High-speed Rail Food Chain Upstream Eaters - Tonghao Group

Why can the Tonghao Group monopolize the high-speed rail signal system market? How do the food eater on the food chain in the high-speed rail industry survive?

If the “July 23 EMU rear-end collision accident” did not happen, the myth of Tongling Group should be written like this:

Through a joint venture with foreign capital, digestion and introduction of foreign advanced technology, introduction of proprietary intellectual property products, and monopolization of China's high-speed rail signal system market, the Tonghao Group, which integrates design, production, and engineering, has been leaping forward with large-scale development of high-speed rail in the past five years. Revenue and profit have increased by 2 and 3 times respectively. In 2010, it became a large enterprise group with a revenue of 12.05 billion yuan and a profit of 1.26 billion yuan. In 2011, its joint-stock company held a listing ceremony in Beijing. If it is successful, in early 2012, the shares will be listed on the A-share market.

This is a typical success story of the rapid development of high-speed rail in China. In China's high-speed rail industry chain, state-owned enterprises—especially state-owned enterprises born out of the Ministry of Railways—are often the first-tier beneficiaries. On top of that, the Ministry of Railways, which was linked by blood in the past and peeled off from it in 2000, is a small company of various types who survive and eat high-speed rail orders.

However, the listing's dream of being listed in the derailment of high-speed trains is near collapse. As the general contractor of the Wenzhou-Shantou railway signal system, the signal system problems exposed by the accident made this company, which is entirely known as the China Railway Communication Signal Group Corporation (hereinafter referred to as Tonghao Group), become infamous overnight.

Their legendary independent intellectual property products did not stand the test of thunderstorms and the market. After the incident, its chief engineer flew to Wenzhou that night and was closed to a meeting. While other related companies have issued clarification announcements, only the Tonghao Group has remained silent until a statement of apology was issued on July 28.

Tracking source

The Tonghao Group was established in January 1984 and originally belonged to the Ministry of Railways. In 2000, the Tonghao Group was decoupled from the Ministry of Railways and transferred to the State-owned Assets Supervision and Administration Commission. It is a large state-owned enterprise under the direct control of the State-owned Assets Supervision and Administration Commission. China Railway Group and China Railway Construction Co., Ltd. call China Railway construction three major auxiliary companies. According to the State Administration for Industry and Commerce, the registered capital of the company is 1.482 billion yuan, and its legal representative is Ma Yong.

2006 was the start-up year for high-speed rail construction in China. At that time, the Tonghao Group had a profit of only RMB 300 million and operating income of RMB 4.2 billion. After two years, its operating income has increased to 6.21 billion yuan and its profit is 560 million yuan. Because of its small scale, the SASAC has intended to merge it with China Railcom. However, due to the high-speed rail investment and the construction of express trains, the company that had been merged with this insurance soon began its miraculous development.

Since 2008, the annual investment of China's high-speed rail has doubled from the previous year, rising to 337.6 billion yuan in one fell swoop, and rising to 600 billion yuan in the following year, reaching 709.1 billion yuan in 2010. The automatic train control system can be called "the central nervous system for railway operation." It accounts for about 10% of the total investment in high-speed rail construction and is firmly controlled by the Tonghao Group.

Thanks to the general contracting qualification of communication and signal engineering, Tonghao Group has participated in numerous high-speed rail projects and formed an industrial chain integrating design, production and engineering. In 1986, it established a joint venture company with Alstom Cosco Signal Limited. The company has a registered capital of 100 million yuan, which is the first Sino-foreign joint venture of China Railways.

Beijing Quanlu Communication Signal Design and Research Institute (hereinafter referred to as Tonghaoyuan) is the group's design unit. Its core technologies include the CTCS-3 level train control system, claiming to have independent intellectual property rights. The system is based on GSM-R wireless communication to achieve two-way transmission of vehicle-to-ground information and a train control system that generates driving licenses from the Radio Block Center (RBC). According to the company, "The system adopts advanced technology to monitor real-time monitoring and overspeed protection of the train under high-speed operation, such as operating speed and operating interval, and monitors the safe operation of the train with the target distance continuous speed control mode and equipment braking priority."

The signal system technology owned by China Tonghao also includes: automatic blocking system, computer interlocking system, train dispatching and command system (TDCS), dispatching centralized system (CTC), localized automatic train protection ATP system, station train control center and transponder System, hump automatic control system, turnout conversion security system, etc.

From 2006, with the rapid development of domestic railway construction, Tonghao Group gradually emerged from the predicament. In 2008 alone, Tonghao Group completed the passenger dedicated line construction projects such as Wenfu, Yongtaiwen, and Wuhan-Guangzhou, and successively carried out the construction of special passenger lines such as Hainan East Ring, Shanghai-Nanjing, Shanghai-Hangzhou, Hadah, Xiangyu, Hangzhou-Ningbo. project. Contracted to undertake the Beijing-Shanghai high-speed railway communication signal project. In 2009, the Group signed a total of 7257 contracts with a total contract value of 19 billion yuan.

Since 2010, Tonghao Group has provided communication signals for high-speed railway construction projects such as Beijing-Shanghai, Ha Da, Guangzhu, Guangzhou-Shenzhen, Xiangyu, Hangzhou-Ningbo, Hefei, Xiamen, Xiamen, Nanguang, Chengmianle and Wuhuang. System integration and column control core technology. In respect of its overseas operations, the Tonghao Group has received orders for the Pakistani Railway Project, the Saudi High Speed ​​Rail Project and the Tehran Metro Lines 1, 2 and 4 in Iran.

In 2010, the Tonghao Group's performance jumped, its operating income and profits increased to 12.05 billion yuan and 1.26 billion yuan, respectively, three times and four times in 2006. On December 29, 2010, its joint-stock company, China Railway Communication Signal Co., Ltd. (hereinafter referred to as Tonghao Co., Ltd.) was established in Beijing and introduced China National Machinery Industry Corporation, China Chengtong Holding Group Co., Ltd., and China Guoxin. Shareholders such as the controlling limited liability company and China National Jinjiacheng Investment Management Co., Ltd. have a registered capital of 4.5 billion yuan.

Tongxiang shares inherited all the backbone enterprises, qualifications, and main businesses of the Tonghao. After reorganization, the assets and personnel of the joint-stock company exceeded 98% of the group's total assets and personnel. It has integrated railroad and urban rail transit communication signal systems, R&D and design, Equipment manufacturing, construction, operation and maintenance of a complete industrial chain.

Occupy the mysteries of the high end of the food chain

The Tonghao Group is located at the top of the food chain of the high-speed railway, and is generally contracting the signal system project, and then either designating its subsidiaries to produce, or subcontracting part of its business through tendering.

On May 9th, 2008, Tongyue Group and China Railway Electrochemical Bureau jointly signed a contract for the construction of a new four-circuit system for the integration of railways in Ningbo-Taiwan Railway with Zhejiang Provincial Co., Ltd. The Ningbo-Taizhou temperature line is from the original Ningbo East Railway Station to the newly-built Wenzhou South Railway Station. The line has a total length of 274.106 kilometers, and the maximum speed is 200 kilometers per hour. The number of the communication signal system that the Tonghao Group undertakes for the contract is approximately RMB 500 million. The number of the Beijing Engineering Branch Company is responsible for communication and signal engineering as a whole, and the signal construction tasks are all borne by them.

Previously, Tonghao Group and the Electrification Bureau had jointly undertaken several projects for the "four powers" construction projects of the Beijing-Tianjin-Hebei, Guangzhou-Guangzhou inter-city and Wuhan-Guangzhou passenger specialties.

On August 18th, 2008, the system integration project of Yongtai Electric IV (communication, signal, traction power supply and power supply system) started. At that time, the Tonghao Group also won the bid for the introduction of the Fuzhou Hub Communication and Signal System Project. The signal system includes the CTC system, interlocking system, blocking system, train control system ground system, and signal computer monitoring system.

After consulting the public information, Caixin “New Century” reporter found that the Tonghao Group has taken over most of the newly built railway communication signal system projects in recent years. After getting the project, Tonghao Group subcontracted the design, production, and engineering contracts, and several companies in the Tonghao Group eventually became suppliers.

When inquiring about the bidding for communication and signal materials on the Ningbo-Taiwan-Wenzhou Railway, Caixin’s “New Century” reporter found two tender announcements, but could not find the subsequent successful bid. According to the “Economic Observer” report, Tongyu Group immediately split the project after receiving the project, including Shanghai Tieda Telecom Equipment Co., Ltd., Beijing China Railway Power Technology Development Center, and Fiberhome Communications (600498.SH) Technology. Corporations, etc. are all bid-winning companies.

In the Yuwentai communication signal system, the ZPW2000 automatic blocking system was provided by the Tonghao Group and completed by its Guangzhou branch. The communication and signal engineering of Ningbo-Taiwan-Wenjia special communications will be entirely responsible for the Tongyuan Group Beijing Engineering Branch, and the signal construction tasks will also be entirely borne by the company.

The communication signal system is integrated and provided by Beijing Quanlu Communication Signal Research and Design Institute. It is also a subsidiary of Tongtong Group. The railway signal centralized monitoring system (formerly railway signal microcomputer monitoring system) equipment on the Yongwen line is provided by the brilliant technology (002296.SZ) listed on the small and medium-sized board.

GEM listed company Beijing Century Real Technology Co., Ltd. (300150.SZ, hereinafter referred to as Century Riel) provided two products for the railway communication monitoring system and the railway comprehensive video monitoring system for the Yongtaiwen Passenger Dedicated Line. The railway communication monitoring system mainly monitors the operation of equipment in the railway communication equipment room. The railway comprehensive video monitoring system mainly provides video image monitoring services for the railway department.

The disaster prevention safety monitoring and control system project was provided by Gentec Anda, which is a subsidiary of Changzhou Genchuang Group in Jiangsu. According to Caixin’s “New Century” reporter previously understood, the relationship between Jinchuang Group and Luo Ma’s Ministry of Railways Director of Transportation Zhang Shuguang is very close. close.

The transportation dispatching command system and the train control system center (FZk-CTC system engineering) of Handanwentai Line are provided by Casco Signal Co., Ltd., a joint venture between Tongyu Group and Alstom of France. Casco also won the bid for the Beijing-Shanghai high-speed rail signal system. Jiaxun Feihong (300213. SZ) provided the "MDS multimedia command and dispatch system" for the Yongtaiwen line.

According to an article by Li Jia, a researcher at Tongyuan Academy, entitled "Introduction to the Integration of Fujian-Taiwan-Wanzhou Railway Signaling System," the CTCS-2 reminds the construction of a train control system on the Taiwan-Taiwan-Wenzhou thermal line. The ground equipment is controlled by the train control center and the station. Line control security information network, ZPW-2000A track circuit, LEU, point response equipment. All stations in the railway line are equipped with corresponding ground control equipment to ensure the integrity of the ground train control message in the CTCS-2 operation section. The EMUs running on this line should be equipped with CTCS-2 class-controlled on-board equipment (ATP) and transport controllers. Passenger trains and freight trains running on this line should be equipped with locomotive signals and transport controllers. The leading CTCS-2 designer is the Tonghao Design Institute under the Tonghao Group.

In addition, Hollysys (Nasdaq: HOLI) is a supplier of two-train ATP systems for cars.

In August 2009, the Fujian-Taiwan temperature line communication signal project was completed, and the Tonghao Group was honored at the joint trial meeting of Yantai Wenyu Railway and Wenfu Railway. At that time, the EMU of the railway line hit a maximum operating speed of 292 kilometers. Tong Weizhong, deputy general manager of Tonghao Group, is the person in charge of the project.

Tonghao Group is able to monopolize the automatic train control market. It is considered that it was born out of the Ministry of Railways and considered as an “inside company.” During the Spring Festival, the leaders of the Ministry of Railways continue to express their condolences to the Tonghao Group.

Although telecommunications companies such as Huawei and ZTE have beaten many multinational telecommunications companies including Siemens and Nortel in the field of international communications, they have repeatedly won bids in high-speed railway passenger data network projects, but their communication signal systems It has so far failed to gain access to the Ministry of Railways.

According to an industry source, getting into the railway industry and obtaining the certification of the Ministry of Railways is crucial. According to the requirements of the Ministry of Railways for the bid of the consortium (that is, it must be joint venture with foreign companies), even if some off-road companies have the corresponding technology and already have similar products, if there is no performance, it will be difficult to become a qualified supplier of railways, generally only with foreign companies. It is only possible for the alliance to enter the market.

The real "shortlisted" is not necessarily a good company. "The procurement catalog is divided into first and second grades. When it was first introduced in previous years, it mainly depends on relationships. Many of them are unknown companies in the industry; in the past few years, they have slowly adjusted and now they have at least been project companies."

Benefit eater characteristics

As for the companies in the downstream food chain under the Tonghao Group, there are a lot of situations. Some of them have no technology. They are just the channels used by the Tonghao Group to “walk through”, such as China National Electric Import and Export Co., Ltd., while others rely on relationships. , Half rely on technology, from below the pass number, brilliant technology, Trek, Jiaxun Feihong, Century Riel are in this column.

In the railway system, product procurement and project contracting on a stipulated scale must be conducted through tendering and bidding. However, from the Ministry of Railways to the general contractor, tendering tends to take shape.

In August 2000, Shanghai Electric Import & Export Corporation, a wholly-owned subsidiary of China National Electric Power, won the bid for the automatic blocking system of Guiyang-Luandi West Line. At the time, Ren Zhipeng, chairman of CLP, said: “At that time, it was a typical landmark. Only CLP and its wholly-owned subsidiary, Shanghai Electric Import & Export Corporation (hereinafter referred to as Shanghai CLP), were the only bidders. It is CLP.” Another CLP source also revealed that there were two packages at that time. Originally, CLP Corp. and Shanghai CLP were originally prepared. As a result, there was a problem with quotation. All of them made Shanghai CLP a winner.

However, rather than the standard in the CLP, it is better to say that it is the props of the Tonghao Group at the front desk. In December 2000, after the execution of the contract, Shanghai Zhongdian signed an agreement with the Beijing Tonghaoyuan to generate 9.21 million yuan of the 9.77 million yuan in profits from the project, to consult the bidding documents, foreign trade contracts, and domestic trade. The technical terms for the preparation and verification of contractual technical terms, technical service fees for the supplied products, and technology transfer fees were transferred to the No.

According to Zhai Zhipeng, the bidding for the project was actually a project that was first designed by Tongyuan Hospital, including the selection of equipment and the identification of manufacturers. They also helped CLP to produce bidding documents, and then “recommended” suppliers to CLP. Said that the entire process design unit is operating in one hand. Its "recommended" manufacturers are the railway signal factories of the Tonghao Group in Beijing and Shanghai.

The latter type of companies are more competitive than Zhongdeng and have been listed in recent years. However, for investors, the biggest risk is the high dependence on railways. In addition to the glorious technology listed earlier, listed on the small and medium-sized board, the remaining four with high-tech, high-growth and other halo on the GEM. In 2008, Hollysys selected the US Nasdaq Stock Market.

These "parasitic" companies play an important role in high-speed rail signal, monitoring, train control, dispatch, and disaster prevention systems. They have some common features.

First, the establishment of a short time, small scale, rapid growth in performance in the recent five or six; Second, the order is highly concentrated, the main business is a single, mainly by eating high-iron cake survival and development. Third, the founders and senior executives were born in railways.

The prospectus of the brilliant technology shows that the company is the main contractor of the designated enterprises of the Ministry of Railways, the high-speed rail signal monitoring system and the disaster prevention and safety system. Its railway signal microcomputer monitoring system, disaster prevention system and wireless shunting system occupy a high proportion in the high-speed rail. Share. In the three years prior to the listing, revenue from the national railway market accounted for 76.35%, 66.80% and 77.42% of the main revenue respectively. As of the 2010 annual report, the company's railway communications and signal industry revenue reached 244 million yuan, accounting for up to 98% of the main income of 250 million.

Similarly, Jiaxun Feihong's main business includes three categories: conventional dispatch series products, emergency command series products, and railway disaster prevention and security monitoring system products. These products cover almost 100% of the company's main revenue. One of the main businesses of Hollysys is railway signal and transportation automation. The business generated revenue of US$ 14.5 million in the first quarter of 2011, accounting for 27.7% of operating revenue.

Jiaxun Feihong's main products are the research and development and sales of command and dispatch products. The prospectus shows that the company's products include the three major products of conventional dispatch series, emergency command series and railway disaster prevention and security monitoring systems. At present, the national railway system has a total of nearly 6,000 stations (segments), of which more than 4,000 stations (segments) are using the company's products, of which, FH98 series of scheduling products in the railway market share of similar products more than 60%, FH-V088 series The market share of emergency command products is as high as 80%. In other words, Jiaxun Feihong’s products are on 75% of the national railway system.

As it relates to the safety of life and property, the railway department implements the necessary administrative licenses for procurement of dispatched communication products involving transportation safety, and sets higher product access thresholds through administrative licensing or special bidding to achieve the purpose of ensuring transportation safety. As a result, as one of the few communication and information companies in China that possesses the “Certificate of Railway Transport Safety Equipment Manufacturing Enterprise” certificate, Jiaxun Feihong has a monopoly advantage in the competition in the railway market. From 2007 to 2009, the railway market share It was 47%, 47% and 48%, respectively, ranking first in three consecutive years.

Century Ruire was founded in 1999 by Niu Junjie and Wang Tie, two naturalists who graduated from Northern Jiaotong University, and invested RMB 3 million. Now it ranks first in the railway safety monitoring system market with a 20% market share, and has accumulated more than 400 railways. The safety monitoring program, listed at the end of last year, raised 1.1 billion yuan and earned 234 million yuan.

Century Riel's prospectus shows that the company's main business is providing railway users with traffic safety monitoring system software products and related services.

The company's operating income from railway traffic safety monitoring system software products and related services in January-September, 2009, 2008, and 2007 was RMB 159.5 million, RMB 140 million, 85.43 million and 79.18 million respectively, accounting for The proportion of main business income during the same period was 97.09%, 92.89%, 93.74% and 95.97%, respectively.

These companies are bundled with the railway system in various ways. Brilliant Technology appointed Zheng Yujun as general manager in October 2010. Zheng Yujun began working at the Zhengzhou Railway Bureau in December 1980. He served as the director and deputy director of the Zhengzhou Railway Bureau office from December 2001 to September 2005. Since 2005, he has served as a member of the Party Committee, director, and deputy general manager of China Railcom Group Corporation. He also serves as chairman of China Railcom Engineering Construction Co., Ltd.

Tang Tao, an independent director of brilliant technology, is a professor at Beijing Jiaotong University and has served as the director of scientific research projects of various countries and railways, including the director of the Railway Transport Automation and Control Laboratory of the Ministry of Railways' key laboratory. Professional committee members, members of the Automation Committee of the China Railway Institute, members of the National Development and Reform Commission's subway equipment localization expert group, and members of the Beijing Urban Rail Transit Construction Expert Committee.

Lu Zhidong, director of test technology of Jiaxun Feihong, once worked at the numbering office of the Ministry of Railways Science Research Institute, and Yang Yong, director of the company’s integrated product line, worked as an assistant engineer at the Chengdu Research Institute of China Tonghao Corporation.

Century Riel's director, technical director, and deputy general manager Rui Jiangang, once worked as Engineer of Shenyang Signal Plant of the Ministry of Railways and Engineer of Software Center of the Ministry of Railways Communications Signal Corporation; Zhang Nuoyu, Deputy General Manager also served as China Railway Construction Engineering Corporation. Department engineer position.

In this industrial chain formed under the Chinese railway monopoly system, the competition rules are not transparent, and it is almost impossible to survive without relations. But the system that breeds on all kinds of nepotism is also exposed to high risks—risks may come from corruption cases, policy changes, or grey bidding and investment change processes.

Kinghand is an example. Jin Handde’s actual controller is Ding Shumiao, who relied on Ding’s special relationship. Jin Hande, which was established in September 2006, monopolized the high-speed rail sound barrier market in recent years. It mainly relied on the sound barrier technology introduced from the German company Xupulin Engineering Company. Apply for a patent in the country. After that, they successively won bids for projects such as the Beijing-Tianjin Intercity, Wuhan-Guangzhou, Zhengxi, and Guangzhou-Shenzhen-Hong Kong High Speed ​​Rail. However, after Ding Shumiao was involved in the case of Liu Zhijun, the company had already lost financing in progress and the listing plan came to an abrupt end. Now it is hard to find a buyer.