Frost & Sullivan in collaboration with LeadLeo Research has released the 'White Paper on Industry Trends in China for the Next 50 Years'

Development dilemmas of traditional chips

Intelligent chips typically refer to chips that have been designed with acceleration for artificial intelligence algorithms. GPUs, FPGAs, and ASICs continue the legacy von Neumann architecture, where storage and computation are separated spatially. Each time a computer performs an operation, it needs to repeatedly call between the CPU and memory areas. Frequent data exchanges lead to low efficiency in processing massive information and high power consumption, which could reach an architectural bottleneck within ten years.

Brain-inspired chips represent the ten-year trend in chip development

Neuromorphic chips mimic the neural synaptic transmission structure of the human brain in architecture. Numerous processors are similar to neurons, and communication systems are akin to nerve fibers. Based on the combination of microelectronics technology and new neural morphological devices, they have broken through the bottleneck of von Neumann architecture, achieving deep integration of storage and computation, significantly enhancing computing performance, increasing integration, and reducing energy consumption. Compared to traditional chips, neuromorphic chips have clear advantages in terms of power consumption and integration, and have very broad application prospects in the post-Moore era.

The report suggests that the current development trend at the technology level is:

1. The model compression implementation algorithm enables lightweight deployment and low-cost setup, supporting algorithm embedding into terminal systems;

2. Cloud-edge-end collaborative computing will replace centralized analysis as the mainstream choice for intelligentization in the future;

3. Not only will intelligent voice and computer vision be combined, but various applications of artificial intelligence are not independent of each other. In the future, artificial intelligence will receive and process sensory information from hearing, vision, touch, and smell simultaneously like the human brain. Multimodal integration will elevate the intelligence level of artificial intelligence;

4. Matthew Effect: Artificial intelligence algorithms continue to gain data and spread across human society with the support of computing power and application scenarios. Internet giants, leveraging their computational power and dominant position in applications, will become increasingly powerful in the field of artificial intelligence.

The report points out that high-tech fields such as financial services, telecommunications, automotive assembly, and energy are currently where artificial intelligence (AI) applications are most widespread and leading, driving rapid development of related application-layer industries in the AI industry. The commercial application of AI in fields such as transportation, healthcare, finance, and security is accelerating, and with it, AI has a large-scale high-quality user base, bringing significant space for the intelligent transformation of other related industries.

The report points out that China's manufacturing industry is at a critical period of transitioning between old and new drivers. This is reflected in several aspects, including the insufficient level of Made in China, the lack of momentum for digital transformation in manufacturing, the relatively low proportion of R&D investment in technology, and the dependence on international advanced technologies for core technologies and equipment. China's manufacturing industry urgently needs intelligent upgrading and green transformation.

Intelligent manufacturing redefines the manufacturing system. The traditional manufacturing system is linear, analyzing consumer demand, developing products and manufacturing according to pain points, and finally placing the products on the market for marketing activities. Each link has limited interaction, mostly in a single transmission mode, with slow information feedback, resulting in a relatively inefficient production system. Under intelligent manufacturing, the manufacturing system undergoes significant changes, shifting from a linear process to an interactive loop structure among various links, transforming into integrated organizational units. Information is fed back in real-time and has a two-way relationship with processes and R&D, making it more conducive for production R&D departments to define product characteristics based on consumer demand, achieving 'targeted treatment'.

Against the backdrop of China's vigorous efforts to achieve the 'dual carbon' goals, China's manufacturing industry, based on its large industrial activities, will move towards green industry. Green industry can minimize the production of carbon emissions from industrial economic activities by rationally and fully utilizing various resources and technologies. The production and manufacturing of renewable and continuously utilized energy sources such as wind power, photovoltaic power, new energy vehicles, and smart grids will become another trend in industrial activities in the future. At the same time, clean energy, as an energy source that does not emit pollutants and can be directly used in production activities, is another key to reducing carbon emissions from industrial activities. Renewable clean energy can be replenished after consumption.

The report points out that 5G has advantages such as high connection rates, ultra-low network latency, massive terminal access, and high reliability. In the future, 5G is expected to replace factory IoT communications (including short-range communication technologies such as Wi-Fi and Bluetooth) and become a channel for accelerating information transmission. Through extensive connectivity, 5G will enable high-speed access of a large number of sensors and devices to factories, serving as the carrier for connections in smart manufacturing plants.

Intelligent manufacturing is the carrier and source of industrial big data, with data generated by information technology and automation systems in all aspects of production and manufacturing constituting the main body of industrial big data. Moreover, intelligent manufacturing is also the ultimate application scenario and goal of industrial big data products. Industrial big data describes the real conditions at each stage of intelligent manufacturing production, providing valuable data resources for perception, understanding, analysis, and optimization of manufacturing. It is the foundation for realizing intelligent manufacturing. Therefore, industrial big data and intelligent manufacturing are inseparable.

Intelligence is of great significance to industrial enterprises. Artificial intelligence is an essential part of intelligent manufacturing, which can promote the refinement of division of labor among enterprises and establish new ecological relationships between them. Intelligence can optimize the allocation of social resources, enhance enterprises' management capabilities, and reduce problems caused by poor management.

The report suggests that with the popularization of digital twin technology, entities in different physical spaces can be mapped and reconstructed 'fully' in the same information space, forming digital twins with sensing, analysis, decision-making, and execution capabilities. This enables the interaction and integration of physical and information spaces on a broader scale and at a deeper level, possessing self-awareness, self-learning, self-decision-making, self-execution, and adaptive capabilities. In the context of Industry 5.0, real-time responsive distributed supply chains integrate machine maintenance and quality control into factory operations, producing semi-finished products in the form of large-scale global robot factories and completing the final steps at local factories to produce highly customized products that can interact with users. Unlike the goal of Industry 4.0 automation production, which seeks to replace human labor, Industry 5.0 requires experienced experts to improve production efficiency throughout the entire production cycle, becoming a powerful supplement to limited intelligent operations.

Against the backdrop of China's vigorous efforts to achieve the 'dual carbon' goal, China's manufacturing industry, based on its large industrial activities, will move towards green manufacturing.Green industry can minimize carbon emissions (such as industrial waste gas and industrial wastewater) through rational and full utilization of various resources and technologies, while also reducing harm to the ecological environment and human health during industrial activities (for example, adopting environmentally friendly and low-carbon methods in the production and manufacturing processes of industries such as steel, electricity, and metals, using digital technology to optimize environmental protection processes and improve energy efficiency while increasing production capacity).

In addition, the report points out that under the trend of global carbon neutrality, various developed and developing countries are adopting green and sustainable development strategies in the industrial sector to reduce environmental damage and enhance their voice in international resource utilization. China has also successively introduced policies related to environmental protection, intelligent manufacturing, low carbon, and ecological civilization construction since 2015, indicating that the demand for enterprises specializing in treating industrial wastewater and waste gas will increase in the future. At the same time, the environmental protection industry combined with advanced artificial intelligence technology will also enter a period of rise. Overall, China's manufacturing industry will enter an era of green industry in the future.

In terms of clean energy, the production and manufacturing of renewable and continuously utilized energy sources such as wind power generation, photovoltaic power generation, new energy vehicles, and smart grids will become one of the future trends in industrial activities. At the same time, clean energy, as an energy source that does not emit pollutants and can be directly used in production activities, is another key to reducing carbon emissions in industrial activities. Renewable clean energy can be replenished after consumption, including wind energy, bioenergy, hydropower, geothermal energy, hydrogen energy, and solar energy. Taking smart grids as an example, one of the differences between them and traditional grids is that smart grids can connect to clean energy sources, which can improve the overall operational efficiency and profitability of power assets.

At the same time, the report suggests that against the backdrop of favorable policies and subsidies for photovoltaic and wind power generation issued in China since 2017, the market scale of new energy power generation in China has also witnessed significant growth. Moreover, with the trend of technological updates and iterations in photovoltaic power generation systems such as heterojunction batteries and TOPCon batteries,Photovoltaic and wind power generation alternatives can effectively reduce carbon dioxide and other pollutants generated by coal combustion in thermal power generation. Therefore, the importance of clean energy in the power generation sector is becoming increasingly prominent.

The report points out that currently, cancer continues to be a major global health issue, with China ranking first in both the number of new cancer cases and deaths globally. Cancer patients bear a heavy disease burden and there is a huge unmet demand. This chapter will explore five major trends from the perspectives of epidemiology, tumor treatment, R&D approval, payment burden, and corporate development in China's oncology industry. On the other hand, this year's 'China Rare Diseases Definition Study Report 2021' defined rare diseases for the first time, which are 'diseases with a neonatal incidence of less than 10,000 per 10,000 births, prevalence of less than 10,000 per 10,000 people, and a number of patients of less than 140,000'. Under the premise of improving drug accessibility targets, rare diseases will receive more attention from all sectors of society.

The report suggests that the main methods of tumor treatment include surgery, radiotherapy, chemotherapy, targeted therapy, and immunotherapy. Treatment drugs are divided into chemical drugs and biologics, with biologics mainly consisting of monoclonal antibodies, bispecific antibodies, ADC drugs, cell therapy, gene therapy, and oncolytic virus drugs. Currently, immunotherapy, precision medicine, and integrated traditional Chinese and Western medicine are becoming new hotspots in tumor treatment.

Trend 1: Tumor immunotherapy revolutionizes cancer treatment outcomes, with broad industrial prospects ahead.Cell therapy is a treatment that uses living cells from patients or donors to replace damaged or diseased cells, stimulate the body's immune response, or promote regeneration. In recent years, there has been an increase in interest in cell medicine, with researchers exploring tumor immune evasion, metastasis, and drug resistance from the perspectives of cellular heterogeneity and evolution.

Trend 2: Precision Medicine, the future of next-generation sequencing in the field of oncology.Precision medicine is based on evidence-based medicine, combining cutting-edge technologies such as proteomics, transcriptomics, and metabolomics. It involves analyzing and studying large sample populations at the gene level to identify the causes of diseases and therapeutic targets. It provides a deeper understanding of disease classification for precise categorization of disease states, ultimately achieving the goal of personalized treatment. Precision medicine is the future direction of tumor treatment development. Hotspots in tumor precision medicine include MRD (molecular/mini residual disease), HRD (heterogeneous rearrangement defect), ctDNA (circulating tumor DNA), early tumor screening, and NGS (next-generation sequencing) applications.

Trend 3: Integrative Medicine, which combines traditional Chinese and Western medicine, plays an important role in treating tumors, especially during maintenance therapy and palliative care, where expert consensus has been reached.The treatment of malignant tumors with traditional Chinese medicine (TCM) new drugs can be divided into therapeutic drugs, adjuvant drugs, and symptomatic improvement drugs. TCM and modern medicine are organically integrated, overcoming the shortcomings of unclear material basis of TCM and single targets of Western medicine. At the same time, they combine the advantages of TCM's multi-molecular, multi-target, and multi-channel nature with the strong targeting capabilities of modern medicine, providing new approaches and strategies to overcome tumor resistance to treatment.

The report points out that China's drug R&D phase has evolved from the 1.0 model, which focused on imitation to innovation, to the 2.0 model of born innovation, and finally to the 3.0 model of open innovation. This model introduces R&D technologies, innovative projects, and R&D teams through mergers and acquisitions, thereby quickly entering international markets and achieving a parallel development of R&D innovation and internationalization. Chinese oncology pharmaceutical companies will develop in three major directions: product differentiation, business commercialization, and global internationalization.

Differentiation:Product differentiation is the foundation for the survival of local innovative companies. The transition from Me-too/Me-better to Best-in-class, ultimately leading to the development of First-in-class drugs, is an important pathway for China to transform from a major pharmaceutical country into a strong pharmaceutical nation;

Commercialization:Chinese pharmaceutical companies are accelerating their License-in R&D model, bypassing the lengthy process of early internal development. They quickly integrate external collaborative or complementary resources to bring product lines that align with the overall strategic planning to the company as soon as possible, making up for the shortcomings in the company's product line;

Internationalization:The number of cases of Chinese innovative drugs being licensed out is rapidly climbing. As domestic pharmaceutical companies continuously improve their innovation and R&D capabilities, foreign-funded enterprises are gradually recognizing the innovative strength of domestic firms, and licensing cooperation has become one of the common ways for Chinese innovative drugs to 'go global'.

Recently, the 'China Rare Diseases Definition Research Report 2021' proposed for the first time the '2021 Edition of China's Rare Diseases Definitions', which include 'diseases with a neonatal incidence of less than 10,000 cases per 10,000 live births, prevalence of less than 10,000 cases per 10,000 people, and number of patients less than 140,000'. In May 2018, the National Health Commission and four other ministries jointly issued the 'First Batch of Rare Diseases Catalogue', which included a total of 121 (or categories) of rare diseases.

The report points out that, to improve the accessibility of rare disease drugs,In drug research and developmentRare diseases are gradually becoming a new hot spot in pharmaceutical development. The number of orphan drug designations granted by the US FDA and the number of approved orphan drug indications are increasing year by year, with pharmaceutical companies at home and abroad joining the ranks of orphan drug research and development.

Medication securityRare disease treatment drugs that are available globally can be categorized into 'available overseas but not domestically' and 'off-label use'. In the context of limited accessibility to rare disease drugs, doctors and patients can only try 'off-label use', 'new uses of old drugs', and 'experimental therapies'. The release of the first batch of rare disease listings in 2018 was a pioneering effort in rare disease diagnosis, treatment, and drug research and development innovation in China. With the upcoming update of the second batch of rare disease listings, it will further promote the medication security for Chinese rare disease patients.

Medical insurance paymentIn recent years, practice has shown that policies will continue to guide the establishment and improvement of a national-level government-led '1+N' multi-party co-payment mechanism for rare disease medication. '1' refers to continuing to take the lead in leveraging the role of national basic medical care, exploring national coordination of medical insurance funds and establishing a national special fund for rare diseases; 'N' refers to multi-party participation, such as major illness insurance, medical assistance, government-sponsored commercial insurance, charitable support, mutual aid, and a certain proportion of individual payment.

The report points out that, looking at the development history of consumption formats in China, the consumption formats have gone through five stages: the era of necessity goods, the era of durable goods consumption, the traditional consumption era, the internet consumption era, and the new consumption era.

Looking at the evolution of consumer formats, the innovation of the consumer market is inseparable from technological progress. With the start and advancement of the technology industry cycle, more innovations in consumer goods and channels will be brought about, opening up broad space for technology to empower new consumer consumption. Artificial intelligence is involved in the R&D and production processes of the consumer industry, with the production side using AI to help coordinate the entire life cycle of production. Currently, AI provides solutions for enterprises in the production process such as visual inspection, automated control, intelligent calibration, and analysis of root causes of problems.

With the application of artificial intelligence in the production process of the consumer industry, the intelligentization of high-end products will be one of the trends in the future consumer industry. As a result, high-end products possess stronger perception, flexibility, and collaboration capabilities.

The report indicates that in the future, the middle-income and above group will be the main driving force for growth in China's consumer market. It is estimated that by 2030, the proportion of Chinese middle- to high-income consumers among the resident population could reach over 60%, driving major urban consumption.

For the growing consumer goods market among high-income groups, the change in income population structure will reshape China's consumer goods market. The mass consumer goods market and the quality consumer goods market will maintain a relatively low growth rate. On the contrary, some high-end products and services markets, such as luxury goods, high-end automobiles, and high-end beauty care, will see development opportunities in the future. Moreover, due to their current low proportion in the consumer market, some service-oriented consumer goods still hold great potential for development in the future.

The report points out that by emphasizing the application of big data and artificial intelligence at the consumer end, new retail operation models can be realized. In the digital transformation of new retail operations, the application of virtual reality technology has improved consumers' decision-making experience. In the future, the retail industry will take digital intelligence as an opportunity point for transformation and upgrading.

The construction of digital intelligence is divided into three development paths: digitization, onlineization, and intelligence. Each link in the supply chain has been digitized, with data stored and transported and loaded into online systems. The online process facilitates retail enterprises in management and operations. Finally, the digital intelligence system connects data through artificial intelligence technology, helping businesses make decisions while achieving decision intelligence.

The digital intelligence era is a market-oriented organizational form and one of the transformative trends in the development of consumer markets. Changes in user needs will accelerate the digitalization process. At the same time, retail enterprises are implementing digital intelligence transformations, using data operations to solve business problems, reduce costs and increase efficiency, and improve the level of refined and intelligent operations.

In 2020, China's urbanization rate had reached 63.8%, entering the middle and late stages of urban development. China's urbanization will shift from incremental construction to structural adjustment of existing stock. From the perspective of urban population mobility, the population continues to gather in a few cities, with the growth rate of population inflow slowing in first- and second-tier cities, while population continues to flow out of third- and fourth-tier cities, gradually concentrating in the core urban agglomerations.

In the future, the vast majority of China's consumption growth will still come from cities. However, consumption is not limited to large cities; medium-sized cities have greater potential for growth and development compared to larger ones.According to geographical location and industrial development, China has different core urban clusters, and enterprises can make corresponding strategic adjustments based on different urban clusters in the future.

In order to promote China's low-carbon green development and address global climate change,In September 2020, Chinese President Xi Jinping proposed 'China will increase its national autonomous contribution efforts, adopt more powerful policies and measures, strive to peak carbon dioxide emissions before 2030, and work towards achieving carbon neutrality by 2060', and officially submitted China's emission reduction schedule to the world.

Carbon peak refers to the process where carbon emissions reach a maximum level and then stop growing, gradually declining. Carbon neutrality means that within a specific period, the future 'carbon emissions' of each entity are equal to their 'carbon absorption.' Only by achieving the goal of carbon peak can China proceed with carbon neutrality actions. The earlier the former is achieved, the more conducive it is to advancing the latter process. The longer the transition period left for carbon neutrality, the less pressure there will be on emission reduction efforts, and the smoother the economic impact will be.

The report suggests that electricity, industry, and transportation are the three sectors with the largest carbon emissions in China, indicating that over the next 40-50 years, China will focus on reforming energy conservation and emission reduction efforts in these three areas. This has also given rise to new opportunities for the development of low-carbon or zero-carbon technologies. According to the 'Zero Carbon China & Green Investment Blue Book' released by the China Investment Association, carbon neutrality will bring about 70 trillion yuan in green investment.

Such massive investment in green and low-carbon industries will put China's new energy industry (such as photovoltaics, wind power, energy storage, and hydrogen) on a fast track of rapid growth. At the same time, it will also drive industrial upgrading in China's industries (such as steel), research and development of low-carbon technologies, and lead to a new pattern in the transportation sector where new energy vehicles gradually replace traditional fuel vehicles. In addition, forestry carbon sinks and CCUS technologies will also see significant development to enhance carbon absorption capacity and ensure the smooth achievement of China's dual-carbon goals.

CCUS (Carbon Capture, Utilization and Storage) refers to the process of capturing carbon dioxide from industrial production processes, then reinjecting it into new industrial production for recycling. CCUS technology mainly includes three stages: carbon capture, utilization, and storage. Carbon capture is the process of extracting carbon dioxide from the mixed gases emitted by industrial production using carbon capture technology. The captured and compressed carbon dioxide is transported through pipelines, tank trucks, gas transmission ships, and other methods, and finally injected into underground rock layers for storage. The treated carbon dioxide not only does not harm the environment but can also be effectively reused in geology, chemistry, production, and other fields.

According to IEA analysis, to achieve the goal of keeping global temperature rise within 2°C as stipulated in the Paris Agreement, global CCS technology capture capacity needs to reach 7.6 billion tons by 2050. Although CCS technology has been continuously developing globally over the past decade or so, China's CCS technology is still in its infancy, with broad room for development in the future. The investment amount for CCS projects generally ranges from several hundred million to billions of yuan. China's current low-concentration carbon dioxide capture cost is 300-900 yuan per ton. In the CCS capture, utilization, and storage stages, capture is the most energy-consuming and costly link. China has not yet formed corresponding economic incentives or compensation mechanisms, lacking effective cross-enterprise coordination and cooperation, which makes it difficult for most CCS projects to achieve break-even and faces strong business model constraints.

The report points out that CCUS technology is an important lever for China to achieve its carbon neutrality goals.At present, the development of CCUS technology in China lags far behind expectations. In the future, China will construct and improve CCUS-related infrastructure on a large scale to reduce the transportation costs of carbon dioxide; promote large-scale pilot demonstration projects, form CCUS industrial clusters, and facilitate the maturity and commercial application of research and demonstration technologies; at the same time, relevant departments may formulate CCUS policy guidelines and incentive measures that suit China's national conditions, incorporate CCUS into the carbon emission trading market, establish emission reduction pricing mechanisms, mobilize the active participation of enterprises, and accelerate the realization of a virtuous cycle where enterprises achieve low costs and high financing.

The report suggests that carbon finance, through market supply and demand relationships, utilizes capital to regulate carbon resources in human production and business activities. This includes adjusting and transforming the production capacity and technology of high-carbon industries, thereby guiding funds and technology towards the development of low-carbon industries. This achieves the goal of carbon emission reduction for enterprises and the completion of carbon neutrality targets.Since carbon is a product of human production and business activities, carbon finance must start from these activities in regulating carbon resources. It affects the production capacity of enterprises in various industries through capital power, thereby impacting the output and efficiency of the entire national real economy.

The carbon trading market is the foundation of carbon finance. The carbon emission rights trading market refers to a system that allows carbon emission rights to be bought and sold as commodities on the market. In this market, only products related to carbon emissions rights are allowed to be traded, such as carbon allowances, carbon financial derivatives, etc.The principle of the carbon emission trading market is that the government includes enterprises that have reached a certain scale of carbon emissions in carbon emission management and allocates annual carbon emission allowances to these enterprises under certain rules. If an enterprise runs out of its allocated allowances, it needs to purchase additional carbon emission rights in the carbon emission trading market; if an enterprise has achieved significant results in energy conservation and emission reduction, the surplus part of the allocated carbon allowances can be sold in the carbon market to generate income.

The main entities in the carbon emission trading market are divided into three categories: central governments, local governments, and emission control enterprises.The central government is responsible for formulating policies for the carbon market, including the development of quota allocation plans, verification of technical specifications, and emission reporting management methods; local governments conduct data validation, submission, and verification, implement the distribution plans formulated by the central government, supervise and collect compliance payments from enterprises; emission control enterprises adopt their own emission reduction methods based on emission reduction costs and quota prices, or purchase quotas from the market, regularly report emission data, undergo verification and validation, and regularly pay for their quotas according to actual emissions.

In July 2021, China's carbon emission trading market was officially established and is currently in its initial stages.The carbon trading system forms an incentive and restraint mechanism for enterprises, guiding technology and capital towards low-carbon development, phasing out backward production capacity, and promoting enterprise transformation and upgrading.The report points out that enterprises with low emission demand can sell their surplus carbon emission allowances to stabilize production costs or even generate profits through trading. This directly promotes enterprises' determination and efforts to reduce carbon emissions. Moreover, through technological innovation, it accelerates the upgrading of industrial structure and further enables enterprises to develop continuously towards the goal of green and low-carbon development.In the future, China will further improve its carbon trading system and become the world's largest carbon trading market.