China's medical device industry has experienced hand-over-fist growth over the past few years, and one equity manager told China Daily the sector will only continue its upward climb as local devicemakers catch up to their overseas competitors.
Ouyang Xiangyu, managing director of Legend Capital, tells the paper that China presents a big demand for medical devices, but most China-made products on the market aren't up to Western snuff. With a little innovation, though, Ouyang says Chinese devicemakers will be able to undercut foreign firms and cash in on the huge domestic market.
"It will prove to be a driving force that in 10 to 20 years results in a batch of great Chinese medical equipment enterprises that will be similar to today's large (Chinese) IT companies, such as Lenovo Group, Huawei Technologies and ZTE Co.," Ouyang told the paper.
As of 2011, the Chinese medical equipment market was worth about $15.7 billion, China Daily reports, a 26.6% jump over the previous year. The biggest device players in the country tend to be foreign giants like Johnson & Johnson ($JNJ), but imported devices tend to carry hefty price tags only manageable for China's wealthiest hospitals and residents, Li Guoqiang, a director at Chinese devicemaker Lepu Medical Technology, told the newspaper. If local companies can get their tech up to that standard and do so on the cheap, they can snatch profits from the heavy-hitters, Li said.
Of course, industry big-shots are well aware of promises and pitfalls of the Chinese device market, and most are looking to commercialize lower-cost products specifically tailored for the country's population. Medtronic ($MDT) has been especially bullish of late, buying orthopedics company China Kanghui Holdings for $816 million last month and snapping up shares of other Chinese devicemakers, most recently spending $66.2 million for 26.4% of Shenzhen's LifeTech Scientific. J&J, Covidien ($COV) and St. Jude Medical ($STJ) are among the many companies that have opened R&D shops in the country, looking to use local talent to develop products designed for Chinese success.
- read the China Daily story