Chinese Automation Ended the First Half Strongly, with Domestic Manufacturers Continuing to Gain Share

Overview

This report is Morgan Stanley’s operational tracking update on Chinese industrial automation. The key conclusion is that the first half of 2026 ended with strong order and sales momentum: in June, domestic automation manufacturers generally achieved double-digit year-on-year order growth, with demand not concentrated in one industry but distributed across AI, battery, semiconductor, 3C, logistics, shipbuilding, construction machinery, and machine tools. The report also notes that this strength will create a higher comparison base for the second half.

Core views

First, demand remains resilient, with most domestic automation manufacturers posting double-digit year-on-year order growth in June. Second, price increases and demand improvement are expected to jointly support automation company earnings in the second quarter, such as Leadshine’s preliminary indication of a 55%-65% year-on-year net profit increase for H1 2026. Third, Morgan Stanley expects China’s automation market to grow about 5% year-on-year in 2026, with domestic players continuing to win market share. Fourth, global manufacturers showed positive growth in servo and low-voltage AC drive sales in China, with low-voltage AC drives up 21% year-on-year in June, faster than the 10% growth in the first five months of 2026.

Analysis framework

The report uses operational tracking, combining year-on-year changes in new orders for domestic automation and general machinery manufacturers with year-on-year movements in servo and low-voltage AC drive sales of global players Yaskawa, Panasonic, Delta Electronics, and ABB in China to assess sector demand strength, second-quarter earnings support, and second-half comparison pressure.

Methodology notes

• Operational TrackingOrder and Sales Year-on-Year Monitoring

  Assess industrial automation sentiment through monthly new-order and sales year-on-year changes and the downstream demand mix.

  The report highlights comparing June with the first five months of 2026 in servo and low-voltage AC drive sales, and tracks order performance of Wuxi Xinje, Tsugami China, Haitian Int'l, and Guomao.

• Relative RatingsMorgan Stanley Industry View and Stock Rating Framework

  Industry views are Attractive, In-Line, or Cautious; stock ratings are Overweight, Equal-weight, Not-Rated, or Underweight.

  The report states the China industrials APAC view as In-Line; stock ratings and pricing should follow the published coverage universe, as ratings may change.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Wuxi Xinje (603416.SS)

  Domestic automation exposure

  Strengths

  New orders in June were up over 30% year-on-year, and over 35% year-on-year in May, with emerging-business momentum remaining relatively strong.

  Weaknesses

  The report does not disclose company-level profitability, pricing pass-through, or second-half order durability details.

  Comparison

  Order growth is clearly above the expected 2026 China automation market growth of around 5% year-on-year cited in the report.

  Risks

  Higher comparison base, potential downstream demand slowdown, and intensified domestic automation competition.

• Tsugami China (1651.HK)

  Machine-tool and automation demand-linked name

  Strengths

  Order volume rose 50%-60% year-on-year in June, supported by 3C and liquid-cooling demand.

  Weaknesses

  Order strength may be tied to specific downstream cycles, and sustainability needs validation.

  Comparison

  Order growth is among the highest among peers discussed, indicating relatively strong demand in the 3C and liquid-cooling chain.

  Risks

  Volatility in 3C or liquid-cooling capex, competition between domestic and overseas machine tools, and a higher second-half comparison base.

• Haitian Int'l (1882.HK)

  General machinery exposure

  Strengths

  June orders were up mid- to high-teens year-on-year, with domestic orders also rising in the mid-teens year-on-year.

  Weaknesses

  Overseas orders declined by low single digits year-on-year, and H1 2026 total new orders were only low-single-digit year-on-year growth.

  Comparison

  Domestic order performance is stronger than overseas, and growth is less aggressive than some higher-growth automation names.

  Risks

  Weak overseas demand, general machinery cycle slowdown, and margin volatility.

• Guomao (603915.SS)

  General machinery and reducer-related name

  Strengths

  New orders rose mid-teens year-on-year, reflecting recovery in general machinery demand.

  Weaknesses

  The report provides no segmentation, margin, or overseas demand details.

  Comparison

  Order growth is similar to Haitian Int'l’s June performance but weaker than Tsugami China’s high-growth performance.

  Risks

  Industrial capex pullback, pricing competition, and the stock is rated Underweight in the ratings disclosure.

• Global automation peers: Yaskawa, Panasonic, Delta Electronics, ABB

  External validation sample for China automation demand

  Strengths

  Low-voltage AC drive sales in China rose 21% year-on-year in June, and servo sales rose 5% year-on-year.

  Weaknesses

  Servo sales growth is flat versus the first five months of 2026, not showing further acceleration.

  Comparison

  The June low-voltage AC drive growth rate is above the 10% year-on-year pace in the first five months, indicating stronger localized demand.

  Risks

  Replacement risk from domestic suppliers, price competition, and cyclical fluctuations in the industry.

Key data

• 2026 China Automation Market OutlookAround 5% year-on-year growthThe report expects domestic manufacturers to continue expanding market share.
• Global Manufacturers’ Servo Sales in China5% year-on-year growth in June 2026Covers Yaskawa, Panasonic, Delta Electronics, and ABB; year-on-year growth in the first five months of 2026 was also 5%.
• Global Manufacturers’ Low-Voltage AC Drive Sales in China21% year-on-year growth in June 2026This accelerated versus the 10% year-on-year pace in the first five months of 2026.
• Wuxi Xinje (603416.SS) New OrdersOver 30% year-on-year growth in JuneOver 35% year-on-year growth in May, with new-business momentum remaining relatively strong.
• Tsugami China (1651.HK) Orders50%-60% year-on-year growth in JuneSupported by sustained demand in 3C and liquid cooling.
• Haitian Int'l (1882.HK) OrdersMid-teens year-on-year growth in June; first half 2026 new orders up only low-single-digit year-on-yearDomestic orders rose by a mid-teens year-on-year, while overseas orders declined by low single digits year-on-year.
• Guomao (603915.SS) New OrdersMid-teens year-on-year growthRepresents improvement in general machinery-related orders.
• Leadshine Preliminary Results55%-65% year-on-year net profit growth in H1 2026The report uses this as evidence that demand and price increases are supporting second-quarter growth in automation companies.

Impact & implications

At the sector level, broad demand improvement in automation and rising domestic share gains are favorable for domestic automation, motion control, machine tools, and the general machinery value chain’s revenue and profit performance. From an investment perspective, short-term orders and pricing factors support second-quarter results, but because first-half performance was very strong, year-on-year growth in the second half may face a higher comparison bar. At the same time, domestic and overseas demand divergence, downstream capex pace, and global competitor intensity still need monitoring.

Risks

• The strong first-half performance in 2026 raises the second-half comparison base, which may suppress year-on-year growth.
• Overseas order performance remains pressured, such as overseas orders at Haitian Int'l being down low-single digits year-on-year in June.
• Automation and general machinery demand depends on capex cycles in AI, battery, semiconductor, 3C, logistics, shipbuilding, construction machinery, and machine tools, and is therefore cyclically volatile.
• Profit support from price increases may be constrained by intensified competition, client bargaining, and cost changes.
• The report includes conflict-of-interest and regulatory disclosures; Morgan Stanley may have business relationships with some covered companies, and investors should assess independently.

What to watch

• Whether China’s automation new orders in the second half of 2026 can maintain year-on-year growth versus the higher base.
• Whether domestic manufacturers’ market-share gains continue and translate into margin improvement.
• Monthly changes in servo and low-voltage AC drive sales growth, especially whether the high low-voltage AC growth in June is sustained.
• Whether downstream capex in AI, battery, semiconductor, 3C, and liquid cooling continues to support automation demand.
• Whether overseas orders of general machinery peers such as Haitian Int'l improve.
• Whether preliminary H1 and Q2 results from automation names such as Leadshine are fully confirmed.