for work safety, the awareness of safety hazards has also objectively promoted market demand for distributed fire alarm systems, optical fiber online monitoring systems for power equipment, and optical fiber perimeter intrusion systems. The market space for the safety industry is vast, with great growth potential.

• The booming development of the Internet of Things

With the continuous upgrading and iteration of fiber optic sensor technology, distributed fiber optic sensors' high sensitivity, high precision, strong adaptability, and compact intelligence have made them indispensable in the field of the Internet of Things (IoT). The application scope of the IoT is very broad, covering multiple areas such as intelligent transportation, environmental protection, government work, public safety, smart cities, smart homes, environmental monitoring, industrial monitoring, food traceability, and more. The IoT applies new-generation information technology to various industries. Specifically, sensors are equipped on items such as power grids, railways, bridges, household appliances, and food. Various information is integrated through networks, and the central control system processes and feeds back information in real time to achieve more effective management of production and life. The trillion-level market scale of the IoT industry in the future provides a vast development space for IoT hardware devices like distributed fiber optics.