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The Status Quo and Countermeasures of R&D Investment of Agricultural Machinery Enterprises in China

10-09-2019 YUNTAI

Since the State promulgated and implemented the "Agricultural Mechanization Promotion Law" in 2004, the central government has invested more than 200 billion yuan to support farmers in purchasing agricultural machinery and greatly promoted the development of the agricultural machinery industry. At present, the independent innovation capability, scientific research and development, and product quality level of agricultural machinery enterprises have been greatly improved.

Through the introduction of technology and independent development, agricultural machinery enterprises have successfully developed and put into use a batch of high-tech agricultural machinery products such as large-power power shift tractors, large-scale self-propelled sprayer sprayers and large-scale no-tillage planters. China's agricultural machinery products and advanced foreign countries. The gap between the levels has been further shortened, forming a product structure that combines large, medium, small, high, medium and low technical grades to meet the 90% demand in the domestic market.

At the same time of the rapid development of China's agricultural machinery industry, we must also clearly understand that although the investment in research and development expenses of China's agricultural machinery enterprises has increased year by year, the scientific and technological content of agricultural machinery products has been increasing, but the technological competitiveness of enterprises is still not strong. The R&D investment is quite different from that of the international agricultural machinery giant.

China's agricultural machinery industry R & D costs accounted for less than 2% of corporate sales, while international agricultural giants research and development costs generally account for 3% to 6% of sales. How to increase R&D investment costs, improve the efficiency of R&D expenses, and enhance the competitiveness of agricultural machinery products, thus occupying the domestic market and expanding the international market, is an urgent task facing China's agricultural machinery enterprises.

Domestic enterprise R&D investment status

Before 2004, the R&D investment of other industries in the machinery industry increased year by year, and the R&D investment of the agricultural machinery industry decreased year by year. In 2004, it was only 0.87%, far lower than the 2003 Klass (4.5%) and John Deere Company (4.3). %), Kubota (2.9%) and other international agricultural machinery companies.

After 2004, driven by the national agricultural machinery purchase subsidy policy, the agricultural machinery industry entered the "golden 10 years" of rapid development. In 2014, the main business income of enterprises above designated size of agricultural machinery industry was 395.23 billion yuan, which was 4.4 times that of 2004. It has quadrupled in 10 years and maintained double-digit annual growth. In 2014, the profit reached 22.81 billion yuan, with an average annual growth. 25.8%. While the agricultural machinery industry is developing at a high speed, key enterprises pay more attention to R&D investment.

The China Agricultural Machinery Industry Association conducted research on the R&D investment of 24 domestic agricultural machinery and component backbone manufacturing enterprises. According to the nature of the company, there are 2 enterprises in China and 22 private enterprises. According to product types, there are 11 complete machine enterprises, 2 agricultural tool enterprises, 1 water pump enterprise and 10 leading parts enterprises. According to the survey results, from 2015 to 2018, there are 4 companies with R&D investment accounting for <3% of the average sales ratio, 6 with 3% to 4%, and 12 with 4% to 5%, >5%. There are 2 homes.

In terms of R&D investment, domestic key agricultural machinery enterprises and leading parts and components enterprises are far higher than the industry average. China's Yituo, Lovol Heavy Industries, Zoomlion, Jiangsu Yueda, Shandong Shifeng and other 11 key enterprises have invested in 4.06% of research and development in the past four years. China's 2018 R&D investment accounted for 6.83 percent of operating income. %.

The research and development investment accounted for 4.41% of the 10 parts and components enterprises surveyed. Huzhou Shengli Hydraulics and Rongcheng Huanghai Clutch reached 6.73% and 5.61% in the past four years. In comparison, agricultural and water pump companies have lower R&D investment.

From the comparison of state-owned enterprises and private enterprises in research and development investment, the proportion of R&D investment of state-owned enterprises represented by China Yituo has been relatively high, and some private enterprises pay more attention to R&D investment.

According to the survey, the proportion of R&D investment of domestic backbone agricultural machinery enterprises is basically the same as that of international agricultural giants such as John Deere and Case New Holland. However, due to the fact that there are more than 2,000 enterprises above designated size in China's agricultural machinery industry, except for a few key enterprises, most enterprises have relatively low R&D investment, and there is still a considerable gap compared with international agricultural machinery enterprises.

In the current fierce competition in the agricultural machinery market, domestic backbone agricultural machinery enterprises do not stay in competition with similar low-end product prices, but pay more attention to the research and development of new products and new technologies, and improve the competitiveness of products. From the perspective of R&D investment in supporting agricultural machinery, domestic enterprises are not paying enough attention.

Reasons for low R&D investment

1. Agricultural machinery products have low profit margins

The concentration of agricultural machinery industry in China has been decreasing year by year. Taking tractors as an example, there are more than 200 production enterprises, more than 70 enterprises capable of producing tractors with 147kW (200hp) or more, and the homogenization of products is serious, and enterprises are caught in low-end price wars. On the contrary, in the developed countries, the pattern of monopoly markets of agricultural giants such as John Deere, Case New Holland, Aike, Kubota and Klass has basically formed.

The end users of agricultural machinery products in China are farmers with lower income levels, which determines the lower profit margin of agricultural machinery products. In 2018, the main business income of the agricultural machinery industry was 243.874 billion yuan, with a profit of 9.293 billion yuan and a profit margin of only 3.81%. In the 2018 financial report, John Deere showed that the company realized operating income of 37.358 billion US dollars, net profit of 2.368 billion US dollars, and profit margin of 6.34%, which is nearly twice the average profit of China's agricultural machinery industry.

The lower profit margin directly leads to the relatively low cost of product development for agricultural machinery enterprises in China, and the R&D investment is mainly concentrated on the continuous improvement and modification of products, and the cost for research and development of new products and new technologies is relatively lower.

2. Intellectual property protection is not in place

Although China has established an intellectual property law and regulation system that conforms to international rules and is more suitable for national conditions, and has promulgated a series of laws and regulations on intellectual property protection, it still does not form a sound intellectual property protection system, especially in the field of agricultural machinery. Protecting blind spots or conflicting areas cannot stimulate the continuous innovation of agricultural machinery technology and the effective allocation of agricultural machinery and technology resources.

Globally, modern agricultural equipment from research and development to industrialization, from technical research to patent registration, has been highly concerned by many countries, and some countries have achieved remarkable results in related fields. For example, the achievements of American agricultural machinery enterprises in the core technology fields of harvesting technical equipment have an absolute advantage in the world, and their patent applications for corn harvesters account for about 41% of the total number of patents in the world.

Due to the regional characteristics of patents, international agricultural machinery giants have deployed on a global scale. Taking the patent application for smart agricultural machinery as an example, in 2017 alone, agricultural machinery enterprises in Japan, the United States, Europe and other countries have filed 442, 782 and 339 patents in other major countries and regions, respectively, while China is only abroad. 25 patent applications. At the same time, the number of patents in the field of intelligent agricultural machinery declared by the international agricultural machinery giant in China reached 222.

It can be seen that China's agricultural machinery manufacturing enterprises or research institutions should strengthen technical patent applications and intellectual property protection when conducting scientific research and research, and effectively protect the legitimate rights and interests of individuals or units in technological competition and market competition. Long-term survival and continuous development formulate long-term planning and overall strategy.

3. Long development cycle and high cost

At present, international agricultural machinery giants have adopted modern technology to develop and design products in new product development, and pay more attention to innovative design of products. Digital design techniques are widely used at different stages of product development, and design theories and methods such as innovation and intelligence are widely used to improve the technical content of products.

The product development model has also shifted from centralized to distributed, especially the application of the product lifecycle PDM management system and the network-based product description model, which not only guarantees product quality, but also shortens the product development cycle and reduces development costs.

The modern design methods and indoor simulation experimental conditions of agricultural machinery products in China are still immature. 3D simulation and industrial design are generally not adopted, and the product development cycle is 2 to 3 times of the international level. Agricultural machinery products have a long period from design to market launch, especially in the test and verification of products, which requires a lot of investment. This leads many SMEs not to invest in R&D, but to follow the strategy, imitate and copy the products of large enterprises, and reduce Product development costs.

4. Weak research and development capabilities, weak innovation

In March 2005, China Agricultural Machinery Industry Association conducted a survey on the acquisition of new technologies for key enterprises in the industry. The results show that 42% of the technology purchased from domestic research institutions is the most important source of technology; R&D accounted for 33%, ranking second; foreign technology was 19%; and self-developed new technology accounted for only 6%.

Although some enterprises have established R&D centers, due to lack of technology development experience and design theory cultivation and accumulation of reserves, R&D capabilities are mainly concentrated on improvement and modification, and the status of agricultural machinery enterprises as the main body of innovation has not yet been formed. Most of the professional research institutes have been transformed into research-oriented enterprises, and the survival pressure has made their basic research motivation not strong.

Under the influence of many factors such as the continuous downturn in the industry, the shortage of research and development funds in most production enterprises, and the difficulties in intellectual property protection, the overall technological innovation of the agricultural machinery industry is weak, and the independent research and development capabilities need to be further improved.

Development proposals

Enterprises are the mainstay of R&D activities, and many large companies in the world regard R&D as the source of life. China's agricultural machinery enterprises have low R&D investment, which affects the technological innovation and market competitiveness of enterprises. It is necessary to fundamentally enhance the competitiveness of enterprises and increase investment in research and development.

1. Highlight the role of enterprises as the mainstay of innovation

In the support of major projects, the competent government departments should highlight the role of agricultural machinery production enterprises as the mainstay of innovation, and the scientific and technological resources and science and technology projects should be tilted toward enterprises, be strong and weak, supplement short boards, aim at the "card neck" problem, and vigorously carry out key core technology research. Accelerate the breakthrough of industry development bottlenecks.

Accelerate the construction of national laboratories in the field of agricultural machinery and equipment, build an open, coordinated and efficient common technology research and development platform, establish a continuous innovation and sharing mechanism for agricultural machinery and equipment, and make overall use of comprehensive scientific research institutions, relevant state-owned enterprises, private enterprises and international innovation resources to build high efficiency. Operation, production, study and research integrate the scientific and technological innovation system in the field of agricultural machinery and equipment to jointly serve the major strategic tasks of the country.

2. Increase support for fiscal and taxation policies

We will further improve fiscal and taxation financial policies that support enterprise innovation and industrialization of scientific research results, and comprehensively implement tax incentives such as deductions for corporate R&D expenses, accelerated depreciation of research and development instruments and equipment, and tax reductions for research and development facilities that cannot be produced domestically.

Eligible enterprises can apply for the first set of major technical equipment premium subsidies as required. Strengthen the guiding role of the agricultural machinery purchase subsidy policy, and support the encouragement of old agricultural machinery to scrap the renewal.

3. Expand financial capital support channels

Encourage social capital to set up agricultural machinery industry development and innovation funds, provide support in high-end equipment research and development, information application, precision, intelligence and smart agriculture, and focus on supporting large-scale key enterprises and characteristic enterprises.

Guide and promote the continuous investment of industrial capital and financial capital on agricultural machinery and equipment, and establish diversified investment and financing channels including industrial capital, venture capital, financial capital and private capital. Encourage the financing of large agricultural machinery products.

Financial institutions are encouraged to provide credit support to agricultural machinery and equipment industry projects that comply with industrial policies, and encourage private capital and foreign capital to invest in enterprises that are in line with industrial development. Policy support for mergers, acquisitions, and restructuring.

4. Build a service platform

Promote the construction of agricultural machinery public service platform, aiming at the whole industry and taking socialized public welfare services as its tenet, strengthening the industry technical standard system, industry big data service system, comprehensive manufacturing online testing capability, industry testing and testing capability, and product digital design platform construction.

Tracking international standard technology changes, researching and analyzing development trends, improving standard technology systems, raising standards, exploring ways to crack down on international technology trade barriers, and helping companies explore international markets. Promote the integration of Internet, cloud computing, big data, and Internet of Things with modern agricultural machinery equipment manufacturing and services, and promote multi-faceted, systematic support for the whole process solution and big data platform construction.

Strengthen the construction of key test and testing facilities and equipment, and improve the inspection and testing capabilities of agricultural machinery products. Rationally use the basic database formed by the industry's public platform, comprehensively analyze and mine data resources, and support the scientific nature of government policy decisions.

5. Promote the coordinated development of the whole industrial chain of agricultural machinery and equipment

The whole machine and parts are lip-tooth-dependent. The whole machine enterprise should select suitable parts enterprises according to actual needs to form a research and development synergy alliance, so that suppliers can participate in new product development early, and share technical information and the latest market information with suppliers. Improve product market adaptability, shorten product development cycle, and reduce development risk and development costs.

6. Play the role of industry associations

Group organizations such as industry associations shall assist the competent departments in organizing and implementing the "Special Action on Agricultural Machinery Equipment Development". Actively organize host enterprises to carry out demand docking with parts and materials manufacturing enterprises, promote key industry enterprises to establish key agricultural machinery products, key component product manufacturing and promotion industry alliances, coordinate and promote equipment independent research, test identification and experimental demonstration, and accelerate advanced high-end Promotion and application of agricultural machinery products.

Coordinate the promotion of agricultural machinery marketing network and maintenance service center to rationally build and improve marketing service level. Conduct regular research, release data on the development and application of agricultural machinery products; timely reflect corporate demands, feedback policy implementation, and provide professional services to governments, manufacturing enterprises, distribution enterprises and agricultural machinery users.

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