subject: Local Medical Equipment Investment Risks: Constant Price War, Lack Of Innovation [print this page] China, as the world's fourth largest medical equipment market, enjoys a market size of over 60 billion Yuan, including medical diagnostic imaging market size of over 22 billion Yuan. Hu Hai believed that with the era of urbanization and aging coming, medical equipment industry would emerge a great amount of opportunities. In the next few years, Chinese medical device market, including medical imaging, will also continue to maintain a growth rate of 20%.
If wanting these encouraging data come true, the TCL medical group firstly has to overcome the problem which is how they can compete with GE and other international giants company. The Qingke statistics showed that a basic component of the medical device market in China in 2010: high-end products accounted for 25 percent and medium and low-end products accounted for 75%, While the average level in the international medical device market: the share of high-end products is generally 55%, and 45% of the low-end products. China's medical equipment industry as a whole is inclined to medium and low-end products, and the polarization is obvious.
Xiao Jun, the industry analyst in Qingke Health Care considered that the main reason for medical devices industry concentrating on medium and low-end equipments was that some large hospitals generally chose import medical equipments so that the local medical equipment enterprises were difficult to succeed in the high-end market. Also, the competitions between different enterprises in addition to reflect on the quality of the products, more lies in expanding the channels of connecting with hospitals.
Wang Canshou referred that another reason for top three hospitals selecting to purchase foreign equipments was the equipment providers would undertake the risk of malpractice. Once the equipments have any problems, the manufacturers will be responsible for the compensation. In contrast, none of the local enterprises can afford to take the risk.
Medical device enterprises love fighting price war and bribing the hospitals, so the local medical devices are difficult to obtain recognition from high-end customers. Xiao Jun said that Chinas medical device market accounted for 14% of the total pharmaceutical market, much lower than the global level. In addition, compared to the global equipment consumption level, our market can at least increase by five to six times. Wang Hongqing thought that this was exactly why Haoran Capital chose to enter the medical equipment industry at this time. Top three hospitals in first-line cities generally choose imported devices, but hospitals in second or third lines cities cannot afford to buy imported equipments which brings about a great opportunity for local enterprises.
Local enterprises mostly follow a route that they do not have competitive in quality. However, TCL group will mainly focus on technology instead of participating in the price war. Hu Hai told the reporter that TCL had bought a medical imaging technique from an American company in Silicon Valley, and the future funds will be largely used for purchasing and developing technology and constructing channels.
