Equipment Manufacturing Sector Weekly Report: The Pivot to High-Quality Development in Photovoltaics and the Acceleration of Embodied AI

Date: January 12, 2026
Analysts: Zhao Xiaochuang (S1030511010004), Yang Guizhou (S1030524060001)
Research Assistant: Dong Liyanan
Source: Century Securities Research Institute

Executive Summary

The week of December 29, 2025, to January 9, 2026, marked a period of significant divergence and thematic rotation within China’s equipment manufacturing sector. The Mechanical Equipment, Power Equipment, and Automotive sectors posted gains of +6.78%, +2.74%, and +4.01% respectively, outperforming the broader CSI 300 Index (+2.18%). Notably, Mechanical Equipment ranked 7th among the 31 Shenwan Level-1 industries, driven by robust sentiment in wind power components and general machinery.

This report identifies three critical structural shifts shaping the investment landscape for 2026:

1. Photovoltaics (PV): From Price Wars to Technological Supremacy. The industry is undergoing a decisive pivot from capacity-driven expansion to high-quality, technology-led growth. Regulatory intervention by the State Administration for Market Regulation (SAMR) against six major polysilicon producers aims to curb anti-competitive practices regarding capacity and pricing. Simultaneously, technological breakthroughs in Perovskite-Silicon Tandem cells (efficiency exceeding 34.76%) and emerging concepts like Space-Based Solar Power (SBSP) are reshaping long-term valuation models. While domestic installations are expected to moderate slightly in 2026 after surpassing 300GW in 2025, the focus on efficiency and new application scenarios offers premium opportunities for leaders in next-generation cell technology.

2. Construction Machinery: Cyclical Recovery Meets Global Demand. The excavator market demonstrated resilient growth in December 2025, with total sales rising 19.2% YoY. This growth is bifurcated: domestic sales (+10.9% YoY) are supported by an upward equipment renewal cycle, while exports (+26.9% YoY) are fueled by global monetary easing and booming mining activities in Africa and Central Asia. We maintain a positive outlook on leading enterprises with strong overseas distribution networks and competitive advantages in large-scale mining equipment.

3. Embodied AI & Robotics: The Year of Commercial Scale-Up. 2026 is emerging as the inflection point for the commercialization of humanoid robots. With global shipments projected to reach 13,000 units (led by Chinese manufacturer Zhiyuan with 39% market share), and major tech players like XPeng and Mobileye accelerating M&A and product launches, the supply chain for core components—such as precision screws, sensors, and joint modules—is entering a phase of verified demand. Companies with established small-batch orders and technical reserves in these niche components are poised for immediate revenue recognition.

Investment Stance: We recommend an Overweight rating on the Mechanical Equipment sector, specifically targeting leaders in wind power components, high-end construction machinery, and robotics supply chain enablers. For the PV sector, we advise a selective approach, favoring companies with proven tandem cell efficiencies and disciplined capacity management over pure volume players. The Automotive sector remains Neutral-to-Positive, contingent on the absorption of policy changes regarding vehicle purchase taxes.

Key Takeaways

1. Photovoltaics: Regulatory Clarity and Technological Disruption

1.1 Regulatory Intervention to Stabilize Market Structure

On January 8, 2026, the State Administration for Market Regulation (SAMR) convened meetings with the China Photovoltaic Industry Association and six leading polysilicon manufacturers: Tongwei Co., Ltd., GCL Technology, Daqo New Energy, Xinte Energy, Asia Silicon (Red Lion), and East Hope Group.

• Core Mandate: The SAMR explicitly prohibited agreements on production capacity, capacity utilization rates, output volumes, and sales prices. It also forbade market segmentation, output allocation, or profit sharing through equity participation.
• Information Silos: Companies are barred from coordinating on price, cost, or volume data.
• Compliance Deadline: Written rectification measures must be submitted by January 20, 2026.

Analytical View: This regulatory crackdown is a pivotal moment for the PV industry. For years, the sector has been plagued by overcapacity and destructive price wars that eroded margins across the value chain. By strictly enforcing anti-monopoly regulations, the government is effectively forcing a supply-side correction. This does not imply a return to cartel-like behavior but rather a restoration of fair competition based on technological merit and operational efficiency rather than predatory pricing. We expect this to stabilize polysilicon prices in Q1 2026, improving the profitability outlook for upstream manufacturers who have maintained healthy balance sheets.

1.2 Technological Frontiers: Perovskite Tandem and Space Solar

The market narrative is shifting towards "High-Quality Development," characterized by two key technological drivers:

• Perovskite-Silicon Tandem Cells: Jinko Solar announced a laboratory efficiency record of 34.76% for its AI-driven perovskite-silicon tandem cells. This breakthrough significantly exceeds the theoretical limits of traditional crystalline silicon cells (~29%). Jinko has expressed strong confidence in the application of these cells in space environments, citing advantages in weight, efficiency, and resistance to degradation.
• Space-Based Solar Power (SBSP): Inspired by Elon Musk’s recent proposal to deploy 100GW of solar capacity in space annually, market expectations for SBSP have surged. While still in early stages, the convergence of lightweight tandem cell technology and commercial aerospace capabilities creates a new long-term growth vector.

Implication: The PV industry is transitioning from a "manufacturing commodity" logic to a "high-tech innovation" logic. Investors should re-rate companies based on their R&D pipelines in tandem cells and their ability to capture niche, high-margin markets (such as space or specialized industrial applications) rather than just utility-scale ground mount volume.

1.3 Market Outlook and Installations

• 2025 Review: China’s newly installed PV capacity is estimated to have exceeded 300GW in 2025.
• 2026 Forecast: Installations are expected to see a slight decline or stabilization in 2026 as the market digests the massive capacity added in previous years.
• Strategic Shift: The focus is moving from "quantity" to "quality." Policy support is increasingly directed towards integrated energy systems, green microgrids, and high-efficiency modules that offer better Levelized Cost of Energy (LCOE) despite higher upfront costs.

2. Construction Machinery: Dual-Engine Growth (Domestic Renewal + Export Expansion)

2.1 December 2025 Sales Data Analysis

According to the China Construction Machinery Association (CCMA), the excavator market closed 2025 on a strong note:

Key Observations:
* Export Dominance: Exports continue to outpace domestic growth, accounting for nearly 55% of total sales in December. The full-year export growth of 16.1% underscores the successful internationalization of Chinese machinery brands.
* Domestic Recovery: The 10.9% YoY growth in domestic sales indicates that the bottom of the domestic cycle has passed. The primary driver is the equipment renewal cycle, supported by national policies encouraging the replacement of older, less efficient machinery with newer, environmentally compliant models.

2.2 Drivers of Overseas Demand

• Monetary Easing: Global interest rate cuts, particularly in developed markets, are lowering the cost of capital for infrastructure and mining projects, stimulating demand for heavy equipment.
• Resource Boom: Rising prices for commodities (copper, lithium, gold) are driving expansion in mining sectors across Africa, Central Asia, and South America. This has created specific demand for large-tonnage mining excavators and dump trucks, segments where Chinese manufacturers have made significant technological strides.

Investment Implication: We recommend focusing on industry leaders with:
1. Established Overseas Networks: Companies that have built local service and parts distribution centers, reducing downtime for customers.
2. High-End Product Mix: Manufacturers with competitive large-scale mining equipment, which commands higher margins and stickier customer relationships compared to standard construction excavators.

3. Automotive: Short-Term Volatility vs. Long-Term Structural Growth

3.1 December Retail Performance

Data from the China Passenger Car Association (CPCA) shows a warming trend in the final week of December 2025:
* Weekly Retail: Average daily retail sales reached 123,000 units.
* Growth: +17% YoY and +2% MoM.

Analysis: The uptick is largely attributed to year-end delivery pushes by OEMs to meet annual sales targets and recognize revenue before the fiscal year-end. While positive, this is a seasonal phenomenon.

3.2 Policy Headwinds and Opportunities in 2026

• Purchase Tax Adjustment: In 2026, the vehicle purchase tax exemption for New Energy Vehicles (NEVs) will be halved (subject to specific caps). This change may cause short-term demand pull-forward or hesitation among price-sensitive consumers.
• Subsidy Restructuring: Changes in subsidy mechanisms may further impact marginal buyers.

Long-Term Thesis: Despite short-term policy friction, the structural trends remain intact:
1. NEV Penetration: There is still substantial room for NEV penetration to increase, particularly in lower-tier cities and rural markets.
2. Intelligence as a Driver: The competitive frontier is shifting from electrification to intelligence (autonomous driving, smart cockpits). High-level autonomous driving features are becoming key differentiators that stimulate replacement demand.

Recommendation: Focus on整车 (OEMs) with:
* Strong Brand Equity: Ability to pass on tax costs to consumers without significant volume loss.
* Robust New Product Cycles: Launches of highly anticipated models with advanced ADAS (Advanced Driver Assistance Systems).
* Scale Effects: Leaders who can absorb margin pressure through superior supply chain management and manufacturing efficiency.

4. The Rise of Embodied AI: Humanoid Robots Enter Mass Production Phase

The week saw an unprecedented convergence of news confirming that 2026 is the "Year One" for commercial humanoid robots.

4.1 Market Scale and Leadership

• Global Shipments: Omdia forecasts 13,000 units shipped globally in 2025.
• Chinese Dominance: Zhiyuan (Agibot) led the market with >5,100 units, capturing 39% of global market share. Zhiyuan received top ratings in 6 out of 8 evaluation dimensions (including mobility, payload, AI learning, and scalability).
• Tech Giant Entry:
  • XPeng: Announced the mass production of humanoid robots and Robotaxi operations starting in 2026, leveraging its "Physical AI" framework.
  • Mobileye: Agreed to acquire Mentee Robotics for ~$900 million to integrate humanoid robotics into its autonomous driving ecosystem.
  • Unitree: Released videos of its H2 robot performing high-dynamic movements (backflips, kicking 120kg sandbags), demonstrating improved durability and practical utility.

4.2 Supply Chain Verification

Crucially, component suppliers are moving from "concept" to "order book":
* Huawei Technology: Confirmed small-batch orders for humanoid robot springs.
* Boshi Shares: Completed debugging of principle prototypes for humanoid robots in collaboration with Harbin Institute of Technology.
* Lixing Shares: Its rotary joint module passed the solution review of a leading domestic humanoid robot OEM and is in small-batch testing.
* Qinchuan Machine Tool: Confirmed batch supply of host products and key components for the robotics sector.
* Zhaofeng Shares: Redirected IPO funds to build a facility for 500,000 humanoid robot ball screws and 1 million roller screws annually, alongside smart driving components.

Investment Implication: The investment logic has shifted from speculation to earnings visibility. Investors should prioritize companies with:
1. Verified Supply Chain Status: Those already supplying samples or small batches to tier-1 robot manufacturers (like Zhiyuan, Unitree, or XPeng).
2. Core Component Expertise: Manufacturers of precision screws (ball/roller), harmonic reducers, sensors, and joint modules. These components represent the highest value-add and barriers to entry in the robot BOM (Bill of Materials).

5. Wind Power: Deep Sea Breakthroughs and Margin Pressures

5.1 Technological Milestone

The Huaneng Shandong Peninsula North Offshore Wind Power Project connected to the grid, marking a breakthrough in deep-sea wind power.
* Capacity: 504 MW (42 x 12 MW turbines).
* Innovation: Utilized four-pile jacket foundations reaching 83.9 meters, the highest in China for this type. This validates the technical feasibility of large-scale offshore wind in complex, deep-water geological conditions.

5.2 Corporate Earnings Warning: Electric Wind Power

Electric Wind Power (600172.SH) issued a profit warning for 2025:
* Expected Net Loss: RMB 890 million – 1.09 billion.
* Reasons:
1. Price War: Intense competition led to lower turbine selling prices.
2. Delays: Project construction delays slowed revenue recognition.
3. Cost Inflation: Rising component costs during peak installation periods compressed margins.
4. Loss Contracts: Provisions were made for contracts where estimated costs exceed future revenue.

Analytical View: The wind sector remains bifurcated. While technology advances (deep sea, larger turbines) are impressive, the financial health of OEMs is under severe stress due to bidding prices that do not reflect true costs. We advise caution on pure-play turbine OEMs until pricing discipline returns. However, component suppliers (like towers and cables) with diversified customer bases and exposure to overseas markets may offer better risk-adjusted returns.

Market Performance Review (Dec 29, 2025 - Jan 9, 2026)

1. Sector Index Performance

• Outperformers within Sub-sectors:
  • Wind Power Equipment: +20.07% (Driven by deep-sea project news and oversold bounce).
  • General Equipment: +9.57% (Driven by robotics theme).
  • Other Power Equipment: +9.50%.
• Underperformers within Sub-sectors:
  • Passenger Cars: -1.30% (Concerns over tax policy changes).
  • Batteries: -0.23%.
  • PV Equipment: +0.44% (Mixed sentiment despite tech news).

2. Top Gainers and Losers

Top 5 Gainers by Sector

Note: High volatility in small-cap stocks (e.g., Fenglong, Shaoyang) reflects speculative capital flowing into the robotics and automation themes.

Top 5 Losers by Sector

Industry News & Corporate Announcements Deep Dive

1. Policy and Macro Environment

Industrial Green Microgrid Guidelines (Jan 9, 2026)

Five departments, including the MIIT, released the "Guidelines for the Construction and Application of Industrial Green Microgrids (2026-2030)."
* Self-Consumption Target: New renewable energy projects in industrial parks must achieve a local self-consumption rate of ≥60%.
* Grid Interaction: In regions with spot electricity markets, distributed PV can aggregate to participate in the spot market, but grid-fed electricity is capped at 20% of total generation.
* Grid Stability: Emphasis on "observable, measurable, adjustable, and controllable" renewable integration.

Impact: This policy favors companies specializing in energy storage systems (ESS), smart inverters, and microgrid control software. It reduces the curtailment risk for industrial PV projects but requires higher upfront investment in storage and management systems.

Shanxi Energy Innovation Plan (Jan 6, 2026)

Shanxi Province outlined plans to accelerate energy tech innovation, focusing on:
* Next-gen PV: Perovskite-silicon tandem, CdTe thin-film.
* Hydrogen: Heavy-duty hydrogen trucks and storage tech.
* Geothermal: Mid-deep layer efficient utilization.

Impact: Regional policy support creates localized opportunities for equipment suppliers in Shanxi, particularly in hydrogen electrolyzers and advanced PV manufacturing equipment.

2. Technological Breakthroughs

Solid-State Battery Commercialization (Jan 6, 2026)

Finnish startup DonutLab announced the first commercially viable all-solid-state battery (ASSB) at CES 2026.
* Claims: Superior energy density, charging speed, cycle life, and safety compared to Li-ion.
* Applications: EVs, heavy trucks, and construction machinery.

Analytical View: While promising, investors should remain cautious. "Commercially viable" often refers to limited initial production runs. Mass adoption in automotive sectors typically lags announcements by 3-5 years due to validation and scaling challenges. However, this accelerates the R&D urgency for traditional battery makers (CATL, BYD) and material suppliers (solid electrolytes).

Home Humanoid Robot (Jan 5, 2026)

SwitchBot unveiled OneRo H1, a wheeled humanoid home assistant capable of folding clothes and cooking assistance, powered by the OmniSense VLA model.

Impact: Expands the addressable market for robotics beyond industrial/auto to consumer households. Highlights the importance of VLA (Vision-Language-Action) models in enabling practical utility.

3. Corporate Strategic Moves

M&A Activity

• Mobileye acquires Mentee Robotics: $900M deal to integrate humanoid robotics into Mobileye’s AI stack. This signals that autonomous driving tech firms view embodied AI as a natural extension of their core competencies (perception, navigation, decision-making).
• Xiamen Tungsten Acquires mimatic: Subsidiary Xiamen Jinlu to acquire German tool maker mimatic for €10M + €4.9M capital injection. This strengthens Xiamen Tungsten’s position in high-end CNC tools, critical for precision manufacturing of robotics and aerospace components.

Capacity Expansion and Project Approvals

• Yunnan Energy Investment: Received approval for two wind farms (Huating West 150MW, Aguzi 100MW), totaling 250MW. This confirms continued pipeline execution for state-owned energy developers.
• Times New Material: Signed RMB 3.32 billion in blade sales contracts with major wind turbine OEMs for Q4 2025. This provides revenue visibility for 2026, though margin pressure remains a concern.
• Shunfa Hengneng: Upgrading Tan Toushan Wind Farm from 22.5MW to 90MW. This "repowering" trend is gaining traction as older, smaller turbines become economically obsolete compared to modern 10MW+ units.

Robotics Supply Chain Progress

• Zhaofeng Shares: Repurposing IPO funds to build a massive production base for robotic screws (500k ball screws, 1M roller screws) and smart driving screws. This is a direct bet on the scalability of the humanoid robot market.
• Huawei Technology & Lixing Shares: Both confirmed progression from "contact" to "small-batch orders/testing," validating the supply chain readiness.

Risks / Headwinds

While the outlook for select sub-sectors is positive, investors must navigate several significant risks:

1. Macroeconomic and Geopolitical Risks

• Global Trade Barriers: As Chinese construction machinery and EV exports grow, they face increasing scrutiny and potential tariffs in Europe and North America. Protectionist policies could dampen the export growth trajectory, which is currently a key profit driver.
• Exchange Rate Volatility: Significant fluctuations in the RMB exchange rate can impact the competitiveness of exports and the value of overseas earnings when repatriated.

2. Industry-Specific Risks

Photovoltaics

• Regulatory Execution Risk: While the SAMR has issued warnings, the effectiveness of these measures in curbing overcapacity depends on strict enforcement. If local governments continue to subsidize inefficient capacity to protect local jobs, the supply glut may persist.
• Technology Obsolescence: The rapid rise of Perovskite tandem cells poses a risk to existing TOPCon and HJT production lines. Companies that fail to transition quickly may face stranded assets.

Construction Machinery

• Raw Material Prices: Steel and copper prices remain volatile. An unexpected spike could compress margins for OEMs that cannot fully pass costs to customers.
• Overseas Political Instability: Many high-growth export markets (Africa, Central Asia) carry political and security risks that could disrupt projects and payments.

Automotive

• Policy Uncertainty: The reduction in NEV purchase tax exemptions in 2026 may lead to a temporary demand vacuum in Q1-Q2 if consumers delay purchases in anticipation of further price cuts or new subsidies.
• Intensifying Price War: The automotive sector remains in a fierce price war. Even with technological advantages, margin erosion is a persistent threat to profitability.

Wind Power

• Project Delays: As seen with Electric Wind Power’s earnings warning, offshore wind projects are prone to delays due to weather, permitting, and grid connection issues. These delays defer revenue and increase working capital pressure.
• Low Bidding Prices: The trend of low-price bidding in wind turbine procurement continues to threaten the long-term financial sustainability of OEMs, potentially leading to more loss contracts.

3. Technology and Adoption Risks (Robotics)

• Commercial Viability: While shipments are growing, the economic ROI for humanoid robots in industrial settings is still being proven. If early adopters find the reliability or cost-effectiveness lacking, order growth could stall.
• Supply Chain Bottlenecks: The ramp-up of precision components (like roller screws) requires high-precision manufacturing capabilities. Any yield issues or supply shortages could constrain the entire industry’s growth.

Rating / Sector Outlook

Overall Sector Rating: Overweight (Mechanical Equipment) / Neutral (Power Equipment & Auto)

We differentiate our outlook by sub-sector:

Investment Themes for 2026

1. "Hard Tech" in Robotics: Invest in the "shovels" of the AI gold rush—precision manufacturing equipment and core components (screws, sensors, joints) for humanoid robots.
2. Global Champions in Machinery: Companies that have successfully transitioned from domestic champions to global leaders, with robust service networks in emerging markets.
3. Next-Gen PV Leaders: Firms that are not just participating in the current cycle but defining the next one through tandem cell efficiency and new application scenarios (space, BIPV).

Investment View

1. Strategic Allocation Recommendations

For institutional investors, we recommend a barbell strategy within the Equipment Manufacturing sector:

• Leg 1: Stable Cash Flow & Global Growth (Construction Machinery & Wind Components)

  • Allocate to established leaders in excavators and wind towers/cables. These companies benefit from tangible, current demand drivers (mining boom, offshore wind installation) and offer reasonable valuations with improving dividend potential as capex cycles mature.
  • Key Metrics to Watch: Export growth rates, gross margin stability, and order backlog conversion.

• Leg 2: High Growth & Optionality (Robotics Supply Chain & Advanced PV)

  • Allocate to smaller-cap, high-tech suppliers in the humanoid robot value chain and PV firms with breakthrough tandem cell efficiencies. These positions offer higher beta and potential for multiple expansion as the market recognizes the commercial scalability of these technologies.
  • Key Metrics to Watch: Order verification from tier-1 robot OEMs, R&D spend as % of revenue, and pilot project success rates.

2. Specific Company Watchlist (Based on Report Data)

• Leading Excavator/Machinery Makers: Look for companies with >20% export growth and strong presence in mining equipment. (Note: Specific names like Sany or XCMG are implied leaders, though not explicitly rated in this weekly snippet, the logic applies to sector leaders).
• Robotics Component Suppliers:
  • Zhaofeng Shares (301529.SZ): Direct exposure to robotic screw production with clear capacity expansion plans.
  • Lixing Shares: Verified supply chain status for rotary joints.
  • Huawei Technology: Early mover in spring components for robots.
  • Boshi Shares: Collaboration with top-tier research institutions for prototype industrialization.
• PV Technology Leaders:
  • Jinko Solar: Leader in tandem cell efficiency (34.76%). Watch for commercialization timeline of these cells.
  • Polysilicon Leaders (Tongwei, GCL, Daqo): Monitor their compliance with SAMR regulations and subsequent price stabilization effects.

3. Tactical Trading Considerations

• Short-Term Catalyst: The January 20 deadline for PV companies to submit rectification measures to SAMR could trigger volatility. Positive signs of compliance and price stabilization could lead to a sector-wide rebound in late January.
• CES 2026 Follow-through: The announcements at CES (Solid-state batteries, SwitchBot robot) may lead to short-term thematic trading in related supply chains. Investors should distinguish between genuine commercial progress and marketing hype.
• Earnings Season Preview: With Electric Wind Power issuing a loss warning, investors should be cautious of other wind OEMs reporting Q4 2025 results. Expect similar margin pressures across the sector unless hedging strategies were effective.

4. Conclusion

The equipment manufacturing sector is at a fascinating juncture in early 2026. The old narratives of pure capacity expansion are being replaced by stories of technological sophistication (Perovskite, Deep-sea Wind, Humanoid AI) and global market penetration (Construction Machinery).

The regulatory intervention in the PV sector is a necessary pain that should lead to a healthier, more sustainable industry structure in the medium term. Meanwhile, the robotics sector is transitioning from science fiction to industrial reality, creating a new investable universe of precision component manufacturers.

We advise investors to look beyond the headline index numbers and focus on the quality of earnings and technological moats. Companies that can demonstrate real order books in robotics, maintain margins in a competitive wind market, or lead in next-gen PV efficiency will outperform the broader market in 2026.

Appendix: Detailed Data Tables

Table 1: Shenwan Level-1 Industry Weekly Performance (Dec 29, 2025 - Jan 9, 2026)

Table 2: Excavator Sales Breakdown (2025 Full Year vs Dec 2025)

Table 3: Key Robotics Supply Chain Developments

Disclaimer:
This report is prepared by Century Securities Research Institute. The information contained herein is derived from sources believed to be reliable, but no representation or warranty, express or implied, is made as to its accuracy or completeness. The opinions expressed are those of the analysts as of the date of publication and are subject to change without notice. This report is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities. Investors should make their own independent decisions and bear the associated risks.

Analyst Certification:
The analysts named in this report hereby certify that all of the views expressed in this report accurately reflect their personal views about the subject securities or issuers, and that no part of their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this report.