Will Asian ultrasound manufacturers outperform GE, Siemens, and Philips?
GE
Healthcare, Philips Medical, and Siemens control more than 70% of the global
market share in the ultrasound segment. These companies benefit from a large
global network, R&D facilities across different geographies, large
investment capital for new product development, and most importantly strong
brand recognition. Hospitals and diagnostic clinics are loyal to these brands
and accustomed to the ultrasound user-interface specific to these brands. As a
result, most of the hospitals and diagnostic clinics favor the purchase of the
same brand when the ultrasound system needs to be replaced. According to Business
Insight’s analysis, loyalty toward the above ultrasound brands remains the
primary reason for these companies to hold a dominating market share. However,
owing to the impact of economic recession, the last three years have seen many
hospitals becoming budget constrained with new product purchases highly
limited. Ultrasound, being a technique of major importance for primary
diagnosis, has also been affected by these factors. The financial constraints
have encouraged hospitals and diagnostic clinics to purchase ultrasound systems
from Asian manufacturers.
Ultrasound
companies based in China, such as Mindray and Sonoscape, offer dedicated
products for various diagnostic purposes in their portfolio. A stand-alone
ultrasound system that offers diagnostic capability for many hospital
departments can range between $100,000 to $240,000 from companies like GE,
Philips, and Siemens. By exploiting low manufacturing costs, combined with
in-house R&D, Chinese companies offer ultrasound products at less than 50% of
the cost imposed by larger companies. Ultrasound systems from Chinese
manufacturers also meet the safety requirements imposed by regulatory
authorities based in the US and Europe. Many of the ultrasound systems marketed
by Chinese manufacturers are more advanced technically in comparison to the
counterparts from the larger companies. For example, the S8 ultrasound system
from Sonoscape is a laptop-styled portable ultrasound system that has all
features of a large stand-alone system and is capable of providing 4D (Dynamic
3D) imaging. It also has provisions to operate two probes simultaneously in a
small compact module.
The
biggest challenge experienced by Chinese ultrasound companies is brand
recognition, despite their systems being offered for a cheaper cost with
advanced functionalities. This is primarily because physicians in the US and
more particularly in Europe perceive Chinese ultrasound systems as low quality
products in comparison with those offered by GE, Philips, Siemens, and Toshiba.
It is only due to the impact of the economic recession and financial
constraints that some hospitals in Europe and the US have considered buying
Chinese ultrasound systems. The Chinese manufacturers have experienced an
increased acceptance of their ultrasound systems in the US and Europe over the
last three years and consequently these companies’ revenues have been steadily
rising owing to increased unit shipments. According to Business Insight’s
analysis, it is very unlikely that Chinese manufacturers will outperform GE, Philips,
and Siemens over the next decade, but the dominating market share of over 70%
by the large companies will continue to decline by 2–3% annually over the next
decade. Business Insights also estimates that the low-to-medium range
ultrasound products in China itself will be dominated by Chinese manufactures.
This is because the country is slated for a steady growth in ultrasound sales,
expected to touch $1bn sales by 2014, and high volume sales will be dominated
by the low-to-medium range ultrasound systems. Chinese manufacturers will also
use their low-cost proposition to exploit ultrasound sales in the other BRIC
economies, where the average growth in ultrasound revenues is expected to be
over 13% for the next five years.
