What is the outlook for the medical device industry?

Recently, the Guangdong Provincial Drug Administration released the “List of Pilot Varieties for Medical Device Registration Holders in Guangdong Province.” Item 61 on the list shows that Huawei Terminal Co., Ltd. has applied, as the registration holder, for a medical device—the wrist-mounted single-lead electrocardiogram recorder (VID-B99). This means that, through Guangdong’s registration-holder pilot program, Huawei has now obtained a registration certificate, effectively entering the medical-device sector.

Huawei Intensifies Its Presence in the Medical Device Sector

According to the inquiry, the product’s registration number is Yue Xie Registration 20202071705, with Huawei Terminal Co., Ltd. as the registrant. The product falls under Class II in the medical device classification system, and its intended use or scope of application is for the acquisition of single-lead electrocardiogram data from adult wrists.

In fact, as a leading Chinese technology company, Huawei has long been expanding its presence in the healthcare sector. According to data from Tianyancha, Huawei Terminal Co., Ltd., which is effectively controlled by Huawei Terminal (Shenzhen) Co., Ltd., amended its business scope on March 21, 2019, adding activities such as the sale of Class II medical devices.

Following the amendment, the business scope of Huawei Terminal Co., Ltd. shall include the development, manufacture, and sale of telecommunications and electronic products, computers, satellite television receiving antennas, high-frequency heads, and ancillary products for the aforementioned items, as well as the provision of technical consulting and after-sales services; and the sale of medical devices (Class II medical devices), among other activities.

At the end of November 2019, DeepThink AI Robot Technology (Beijing) Co., Ltd., in which Huawei’s wholly owned subsidiary Hubble Technology Investment Co., Ltd. holds an investment, also underwent a change in its business operations, with the addition of the sale of Class I and Class II medical devices, as well as computers, software, and copying equipment.

At present, in addition to the medical-device sector, Huawei has also established various initiatives in areas such as digital hospitals, regional health information systems, and tiered diagnosis and treatment. Industry insiders believe that as Huawei continues to expand its footprint in the healthcare space, it may eventually develop and manufacture flagship domestically produced medical devices.

Well-known enterprises are flocking into the medical device industry.

In fact, with the ongoing implementation of China’s tiered diagnosis and treatment policy, the number of beds and patient visits at primary-level medical institutions has continued to rise, driving a steady increase in demand for medical devices at this level. Data show that the overall size of China’s medical-device market has grown from RMB 255.6 billion in 2014 to RMB 530.4 billion in 2018, maintaining an average annual growth rate of around 20%. Both operating revenue and net profit have sustained rapid growth, placing the sector in a golden period of development. It is projected that by 2022 the Chinese medical-device market will exceed RMB 900 billion.

Against the backdrop of surging demand, numerous well-known enterprises are following Huawei’s lead and entering the medical-device industry. For instance, on February 11, 2019, Baidu Online Network Technology (Beijing) Co., Ltd. amended its business scope to include the sale of Class II and Class III medical devices, and on March 19 it invested in Neusoft Medical. Baidu’s foray into the medical-device sector is clearly unstoppable; coupled with its broader AI ecosystem strategy, this move represents a far-reaching strategic initiative aimed at further expanding its footprint in the healthcare industry.

On the same day, Sinopharm Holdings also issued an announcement stating that it would expand its business scope and increase its investment in the medical-device industry. In fact, as early as September 2018, Sinopharm Holdings acquired a 60% stake in China Scientific Instruments Co., Ltd. (hereinafter referred to as Sinopharm Instruments) from China National Pharmaceutical Group Corporation (hereinafter referred to as Sinopharm Group) for RMB 5.108 billion, valuing the entire entity at RMB 8.513 billion.

In April 2019, according to information from Tianyancha, an investment fund company under Wanda Group invested RMB 40 million in a medical-device firm listed on the New Third Board. This signifies that Wanda has officially entered the medical-device industry.

Of course, in addition to these players, tech giants such as Lenovo, Alibaba, and Tencent, as well as well-known enterprises like Fosun Pharma, have also made moves in the medical-device sector. Industry insiders expect that, as the medical-device market continues to expand, more companies will enter this field in the future. However, it is worth noting that a full-blown market battle is virtually inevitable.

Conclusion

Overall, in the future, driven by supportive national policies, expanding market demand, the accelerating aging of China’s population, and advancements in technology and industrial upgrading within the medical device sector, medical equipment is expected to maintain its robust high-growth trajectory and ultimately achieve the goal of import substitution—from the mid- and low-end segments to the high-end market.