Behind the billion-level potential market, the domestic operating system is united and aligned for warmth|Annual Industry Research
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Behind the billion-level potential market, the domestic operating system is united and aligned for warmth|Annual Industry Research

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Editor’s note:

Away from the magnificent 2020, we are about to usher in a turbulent new decade full of hope and unknown. The dual promotion of technology and capital is the main theme of this decade, and it is likely to become the main thrust of innovation in the next decade. Therefore, approaching the end of 2020, we launched the “Annual Industry Research” series, and selected the most concerned areas for systematic review. These industries are either rewriting the current new economic landscape, or are likely to reshape the future business or even the international landscape, or are of interest to readers, or are having a huge social impact. We also hope to use this method to “expand the boundary infinitely” with my readers, and “see the future first” together.

This article is the fifth in this series. We chose a domestic operating system. After the epidemic, anti-globalization sentiment appeared to spread. The discussion on information security in various countries remained high, and the voices of domestic operating systems were endless. This article hopes to systematically present the status quo of the current domestic operating system industry for readers through a systematic review.

Related Reading:

The Trembled Trillion 5G Market: The Reconstruction of the Connection of Hundreds of millions of Users and the Birth of the Industrial Internet|Annual Industry Research

The global quantum race accelerates again: Behind the tens of billions of dollars market, the hegemony of players | Annual Industry Research

Software development needs to be both agile and safe?Take a look at DevSecOps | Annual Industry Research

The winter of 2020, the spring of China’s vaccine industry | Annual Industry Research

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Author: Bear pure Yi

Editor: Shi Yaqiong (syq@36kr.com)

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After the epidemic, anti-globalization sentiment appeared to spread, and discussions on information security in various countries remained high. At the same time, the United States still imposed strong restrictions on high-tech exports to China, and the localization needs of upstream and downstream enterprises in related industries and the government have grown rapidly.The C-end market of the operating system industry has long been monopolized by foreign companies’ products, and the B-end products are also relatively limited. There are endless calls for domestic operating systems. The Wind operating system index has continued to rise at 940.65 points since the beginning of 2019, and reached a peak of 2289.27 in July 2020.This article hopes to systematically present the status quo of the current domestic operating system industry for readers through a systematic review.

In this article, you will see:

  1. The history and challenges of domestic operating systems

  2. Market structure of each segmented terminal

  3. Main customer groups at this stage

  4. The main competitive advantage of localization

  5. Ability to localize the entire industry chain

  6. New opportunities for operating systems

1. The origin of the domestic operating system

1.1 Affected by the turbulent international environment this year, the concept of a domestic operating system has become stronger

After Huawei’s business was restricted by the U.S. Department of Commerce, and WeChat and Titok were suppressed by the U.S. government, in August this year, there was speculation that Microsoft would “cut supply to China”. Later, Microsoft officially responded that “cutting supply to China” was a rumor, but the monopoly of foreign companies in the operating system market has ignited the concerns of operating system users, and the concept of domestic operating systems has quietly grown in the market.

Operating systems are not only products targeted at PCs and mobile phones, but can be divided into desktop, mobile, server, Internet of Things, embedded operating systems based on application scenarios and terminal devices.

Most of the core technologies, manufacturers, and products of operating systems originated in the United States. The origin of the PC operating system is the earliest. Around the 1980s, the development of large-scale integrated circuit technology caused problems such as computer resource utilization and computer overall performance optimization, so PC-side operating systems were gradually introduced.

At this stage, the operating systems in the market are mainly closed-source Microsoft Windows and various Linux-based open source projects: Ubuntu, Fedora, OpenSUSE and other Linux distributions.

operating system

However, domestic operating systems are very low whether on PC, mobile, or server.

According to Statcounter data, as of July 2020, Windows accounts for up to 86.03% of the Chinese desktop operating system market, and Linux only accounts for about 0.89% of the market. Almost all domestic operating systems are developed based on Linux. Among them, Galaxy Kirin and Wuhan Shenzhidu have developed desktop and terminal operating systems based on Ubuntu; Puhua Basic Software and Meditation have developed server commercial versions based on Debian; winning software, ZTE New Fulcrum, and Red Flag , Zhongke Fangde developed a server community version based on CentOS.

In the mobile phone operating system, Google’s Android accounted for 78.59%, and Apple’s IOS accounted for 20.36%. Windows is also a monopoly in server operating systems in my country. As of the end of 2018, WindowsServer2008 accounted for 45% of the market, followed by WindowsServer2013, which accounted for 24%. Windows occupies 88% of the market.

my country’s server operating system market structure

1.2 History of substitution of domestic operating systems

Since the end of the last century, China’s domestic operating system produced more than 20 corresponding products. However, due to the pre-installation and first-mover advantage of Microsoft Windows, Google, IOS and other operating systems, there has not been a wide range of development, mostly in military government departments, and low marketization.

With the emergence of a series of information security issues such as Prism Gate, the country has begun to deploy corresponding policies at all levels to accelerate the pace of domestic operating systems around 2011.

South Wind Project

It is reported that in 2014 the country began to deploy the South Wind plan for the localization of the entire chain of information engineering. Its main purpose is to promote the localization of the entire chain of information engineering from servers, CPUs, operating systems, middleware, databases to application software.

From the early 15 institutions that piloted the Nanfeng No. 1 plan to the No. 2 plan in 2018, 63 government units have participated.

Encore Industry Alliance

The Encore Industry Alliance (Safe and Reliable Technology and Industry Alliance) is also a non-profit alliance involving multiple fields and involving an entire industrial chain. Its predecessor was the “Information Technology Application Innovation Working Committee” established in 2016. It is a social organization initiated and established by 24 units engaged in the research, application and service of key software and hardware technologies.

2020-2022 is the most important time for the country to promote the construction of the Encore Industry Alliance (safe and reliable technology and industry alliance), and the market will appear as a new outlet for Encore. There has been a wave of localization of the entire chain from basic hardware equipment to basic software to application software and finally reaching information security. At the operating system level, the market urgently needs products that domestic companies can master the code independently and also meet the needs of companies. The Encore Industry Alliance currently has 180 member units, including 15 operating system companies.

1.3 The current status of substitution of domestic operating systems

Although Microsoft, Google, Apple and other foreign companies have a near monopoly position in the operating system market, at this stage, there have been operating system companies with a certain scale and mature products in my country, such as Tongxin Software and Kylin Software. In addition to the party, government and military system procurement, in some specific domestic fields, such as high-tech scientific research institutions and companies that value information confidentiality, domestic OS companies have gained a stable market share.

Not only high-tech scientific research institutions, information security companies, and PC manufacturers, but Chinese mobile phone manufacturers and other terminal manufacturers also have concerns about the supply of foreign companies’ operating systems. Hardware manufacturers such as Huawei and Xiaomi hope to use the “soft + hard” model to construct an IOS system similar to Apple to enhance the independence and bargaining power of enterprises.

Although domestic operating systems are less visible in the C-side market, they are not a blue ocean either. In the industry, there are companies such as Tongxin Software, Tianjin Kirin, and Zhongke Fangde, as well as Internet companies such as Tencent, Ali, and 360. The domestic operating system market has formed a “national team”, private leading companies and Internet companies. .

2. Domestic PC operating system track

2.1 The domestic PC operating system track presents a situation of “Tongxin vs Kirin” competition

The Kylin software and Tongxin software in the domestic PC operating system are relatively mature, with products such as the winning Kylin, Galaxy Kylin, Deepin System, and UOS, and the remaining players are small in scale. Kylin Software is the main software brand created by China Electronics in 2019 by integrating its winning Kylin and Tianjin Kylin, and Tongxin Software is a private enterprise giant established by the merger of Wuhan Shenzhidu and Wuhan ArcherMind at the end of 2019.

The shareholders of Tongxin Software include ArcherMind, 360, Liu Wenhuan, and NSFOCUS, among which private capital is relatively large. ArcherMind, the major shareholder, holds 44.44% of the shares. It is a listed company that provides intelligent technology hardware terminals and software outsourcing services.

As the predecessor of Tongxin Software, Wuhan Shenzhidu has been at a loss for a long timeHowever, the loss situation is gradually improving, and its operating income has remained at around 7 million for a long time.

Wuhan Shenzhidu’s performance (Source: Sorted by Industrial Securities Research Institute)

According to ArcherMind, the listed shareholder of Tongxin Software, the operating income of Tongxin Software in the single quarter of Q3 totaled 106 million yuan, and the operating income in the first three quarters of 2020 reached 145 million yuan, which already has a certain market scale. In addition, Tongxin desktop operating system launched the V20 personal version product based on the Linux kernel in September this year. The company has a certain layout on the G-side and C-side. Although Tongxin Software has not been established for a long time, it is still unable to make profits due to product iterations and expansion of talents, but it has shown the recognition of the market and the government.

In recent years, ArcherMind’s operating income has also been relatively stable, showing an upward trend. The expected income in 2021 can reach twice that of 2019.

ArcherMind’s operating income and growth rate

Kirin Software’s shareholder, China Software, holds 34.93% of the shares. The shareholder Tianjin Advanced Technology Research Institute was established by the Institute of Automation of the Chinese Academy of Sciences and the People’s Government of Dongli District, Tianjin, with a shareholding ratio of 7.55%. Kylin Software relies on China Electronics for market resources, which has more abundant G-end customer resources.

Kirin Software’s major shareholder, China Software, has revenue of 844 million yuan in the third quarter of 2020, a year-on-year decrease of 21.90% due to the epidemic, but the decline has gradually narrowed. Since 2011, its operating income has been slowly increasing. The second half of 2020 will be the bidding stage for Xinchuang. China Software’s single-quarter sales expenses in the third quarter were 70 million yuan, an increase of 48.94%, which played a certain role in supporting the company’s Xinchuang bidding results. Therefore, China Software’s expected revenue growth rate in 2020 will reach 60%.

An analyst from the Middle East Wu Securities Research Institute believes that the development of the Xinchuang industry has entered an explosive period, and the leading indicator contract liabilities and inventory of China’s software have reached the highest position in history, and it is about to enter the realization stage.

China software operating income and growth rate

Although the market opportunities for domestic operating systems are more in the B-side and G-side, the two top players have different shareholder backgrounds, and they have also chosen a relatively different play: Tongxin Software is more and international mainstream operation The system competes in the B-end and C-end markets, while Kylin Software relies on the market resources of China Electronics and other central enterprises to quickly accumulate a large number of orders in the domestic G-end market

2.2 The winning Kylin and Galaxy Kylin under Kylin Software are the main operating system products in China

As a veteran player, Kylin Software started early and has a strong first-mover advantage. At the same time, its “national team” player background also provides a good customer base, and the government has the highest recognition.

Compared with Tongxin’s choice of product development based on the Debian system, Kirin has learned from more versions of Linux to provide more customized and diversified products because of clear customer needs. Galaxy Kylin uses Linux, Mach, K42 and other kernels, while the winning Kylin chose Fedora kernel. The overall product matrix of Kylin Software includes Galaxy Kylin V4, V10 and the winning Kylin V7.0, which is more diversified.

It is reported that Kylin operating system has a Windows-level market share among domestic operating systems in the domestic market. Before the release of the Galaxy Kylin operating system V10, the Galaxy Kylin operating system has ranked first in the Chinese Linux market share for 9 consecutive years, and has played an important role in the Chang’e Lunar Exploration, State Grid, Beijing Subway, and airline ticket systems. . At the V10 press conference, Liao Xiangke, an academician of the Chinese Academy of Engineering, said that more than 10,000 party and government enterprises in my country have adopted the Kylin operating system.

2.3 The rising star UOS, backed by Huawei and other major manufacturers and technology companies, has also established a firm foothold in the market

Tongxin Software was jointly established by Wuhan ArcherMind and Wuhan Deepin at the end of 2019. Its operating system product is UOS (Unified Operating System), based on Deepin operating system from Wuhan Deepin.

As an open source operating system developed earlier in China, Deepin is the only operating system in my country that ranks among the top ten global open source systems. Deepin Desktop Environment developed by Deepin has won an order from the Turkish government.

In addition, Deepin has a relatively prominent performance in the domestic C-end customer base. Its products selected by Huawei and mounted on Magicbook Pro are a huge highlight of its layout in the consumer market.

Based on Deepin, the advantage of Tongxin UOS lies more in stability and user experience, which makes its user structure more diversified, covering B and C end users at home and abroad. As a widely used kernel in China, Linux is often criticized for its difficulty in software installation and high threshold for use. Therefore, Tongxin chose a more unified product line. UOS solves the problem of platformization of system software installation portal by setting up UOS software mall as its only entrance.

In 2020, it has released a Final version for partners and a Release version for end users.

3. The target customer group has seen C-end expansion, but currently it is still concentrated on the G-end

In the PC operating system, Windows in the C-end market has achieved a unique monopoly position relying on product pre-installation and a mature ecosystem, and has a great market influence. For information security factors and the tendency of localized substitution, the G-side customer base is a better starting track for domestic operating systems.

Although thanks to the advantages of the technical route and the cooperation with the C-end manufacturer Huawei, Tongxin Software, as the leader of domestic operating systems, has begun to expand the C-end market, but it is still in the early stage of expansion. There is no product in the industry that can really compete with Windows in the C-end market. Whether it is leading domestic operating system companies such as Tongxin and Kirin, or new forces such as PricewaterhouseCoopers and Wanlihong, more are still tapping the B-end and G-end markets.

In accordance with the requirements of our country’s party and government organs’ computer equipment localization replacement policy, the government will replace about 20 million foreign equipment in the past three years. If the operating system customer unit price remains at about 400 yuan, the incremental market size generated by the overall replacement will reach 8 billion RMB. After the change, if the G-end and state-owned PC market can still maintain tens of millions of new units per year, the operating system market space will be around 4 billion yuan.

3.1 The market dominated by G-end still has great opportunities for growth, but the new forces have encountered the problem of acquiring customers

According to IDC data, China’s commercial PC market (excluding workstations) shipments reached 6.159 million units in the second quarter of 2020, an increase of 0.2% year-on-year. The commercial PC market gradually recovered from the impact of the new crown pneumonia epidemic in the first quarter. According to the second quarter shipment forecast, the annual shipment of China’s commercial PC market can remain above 22 million units in the future. According to data from the Purchasing Center of the State Administration of Management, the number of new PCs purchased and used for replacement by the government industry reached 4 million, while the annual shipment of commercial PCs was about 18 million.

The price of the operating system is different due to different user needs. The official pre-sale price of the UOS V20 operating system is 99 yuan, and the price of the domestic C-side operating system is generally around 200 yuan. Most of the B-end domestic operating systems currently need to be customized according to customer needs, so prices have not been publicly released. According to industry insiders, the unit price of a PC operating system in government industries such as the party, government, and army is around 400 yuan/set, while the price of an operating system in the commercial market is about 300 yuan/set.

According to the above data, the annual sales scale of my country’s commercial PC operating system can be calculated:

China’s PC operating system market size

In my country’s PC market of hundreds of billions of yuan, it is conservatively estimated that there is an annual market space of 7 billion yuan for commercial PC operating systems.

With the rise and popularization of technologies such as the Internet of Things and edge computing, the commercial prospects of server operating systems also have a large upward space.

According to Soochow Securities’ forecast, annual server shipments will reach 4.6 million units in 2024. Assuming that the unit price of server operating systems is 7,000 yuan per set, the proportion of important industries using commercial version OS is 2/3. By 2025, my country’s annual server operating system market will reach RMB 21.5 billion.

3.2 Domestic mobile phone operating system

In 2019, the market share of smartphones running the Android operating system in the Chinese market was approximately 75.44%; followed by the iPhone with a market share of approximately 22.49%. In the Android operating system, Android 8.1 accounted for the highest proportion of 20.03%, Android 6.0 accounted for 16.16%, and Android 8.0 accounted for 14.96%. Although Android 9.0 accounted for 12.18%, it increased by 8% from the previous quarter.

In the second half of this year, through the IOS14 system update, Apple brought small components, App resource library, and overall more compact and efficient design to increase its adoption rate in compatible devices. According to Mixpanel data, the adoption rate of iOS13 on all compatible devices was 20% last year. But this year this rate is expected to reach 25%.

At present, many domestic manufacturers are working hard on the operating system track, including Xiaomi’s MIUI, Meizu’s Flyme OS, Hammer Technology’s Smartisan OS, and the OMS operating system developed by China Mobile and Google. These systems are all based on the Android system.

There are also well-known products such as MIUI and Hongmeng in domestic mobile phone operating systems, most of which are self-developed versions of mobile phone manufacturers.

Xiaomi’s MIUI released its first internal beta version as early as 2010, and has completed dozens of iterative updates to date. It is the operating system for Xiaomi and Redmi mobile phones. Its design focuses on a simple style and provides a more personalized interface based on Xiaomi’s young target customer group. Its early version is equipped with relatively complete small controls to improve the operating experience, and supports file and photo transfer with OPPO, vivo, and Xiaomi notebooks.

Huawei’s Hongmeng operating system started not as early as MIUI, but due to Huawei’s full-scenario strategy, it has developed more scenarios with mobile phones as the core, including mobile office, sports health, social communications, media entertainment, etc. Consumers will be able to see Hongmeng’s presence on terminal devices such as watches, cars, and screens in the future.

In September of this year, the Huawei 2020 Developers Conference announced that the Harmony OS would be iterated to version 2.0 (HarmonyOS 2.0) and started to open source terminal devices with memory less than 128MB. It is planned to open source all devices above 4GB in October 2021.

HarmonyOS 2.0 is a distributed operating system for all scenarios. Huawei has a large base of end users, and Hongmeng operating system can more easily acquire customers through pre-installation and other means. But if you want to retain users or use the operating system as a highlight of its products, the system ecology is essential. Therefore, Hongmeng chose open source for developers and application manufacturers in order to obtain terminal players and developers other than Huawei’s own hardware products, so as to build a “product + ecology” moat similar to the Windows model.

In addition, OPPO’s operating system ColorOS has been iterated to version 11. A few days ago, vivo also launched its self-developed mobile phone operating system OriginOS at the Developer Conference. Its main features are mainly in appearance and interaction. At this stage, almost every mobile phone manufacturer will customize the operating system according to its target customer group and products, and the arms race of manufacturers has also risen from the hardware level to the software level. At the same time, there are also systems that open to third-party hardware vendors like Hongmeng. Therefore, the mobile operating system industry will also be a force that cannot be underestimated in the domestic operating system in the future.

3.3 Domestic server operating system

On the whole, in the server field, Microsoft still occupies nearly 90% of the market, and Linux as a whole has about 10% of the market.

The market share of domestic operating systems is similar to that of PC and mobile phone operating systems, with a relatively low share, and users are more inclined to Windows and Linux products.

Domestic companies such as Puhua, Ningsi, ZTE, Zhongke Fangde, and Galaxy Kylin all have related server operating system products.

Server operating system users mainly choose products based on their application requirements, such as development language, database type, and usage habits.For example, ACCESS and SQL databases are more suitable for Windows systems and MySQL is more suitable for Linux systems.

In addition, Windows, as a single-user, multi-tasking operating environment, is easy to use and friendly to small users. More small businesses will favor Windows Server due to factors such as usage cost. Different distributions of Linux have different strengths: Debian focuses on stability; Ubuntu has better compatibility.

The domestic server operating system track is narrower than that of PCs and mobile phones, and the audience is B-end users with higher professional needs. Therefore, the server operating system track may not have the monopoly of Windows operating system on the PC side, and its market localization replacement process will be faster than PC and mobile phone operating systems.

Huawei is also laying out in the server operating system. In September 2019, Huawei’s server operating system EulerOS was open sourced, and the open source was called openEuler. Afterwards, PricewaterhouseCoopers and Tongxin Software successively launched operating systems based on Huawei Euler servers. The Huawei openEuler community has brought together operating system companies and research institutions such as Tianjin Kylin, PricewaterhouseCoopers, Deepin Technology, and Winning Software. In the future, consumers will be able to see more openEuler LTS commercial releases.

3.4 Entrepreneurs’ life is not easy under new opportunities

Different from other customer groups, the migration cost of government customer groups is higher, and the top manufacturers also have a technological moat against domestic competitors. Domestic head manufacturers, such as Tongxin, which have a certain degree of competitiveness in the international market, still face great pressure on the G-side Kylin software.

ArcherMind, the major shareholder behind Tongxin Software, has achieved tremendous growth in its share price in 2019 and 2020, from less than 30 yuan in the first half of 2019 to a high of 271.53 yuan in March 2020. However, ArcherMind has seen a continuous decline in the second half of 2020.In addition, China Software, the major shareholder of Kirin Software, also fell after hitting a high of nearly 130 yuan in mid-2020.

This may be because investors have doubts about the performance of Tongxin Software in the bidding of Xinchuang that started in June this year. The results of this round of Xinchuang’s winning bids are not announced to the public. Many regions adopt the form of sub-recruitment and sub-signature. At present, it is not possible to know the winning status.

New players can neither face mature overseas products such as Windows, nor can they shake the status of old players in the G-end market.

4. Why is the domestic operating system of the whole chain still not popular?

The domestic operating system started a bit later than in Europe and America. At the beginning of the 21st century, my country began to develop the Red Flag Linux operating system. So far, there are a number of companies that can be commercialized, but the overall market is small.

The landing application scenarios of operating systems are almost all over the entire electronic product industry, ranging from computer external cameras, smart watches, alarm clocks, to large-scale equipment operating systems.

Domestic Hongmeng, PricewaterhouseCoopers and most domestic operating system companies focus on IoT operating system business, such as small smart terminals such as cameras and watches, as well as vehicle operating systems. There are not many companies dedicated to server and desktop terminal operating systems.

In the face of numerous subdivided operating system tracks, is the domestic capability of the domestic operating system unable to expand?

4.1 Where is the moat of the domestic operating system?

Although the domestic operating system did not meet people’s expectations, domestic hardware has already performed well. Whether it is PC, mobile phone or tablet, there are relatively strong domestic brands in China, and the market structure is relatively healthy in other smart hardware fields such as watches and cameras.

There are already abundant operating system hardware carriers in China.

The operating system is an intermediate of software and hardware, and products will eventually land on the hardware. Therefore, Windows and IOS can rely on their pre-installed advantages to have a solid competitive barrier on the operating system track. The B-end and G-end customer groups have certain customization requirements, and the software and hardware bundled sales model will encounter certain obstacles. However, C-side products are generally standardized. Consumers have a high cost of replacing the operating system. Few people will replace the operating system for no reason after purchase.

Therefore, localized hardware has given the operating system a good moat, and manufacturers such as Huawei and Xiaomi have already taken advantage of the hardware carrier.

In addition, compared to the hundreds of thousands of pricing for Windows and other systems,Domestic operating system has a price advantage. It is reported that part of the domestic C-side operating system is free to use, and the charged price range is also between two or three hundred yuan, which is much lower than that of foreign companies.

4.2 Does the industry have mature domestic soil?

The concept and research and development of the whole-chain localized operating system have gone through more than ten years, and consumers still cannot see the domestically manufactured operating system with market status. This has a certain relationship with the underlying equipment, technology and the importance of the industry, but the situation has improved.

The operating system track now has no shortage of money or policies.

In the domestic operating system track, there are leading companies such as Tongxin Software and Kirin Software with the background of shareholders of listed companies. There are also Internet giants such as Tencent and 360 in the industry. With the rapid development of the Xinchuang industry, leading companies with extensive layouts such as Huawei’s Chinese Academy of Sciences and CEC have emerged in China. The future market structure may still change. As a key part of the information technology innovation industry, the operating system track is not “short of money.”

In addition, the complex international environment and the monopoly position of foreign enterprise systems also make the industry not “lack of policies”. There are “national teams” such as Chinese software in the industry.

The soil of the product is the chip level, software ecology and system engineer.

In addition to the influence of other external factors, as a bridge between the software and hardware of the smart terminal, the operating system needs to be directly connected to the terminal’s CPU and desktop software. To complete an excellent full-chain localized operating system, you must have the appropriate computing power Level domestic chips and rich software ecology.

Unfortunately, the overall level of domestic chips is low. If you want to face the C-end market directly, there is a certain gap in the level of domestic chips compared with overseas brands such as Qualcomm at this stage, and domestic CPUs have obvious computing power shortages and heating problems. But this kind of problem mainly exists in C-end products, and B-end products have a large number of basic office requirements, so their requirements for underlying computing power are low.

36Kr Investment Manager Liu Yanting said that because most of the domestic operating systems currently target customers are not in the C-end and some B-end markets with high computing power requirements and heat dissipation requirements, but in the B-end basic office based on the party, government and military. market. The low computing power demand market does not want to face higher chip purchase and use costs brought about by excess computing power, and domestic chips can meet its demand for CPUs and also meet its requirements for the localization of the entire chain. Therefore, the domestic underlying computing power level has little impact on the development of domestic operating systems at this stage, and it cannot be regarded as a bottleneck.

Main chip

As a whole, domestically-made CPU chips already have commercial capabilities. Among operating system-related chips, Huawei’s Kunpeng, China Electronics Group’s Feiteng, Chinese Academy of Sciences’ Loongson, and Tianjin Haiguang’s Haiguang chips have high adaptability and applicability in the industry.

Want to play a big game of chess requires a competitive system ecology.

At the software level, with the exception of the head’s Tongxin software and Kylin software, other early players have a relatively small market size, and often systems need to adapt to the head software for development. The OA interfaces of domestic applications are relatively scattered, and operating system developers need to make different interfaces accordingly, and the cost of the system to be compatible with other applications is relatively high.

According to relevant sources, some software will charge operating system companies an adaptation fee for the new system production interface, and the price of the head software can reach tens of millions of yuan.

The software ecology of the operating system directly affects the consumer experience. At this stage, the domestic operating system does not have the right to speak at the Windows level, and developers will not actively come to join the community ecology. The product ecology is more important for C-end consumers. In the domestic operating system track, Huawei and other manufacturers use hardware voice and open source models to attract developers to join to avoid the closed ecological closed loop of “no developers-no applications-no consumers-no developers”.

However, the software ecology requires a certain amount of time to accumulate, and it is difficult to see products that can directly compete with Windows in the short term.

A large part of the cost of a mature operating system will come from OS engineers, but are there enough engineers in China?

According to relevant sources, there is a gap in OS engineers in the industry.

“The income of OS engineers often does not reach the level of other IT engineers in the same period, which has led to a great brain drain. The industry needs real OS engineers, but they will also have the ability to get better returns in the software industry.”

It is reported that the head of the industry has started the recruitment plan of 5000 people this year, of which R&D personnel accounted for about 60%, adaptation personnel accounted for 10%, and technical personnel accounted for nearly 80%. Kylin Software also plans to form a team of 10,000 people within five years. It is no secret that the industry is rushing to expand.

Therefore, the domestic operating system has deficiencies in the underlying equipment and talent technology, but it is sufficient to support a larger market than the current situation.

4.3 Where are the new opportunities?

The rapid rise of the G-end market provides opportunities for the industry to flourish, but it is not realistic for the industry to shake up the mature B and C-end markets in the short term.

At the same time, the track is extremely vulnerable to the international political environment. If Sino-US relations deteriorate further in the short term, the industry will be blessed by more resources. On the contrary, if the relationship can be eased, the Xinchuang industry track will slow down, and it will be difficult for early operating system companies to survive without a customer base.

There are certain differences between the operating systems of different terminals, but the essence is still the same. The industry has the possibility of leading manufacturers to reduce dimensionality or cross-terminal integration.

There are multiple subdivided terminal scenarios in the operating system, and there are many players in the Internet of Things, servers, and mobile terminals in China. The monopoly of foreign companies’ products on multiple tracks also exists in the Chinese market, such as the high market share of Windows in PCs and servers. Therefore, the versatility of technology can bring players a lower marginal cost when facing different terminal scenarios. The PC-side mobile terminal has a greater potential for integration in the future due to similar functions. The OS in the IoT scenario has the characteristics of complicated hardware adaptation and strong product specialization, and unicorn-level enterprises may also appear.

The current rise of companies on the track is mainly due to the acquisition of G-end orders, but in the long run, the company’s eyes will not be limited to “internal friction”, but more will be on the B-end partners.

In addition to the C-end customer group, domestic operating systems will face a large number of B-end product substitution opportunities in the short term due to localization. If the layout can be completed at a lower replacement cost time point, it can cause a huge impact on the market structure. Shock.

In the past ten years, the share of Windows in the PC market in the United States has dropped from 88.76% in 2009 to 69.42% in 2019, a decrease of 19.34%. In the US market, Windows has already faced the challenge of the new system.

The reason for this change is the rise of Apple’s OSX. Although the overall ecology is not the same as that of Windows, Apple has seized a large number of PC market shares by virtue of its hardware advantages, while domestic hardware manufacturers such as Huawei and Xiaomi already have such a layout.

Although hardware manufacturers can develop their own systems, they often have limitations and cannot achieve cross-hardware and cross-domain integration. Therefore, operating systems are more likely to integrate software and hardware in the form of outsourcing. In the future, there will also be great opportunities for integration and growth in domestic vehicles, such as on-board operating systems for autonomous driving technology, domestic servers, and non-PC and mobile phones such as digital products.

In the long run, the decisive battle of the OS track will still be in the C-end market. C-end consumers have a high learning cost to replace a accustomed system, but if the system is pre-installed in a new hardware product, it may make them more willing to learn and get used to it. Therefore, bundling hardware is an important step for future operating system upstarts to expand their customers in a broader C-side customer base. After the extension of customers, how to enhance user stickiness depends more on the experience of the system.

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