Bosera Fund's Index and Quantitative Investment Department Fund Manager Wang Meng 1. What are the key reasons behind the recent surge in market attention on industrial software? Wang Meng: This is supported by multiple macro-level factors, including policy support, industrial demand, external environment, and technological convergence. Specifically, the government has set a clear target to update approximately 2 million industrial software units by 2027, providing a definitive growth space for the market. At the industrial level, companies are compelled to adopt industrial software for refined management to reduce costs and enhance efficiency amid market competition, creating strong endogenous demand. Externally, the U.S. has imposed multiple rounds of restrictions on software like EDA, highlighting the importance of supply chain security and accelerating the shift toward self-sufficiency from hardware to software. Meanwhile, technological convergence and innovation are injecting momentum into industrial software development, elevating its strategic significance beyond ordinary software to a critical enabler bridging traditional manufacturing and smart manufacturing while fostering technological self-reliance. (Data source: Wind, as of October 31, 2025)

2. How has the changing external environment gradually elevated the strategic importance of industrial software? Wang Meng: The external environment has heightened the strategic role of industrial software in three ways: First, global manufacturing competition has shifted toward high efficiency, flexibility, and personalized customization, exposing bottlenecks in traditional production models. Industrial software like ERP and MES has evolved from optional tools to indispensable "digital brains" for optimizing production and accelerating innovation. Second, intensified international tech competition, including export controls on China's high-end manufacturing, has elevated the strategic status of R&D-focused software like EDA and CAE—now deemed vital for national and industrial chain security. Third, the massive data generated by equipment and production lines requires industrial software for processing, enabling data-driven innovation and new business models defined by software.

3. How does the rise of AI large models impact industrial software? Wang Meng: AI large models primarily accelerate industry development and lower application barriers. Domestic open-source models like DeepSeek have shortened iteration cycles for traditional industrial software while making AI adoption more accessible, driving rapid AI integration. Investment opportunities lie in multi-dimensional AI applications and product-service systems. Key enterprise AI investment areas include generative design, root-cause quality analysis, and dynamic production scheduling. ERP vendors, for instance, are building layered AI product-service systems—offering vertical AI models, no-code/low-code AI tools, Agent-powered application modules, and full-cycle AI services—creating diverse monetization paths and investment potential.

4. What stage is the industrial software industry currently in? Wang Meng: The sector is in an uneven development phase, with breakthroughs toward high-end segments. Embedded software holds a sizable market but largely mimics foreign products, struggling to compete globally. Management and production control software are more localized but need further advancement to capture high-end markets. R&D software (e.g., EDA, CAD, CAE) lags significantly behind foreign counterparts, with low localization rates. Overcoming usability gaps requires heavy R&D investment, and domestic firms are ramping up product launches to expand market share.

5. What are the main categories of industrial software, and what are their core functions? Wang Meng: Industrial software falls into four categories: - R&D Software: Core tools for innovation, enabling virtual product modeling, precise parameter calculations, and simulations. - Production Control Software: Central systems managing end-to-end production for efficiency, stability, and quality. - Digital Management Software: Unified platforms for resource, process, and financial data management, boosting operational transparency. - Embedded Software: Integrated into controllers and sensors for data collection and communication, widely used in industrial IoT, energy, and automotive electronics.

6. What are the high technical barriers in "bottleneck" industrial software like EDA, CAD, and CAE? Wang Meng: These barriers stem from four dimensions: - Algorithmic/Theoretical: Complex math/physics (e.g., EDA’s optimization of astronomical solution spaces using graph theory and PDEs). - Engineering/Architecture: Extreme optimization for stability and speed (e.g., parallel computing for large-scale circuit simulations). - Knowledge/Data: Reliance on proprietary industrial know-how; domestic players face a "no usage → no data → inaccuracy" cycle. - Ecosystem: Entrenched user habits and deep integration (e.g., EDA’s ties to chip design and foundries).

7. What are the core investment theses for the industrial software sector? Wang Meng: Three key logics: - Domestic Substitution & Demand: Policy-driven replacement of imports amid tech restrictions. - Product Competitiveness: Transition from "functional" to "high-performance" through R&D/M&A. - AI-Driven Disruption: Leapfrogging potential via AI, SaaS models, and cloud-based simulations.

8. What are the features of the CSI Industrial Software Index? Wang Meng: The index is small/mid-cap skewed (70% under ¥50B market cap), with heavy exposure to computers, machinery, and electronics sectors. It emphasizes B2B manufacturing applications (95% vertical/IT services) and high R&D intensity (over 2/3 weight in STAR/ChiNext boards). (Data source: Wind, as of October 31, 2025)

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