Varian Medical Systems eyes Chinese market with potential Foxconn deal

Foxconn's New Taipei City, Taiwan-based headquarters--Courtesy of Foxconn

Varian Medical Systems ($VAR) is considering joining forces with Taiwan-based electronics maker Foxconn to sell radiation treatment devices in China, a steppingstone for the company as it looks to chart growth in emerging markets.

Palo Alto, CA-based Varian is in talks with Foxconn, the world's largest contract electronics maker by revenue, to hand the company rights to sell radiation products, Leonard Wu, general manager of Foxconn's healthcare business group, told The Wall Street Journal. Varian confirmed the talks and noted that Foxconn has a good business development track record in Taiwan and China--a resume that could serve the company well as it casts an eye toward lucrative Asian markets.

But the deal stands to benefit both sides, as Varian can expand its global footprint and Foxconn can gain ground in the medical device space. Revenue in the global contract-manufacturing market for medical devices is expected to grow 52% to $35 billion in 2016 from $23 billion in 2013, according to the WSJ story, promising numbers as Foxconn looks to diversify away from consumer electronics.

Last year, Foxconn snatched up an undisclosed stake in San Diego, CA-based Sotera Wireless to make sensors and batteries used in the company's medical devices. Foxconn has since become Sotera's exclusive sales agent in China, and the company could eventually take over production of its devices, Sotera CEO Tom Watlington told the WSJ. If all goes to plan, Foxconn expects its healthcare business to bring in revenue of $200 million by 2020, up from $20 million in 2014, driven in part by China's rising healthcare needs, Wu told the newspaper.

An agreement with Foxconn could also help Varian as it bolsters its presence in Asian markets. In 2012, the company launched its first overseas subsidiary in South Korea, expanding its footprint there for medical imaging products. In January 2014, Varian reupped a three-year deal with Japan's Toshiba Medical Systems to supply medical imaging components, strengthening its position overases.

- read the WSJ story (sub. req.)

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