China rising in medical equipment

Competitively priced products giving companies foothold in domestic and foreign markets

Guangzhou/Singapore-Chinese medical device makers are growing rapidly by offering cost-competitive products, increasing their presence at home, and in other countries.

More than 2,600 firms participated in the last China International Medical Equipment Fair, a semiannual event held every spring and fall. The venue for the fall show changes every year, while the spring show always takes place in Shenzhen, Guangdong Province, the nation's hub of medical equipment manufacturing.

Thanks to the development of the electronics industry, "90% of electronics parts and material can be delivered by car within two hours," said a Shenzhen city official. The city is the backbone of the new industry.

Extensive network
Mindray Medical International Ltd. once was one of those little startups in Shenzhen. It is now a major Chinese maker. The firm handles a wide range of products, including ultrasound image diagnostic devices, blood testing equipment and clinical test analyzers. It has an extensive sales network covering 190 countries and regions. In 2006, it became the first Chinese medical device maker to list on the New York Stock Exchange. For the five years through 2011, sales at the firm jumped by roughly 400% to $881 million.

Mindray was founded in 1991 by Li Xiting and others who left a local medical equipment maker to start their own firm. The firm focused on patient monitoring devices, which are used to check conditions of in-patients, because the market was large but money invested in this business was small.

With low labor and parts procurement costs, it succeeded in developing patient monitoring devices about 40% lower in price than those made by foreign makers, which dominated the Chinese market. Meanwhile, it expanded its market share by making steady efforts to meet demand in small and midsize clinics and hospitals in rural areas.

Many Mindray employees have work experiencce in the U.S. and Europe and are familiar with cutting-edge technologies in the medical industry. Co-founer Xiting is also the CEO. He once studied in France. He has made it that the office has no fixed seating, and workers often engage in heated discussions.

"The office has a free-spirited atmosphere like an American company," said a Japanese industry official. Many foreign visitors express surprise about the office environment.

Rising demand
It is hard for Chinese products to get sales approval in the U.S. But Mindray has established a foothold there through the purchase in 2008 of the patient monitoring business of U.S. firm Datascope Corp.

"In 2011, we achieved high growth, an increase of about 16-19%," said a Mindray official. Sales in the U.S. and other developed countries accounted for 24% of the firm's total in 2011. The percentage was still smaller than that in China and emerging economies, which accounted for 43% and 33%, respectively, but sales were picking up.

U.K. research firm Espicom predicts that medical device market in the Asia-Pacific region will grow by an annual average of 5.4% from 2012 to 2016 and that China would expand by 12.8% because improvements in living standards are pushing up demand for medical services.

Although China makes up less than 5% of the global market of medical equipment, major U.S. and European firms, such as General Electric Co. and Siemens AG, are also stepping up marketing operations in the country. Demand for inexpensive devices is growing fast in China, as income levels are not on a par with those in developed countries.

Foreign partners
Shandong Weigao Group Medical Polymer Co., China's leading maker of disposable medical supplies, sells various products, including syringes, catheters and surgical suture thread. It expanded its sales by 300% to 3.2 billion yuan ($513.1 million) in the five years through 2011.

The Shandong Province based firm has been teaming up with Japanese companies that are looking to cut manufacturing costs through these partnerships...

Resource: The Nikkei Weekly