Espicom View: China is set to substantially increase its output of X-ray equipment as a result of initiatives by multinationals targeting the rapidly expanding Chinese healthcare market and other high growth emerging markets in Asia and Africa.
The drive to exploit the rapidly growing Chinese diagnostic imaging market continues apace with several multinationals increasing their local production capacity to meet the specific needs of the Chinese healthcare market and other high growth emerging markets. In particular, the focus of attention is switching from high-end systems to lower-end products adapted to the requirements of smaller hospitals in more remote areas.
Siemens Opens New X-ray Product Facility
The latest initiative comes from Siemens , which is expanding local production of X-ray equipment with the opening in August 2013 of a new X-ray product (XP) building at its Siemens Shanghai Medical Equipment (SSME) subsidiary. According to Siemens, the new facility will expand the R&D and manufacturing capacity for X-ray products that can fully meet the needs of China's basic healthcare market, and inject the technology created in China to the products and solutions that serve global markets. SSME, which was set up as a joint venture with Shanghai Medical Equipment Works in 1992, is Siemens Healthcare's largest R&D and production base in Asia Pacific and is also the company's largest development and production base for X-ray systems outside of Germany, focusing on the requirements of the basic medical equipment market. In addition to X-ray products, SSME produces CT scanners. Around 700 employees, including 350 researchers and developers, work at the Shanghai facility. Based on the existing digital X-ray, digital gastrointestinal and mobile X-ray product lines in China, more types of digital X-ray and mammography product lines will be introduced to the new facility.
Espicom notes that the move by Siemens follows a decision by GE Healthcare in 2011 to move its X-ray division's global headquarters to Beijing to enable an entire in-country X-ray business cycle from R&D to sales & service. Over 20% of new X-ray products will be developed in China. Meanwhile, Philips has invested over US$50mn in a development centre for diagnostic imaging systems located at the Suzhou Industrial Park, Jiangsu Province, which will produce X-ray equipment for mid-sized hospitals, in addition to CT and MRI equipment. Other developments include Hologic's acquisition in July 2011 of Beijing Healthcome Technology, which manufactures mammography equipment targeted at low-tiered Chinese hospitals.
By increasing their local production capacity, multinationals are seeking to leverage their market position against competing indigenous producers such as Wandong Medical Equipment , China's leading producer of X-ray equipment, which is undergoing a revamp following its acquisition by China Resources in March 2012.
X-ray Market Experiencing Robust Growth
The market for other medical X-ray apparatus has outperformed the diagnostic imaging market as a whole in recent years, growing at an estimated CAGR of 25.9% since 2008 to reach US$1,238mn in 2013. The market is expected to continue to see robust growth with a CAGR of 19.2% projected through to 2018, taking sales to US$2,975mn. Market growth will be driven by the conversion from film and analogue to digital X-ray technology and the rapid expansion of the primary and rural healthcare market.
|China Medical X-ray Apparatus Sales (US$mn)|
Exports Still Relatively Low But Seeing Above Average Growth
Whilst most of the additional production capacity is aimed at meeting the demands of the domestic market, equipment developed for the local Chinese market is likely to be well suited to other emerging markets in the region, including India as well as markets in Africa, where Chinese companies have had notable success in recent years. Exports of medical X-ray apparatus are relatively low, currently representing just 1.3% of total medical device exports. They are, however, seeing above average growth with an 18.1% rise to US$161.7mn recorded in the 12 months to June 2013, compared to a 12.2% rise in diagnostic imaging exports in general. The bulk of X-ray exports are sent to established markets in the EU, Japan and the USA, but the fastest growing markets over the past 12 months have been smaller, emerging markets including South Africa, which received X-ray shipments valued at US$2.7mn.