The recent data released by China's Ministry of Industry and Information Technology paints a promising picture for the software and information technology services sector, often referred to as the software industryThe figures for the first three quarters of this year show a notable revenue of 98.281 billion yuan, marking an impressive year-on-year growth of 10.8%. Additionally, the profit total reached 11.621 billion yuan, reflecting an 11.2% increase, while software exports amounted to 41.03 billion dollars, up by 4.2%. These statistics signal a robust performance by the industry against a backdrop of global economic uncertainty.

Industry experts attribute this positive trajectory to a series of factorsThe consistent growth in software revenue and profit margins, along with a rebound in export performance, are being driven by accelerating technological innovation and broader application across various sectors

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Notably, the software industry is fast emerging as a crucial powerhouse in cultivating new productive forces, evidenced by its adaptability and responsiveness to market demands.

The expansion of market space is substantiated by the ongoing demand growth and the operational strategies of software enterprisesAccording to Han Jian, director of the Institute of Informationization and Software Industry Research at CCID Consulting, the market's expansion is bolstered by the release of policy incentives aimed at modernizing equipmentFurthermore, software companies have increasingly prioritized technology R&D and brand development, enhancing their competitiveness and market recognitionThese firms are also more aggressively pursuing international ventures via collaborative efforts, resulting in positive outcomes in overseas market channels.

In line with the national focus on digital transformation and the integration of artificial intelligence, Wei Daisen, the vice president of Inspur Group, emphasizes that software firms have been deepening the application of new technologies and product innovations in various industries

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There is also a noticeable increase in market needs within sectors such as intelligent manufacturing and financial technology, which prompts software companies to fortify domestic and international partnerships and push for enhanced competitiveness.

Analyzing the components of revenue indicates a substantial share of software products and information technology servicesIn the third quarter alone, revenue from IT services reached 66.164 billion yuan, representing an 11.9% growth and constituting 67.3% of the industry-wide incomeKey business segments such as foundational software, integrated circuit design, cloud computing, and big data services demonstrated particularly high growth ratesZhao Gang, the director of the CCID Industrial Research Institute, notes that this trend is primarily driven by the accelerated innovation in IT applications from government and major corporate clients, which has facilitated the modernization of foundational software products, hence boosting the market share for domestically produced software.

Furthermore, the burgeoning demand for new energy vehicles and smartphones has increased the necessity for domestic chips, leading to growth in integrated circuit design outputs

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The drastic surge in artificial intelligence model training needs further propels the revenues of cloud computing and big data services"The technical advancements in the artificial intelligence sector are not just enhancing the revenue of related businesses; they are also catalyzing rapid development in areas like chip design," says Han JianHe adds, "As intelligence and cloud computing become the definitive trends in the software industry, we can anticipate continued stable revenue growth in information technology services, with its share of total industry revenue steadily increasing."

A significant leap in key areas is illustrated by Huawei's recent launch of its groundbreaking native Harmony Operating SystemThis represents China's first fully self-developed operating system, marking a milestone in the nation's advancement in this tech arenaYu Chengdong, Huawei’s executive director and chairman of the terminal BG, shared at the launch that over 15,000 native applications and services are now available, and devices utilizing the Harmony OS have surpassed 1 billion, with the codebase exceeding 110 million lines and a developer registration count hitting 6.75 million.

The operating system functions as a quintessential foundation software, acting as a vital infrastructure for the digital economy, with its development significantly impacting national security and industrial robustness

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There's an emphasis on establishing a self-reliant industry supply chain and reinforcing development mechanisms for critical sectors, including integrated circuits, industrial equipment, and foundational software.

This year has shown accelerated advancements in critical areas, leading to a series of significant milestones, with some emerging sectors reaching levels comparable to international standardsZhao Gang highlights that since early 2023, breakthroughs in large model technologies have led to continuous updates in foundational software, focusing on distributed computing, vector databases, AI operation monitoring, and network and data security systemsThe application of foundational software has expanded across government departments and industries such as finance, telecommunications, and energy, with foundational software products witnessing a revenue growth of 9.6% to reach 137.7 billion yuan in the first three quarters.

The revenue from industrial software products increased by 8.8%, hitting 210.4 billion yuan

As the industrial structure continues to evolve, China is investing significantly in independent innovation in areas such as intelligent product design, computer-aided engineering, and smart manufacturingThis has led to marked advancements in high-end industrial software, providing robust support for the digital and intelligent transformation of the manufacturing sectorThe domestic market share for industrial software is on an upward trajectory, buoyed by favorable policies regarding equipment updates in industrial fields.

As the efficiency of industrial software applications continues to rise, Han Jian notes that as of the third quarter of this year, the adoption rates for digital R&D design tools and numerical control rates in key manufacturing sectors have reached 82% and 64.6%, respectivelySolutions tailored to specific application scenarios are being launched, significantly facilitating digital transformation efforts.

The ongoing innovations driven by artificial intelligence are reshaping the software industry, positioning it as a key contributor to the cultivation of new productive capacities

With advancements in general and industry-specific large models, the sector is quickly advancing its smart transformation effortsAs of the end of July 2024, there are 197 generative artificial intelligence services registered in China, with many software companies harnessing large models to enhance functionalities in code generation, video production, and digital human services.

As Zhou Hongyi, founder of 360 Group, articulates, the focus on developing large models has traditionally emphasized rapid cognitive capabilities, which may lack complex reasoning abilitiesThe recent introduction of the o1 model by OpenAI, featuring a "thought chain" technique, demonstrates a significant step forward in enabling large models to replicate a more human-like reasoning processPrior to this, 360 Group had already implemented an expert collaboration method based on slower cognitive structures, amalgamating multiple models to improve their collective problem-solving capabilities.

Software is recognized as a critical vessel for digital technologies

Wei Daisen elaborates that digital productivity is a vital component of a new kind of productive capacityWith the empowerment brought about by large models and other digital technologies, the next generation of software is achieving greater connectivity, increased intelligence, and accelerated responsivenessThis shift is set to enhance digital value and further unlock digital productivity, streamlining the transition of enterprises into highly integrated, collaborative, and intelligent entities.

The software also serves as foundational support for technological innovationHan Jian observes that, on one hand, software embodies a universal technology essential for innovationTechnologies like the internet, cloud computing, big data, artificial intelligence, blockchain, and digital twinning—integral components of the new generation of information technology—are fundamentally software-driven

On the other, software acts as a catalyst for advancements in a multitude of scientific domainsBreakthroughs in crucial areas such as gene sequencing and stem cell research, the successful launch of scientific satellites like Wukong and Mozi, as well as stellar achievements in human spaceflight, lunar exploration, deep earth probing, and domestic aircraft carrier development, all underscore the pivotal role of software innovation.

Despite facing challenges, including economic uncertainties, reduced procurement budgets from users, and escalating losses for some enterprises, the software industry remains vibrantZhao Gang asserts that while growth rates may experience a deceleration in the coming year, the sector is expected to maintain a robust growth trajectory of over 10%, with substantial growth persisting in segments such as artificial intelligence, cloud computing, big data, integrated circuit design, and live-streaming e-commerce.

Han Jian forecasts that emerging software technologies, typified by cloud computing, big data, and artificial intelligence, will progressively reshape software technology, models, and ecosystem dynamics, continually generating new business growth points