Siemens wants to become the overall market leader in medical devices in China to tap an expected healthcare boom driven by state-funded upgrades of hospitals and clinics, a senior executive said. Beijing plans to spend about $125 billion by 2020 to build thousands of hospitals and clinics, particularly in rural areas.
The government's investment could encourage hospitals to purchase more advanced equipment. While Siemens, Europe's biggest engineering conglomerate, is facing pressure from recently approved US healthcare reforms, it is banking on China, India and other emerging markets to drive top-line growth in its healthcare business.
"The dynamics will persist because growth is faster over there (China) and the commitment of the state is there to provide more healthcare to its people," Norbert Gaus, CEO of Siemens's Clinical Products division told Reuters in an interview.
Gaus said Siemens wants "to become the number one," in China, where it faces competition from US-based General Electric, The Netherlands' Philips and Japan's Toshiba.
Analysts estimate Siemens is the leader at the high end of China's medical device market, while Mindray Medical holds pole position in the lower and middle segments that the German company is targeting.
"We are working now on broadening our product portfolio," Gaus said, adding the Siemens products sold in the lower segment in China are not a stripped-down version in terms of technology of the products sold in the lower segment in Germany. He said Siemens Healthcare has also been expanding its direct and indirect distribution channels, while tie-ups with leading medical institutions will also increasingly play a role.
Gaus estimates the global market for equipment such as ultrasound, x-ray and patient-monitoring devices will grow by 4-6 percent. "We want to grow faster than the market and we have done this too in the past," Gaus said, referring to China.
Siemens has said China's overall healthcare industry grew 3 percent in terms of market volume in 2008 from 2006, with it the market leader during that period in magnetic imaging, computer tomography, angiography and mammographic systems.
Siemens estimates China's overall healthcare market growth at 10 percent annually between 2008 and 2011, with Siemens revenue growth outperforming the market.
Gaus also said consolidation among medical equipment makers in China was set to continue. "There is a permanent consolidation process in China for quite a long time now, particularly among those in the low-price segment."
Underlining this trend, at least three investors including Samsung Electronics and SK Holdings have submitted bids for a controlling stake in South Korean medical equipment company Medison Co Ltd, a deal worth $300 million, sources in Seoul said.
Siemens Clinical Products division, created this year, is one of three in the company's healthcare sector, which had revenue of 12.3 billion euros ($16.9 billion) in its year to September 2010.
Around 8 percent of Siemens's 2010 group sales of 76 billion euros came from healthcare, energy and industry businesses in China.
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