Medtech in China: Transitioning from the World’s Workshop to Innovation Hub

“You can't do R&D offshore from a distance,” writes Venkatesh Narayanamurti, founding dean of Harvard's School of Engineering and Applied Sciences and director of the Science, Technology and Public Policy Program at Harvard Kennedy School's Belfer Center for Science and International Affairs. “The ‘look-see-do’ of innovation depends on close ties to the manufacturing process. Proximity to manufacturing is the key to other higher-value activities—design, engineering, and R&D,” Narayanamurti notes in an opinion piece published in the March 26 edition of the Los Angeles Times. Narayanamurti wants to draw attention to the fact that sending manufacturing jobs offshore ultimately leads to exiling innovation. He’s right, but seen from China’s perspective, that’s not something to bemoan.

Chinese medical device manufacturers are moving up the value chain. The Chinese government is encouraging entrepreneurs to embrace an innovation mindset rather than simply acting as the world’s factory. Industry observers see China making tremendous progress in a very short span of time. A recent report published by PwC,PwC’s Medical Technology Innovation Scorecard, laid out this dynamic.

The report’s authors note, in regards to medtech innovation, the United States, Germany, France, the United Kingdom, Israel, and Japan will begin to lose ground to other countries during the next decade. They write that Brazil, Russia, India, and China will increasingly pick up the slack, adding that China is firmly positioned as the leader of the pack and will continue to outpace other countries and reach near parity with the developed nations of Europe by 2020.

It is becoming increasingly clear that the Chinese economy and its indigenous medical device industry is at the threshold of seismic change, as an emphasis on R&D and a willingness to embrace a sophisticated international business strategy take hold among Chinese medical device manufacturers. Mindray, Shantou Institute of Ultrasonic Instruments Company, Ltd., and Time Medical Systems are three China-based medical device manufacturers that are setting the tone for an industry in transition.

Mindray

Headquartered in Shenzhen, China, Mindray has become the largest medical equipment manufacturer in China. Since its founding in 1991, Mindray has been single-minded in its focus on the development and manufacture of medical equipment. Patient monitoring systems (representing 45.3% of revenue), clinical testing, and reagents (24.2%), and digital medical imaging (24.6%) are the company’s three major business areas. Mindray went public on the New York Stock Exchange in 2006. It is currently valued at U.S. $3 billion, which makes it the leader of all public medical device companies in China.

Mindray has staked out a midrange position for its products. Its devices compare favorably with systems from Philips and GE in terms of quality, but come with an obvious cost incentive. That competitive advantage disappears domestically, where Mindray’s equipment is 10% to 20% more expensive than competing products. Mindray excels, however, in branding, maintenance and R&D, and its sales network extends to more than 100 countries.

Mindray typically invests 10% of its annual revenue in R&D. This strategy has paid off handsomely not only in the marketplace but also in prestige: the company received a 2011 Medical Design Excellence Award for its V Series patient monitoring system. Mindray is the first Chinese company to win an MDEA trophy.

Shantou Institute of Ultrasonic Instruments Company, Ltd (SIUI)

SIUI manufactures ultrasound and digital medical imaging systems, nondestructive testing products and transducers. Founded in 1978, SIUI has maintained rapid growth and typically invests more than 15% of revenue in R&D. Breakthrough products include elastography systems, and 4-D transvaginal probes that wirelessly transmit ultrasound images from an SIUI device to iPads and iPhones. The app is available for download at the Apple store.

Headquartered in Shantou in southeast China, SIUI is recognized for its R&D-centered approach. Company engineers are avid learners, emulating global best practices and combining in-house and cooperative R&D in the service of mastering its core technology. SIUI has established research centers in the United States and regularly works with universities and world-class high-tech companies.

Time Medical Systems

Founded in 2006, Time Medical Systems is a pioneer in the development of high-temperature superconducting (HTS) coil technology for use in clinical MRI scanners. HTS coils improve the signal-to-noise ratio primarily through the use of more-efficient RF coil materials and design methods.

Company CEO Ma Qiyuan has been outspoken about the need to ramp up indigenous innovation. He has called on the Chinese government to assist device manufacturers to boost their R&D efforts for the design and production of high-end medical devices. China must champion national brands, says Qiyuan, adding that hospitals and other purchasing organizations should give priority to domestically produced medical equipment during the procurement process.

Time Medical Systems has offices in Shanghai, Beijing, and Hong Kong as well as in Singapore and San Diego, CA.

Helen Zhang is Associate Editor, China Medical Device Manufacturer

Norbert Sparrow is Editor in Chief, China Medical Device Manufacturer and European Medical Device Technology