If you look at the global medical device industry, particularly high-end equipment, you’ll find that it's predominantly ruled by foreign “Big Pharma”. In 2022, the top 100 medical device companies commanded nearly 90% of the worldwide market. Many of them are from Europe and North America, including U.S.-based Medtronic, Germany's Siemens, and Royal Philips from the Netherlands. Amid them, one stands out, grabbing great attention with an annual revenue of $3.917 billion, placing 32nd in the global ranking of revenue. The only Chinese firm that made it into the top 50 is the Shenzhen-based Mindray Medical. With products serving 99% of China’s AAA hospitals and 110,000 medical institutions, Mindray’s ability to secure a segment in a sector dominated by multinational behemoths charts a quintessential course of reversal for Chinese manufacturing enterprises. It is a two-step success story for Mindray.
The first step is finding a niche market. In 1991, Li Xiting, a graduate of the USTC, gave a shot to his entrepreneurial idea and founded Mindray Medical. Mindray started as an import agent for medical devices. By the second year, it began with patient monitors and embarked on a path to make self-developed, own-brand devices. To avoid confrontation with formidable foreign rivals, Mindray adopted a strategy to go small. When it was too difficult to penetrate the market of major hospitals in big cities, Mindray targeted small and mid-sized hospitals in smaller towns, selling more cost-effective devices. For example, when imported patient monitors cost ¥100,000, Mindray sold theirs at ¥40,000 to ¥50,000. But its ambitions went beyond this. About 80% of high-end medical equipment in China heavily relied on imports. What Mindray was going for was to gain entry into the upmarket and achieve self-reliance. But it was anything but an easy task. The industry of medical devices requires an enormous amount of capital and time to finally forge an ecosystem with technological barriers.
Hence, Mindray took the second step: Making a huge investment in R&D. Over the years, Mindray has allocated an average of 10% of its annual revenue into R&D. In 2022, its investment in R&D reached nearly ¥3.2 billion, supported by ten major research centers globally. The patents and technology upgrades have propelled Mindray toward the high-end market. Its net profit margin has jumped from 11.7% in 2015 to 31.7% in 2022 with a higher share in profit from upmarket products. Market shares of Mindray’s ventilators and anesthesia machines have surpassed those of imported ones to top the Chinese market. Today, the trailblazer in the Chinese medical industry, originating from the Guangdong-Hong Kong-Macao Greater Bay Area has become a global leader in medical equipment and solutions.
Mindray’s journey to ascent to the top tells the history of this industry in Shenzhen. As China’s No.1 hub of medical devices, Shenzhen witnessed the birth of China’s first domestically developed MRI and color Doppler ultrasound. As the industry moved upmarket, High-end products like MRI and in-vitro diagnostics have become internationally competitive. By 2022, the value-added of Shenzhen's high-end medical equipment manufacturing has reached ¥33.2 billion, marking a YoY growth of 12.4% and becoming a new growth point. With the industry undergoing the process of product upscale and self-reliance Shenzhen will be the birthplace of more examples as Mindrays springing up and guiding China's medical equipment manufacturing towards international excellence.
Source | SFC
