|
European Medical Device
Companies Face Increasing Competition from Low-cost Devices Manufactured in Asia
Asia's increasing emergence as
a prime low-cost medical devices manufacturing spot is a source of much concern
for European medical devices companies that run the risk of losing valuable
market share. While this growing trend doubtless presents a strong threat to
European companies, some view it as a promising opportunity to expand into Asia
but will have to move fast to capitalise on early growth opportunities.
"European medical device
companies looking to capitalise on the advantages offered by the Asian
manufacturing industry - such as lower cost, skilled labour - are considering
outsourcing, partnering with or even relocating manufacturing facilities to this
region," remarks Frost & Sullivan Industry Analyst Claire Staniforth. "Shifting
manufacturing facilities to Asia could also promote better penetration of the
Asian medical devices market."
Many European companies have
started setting up their own production facilities in Asia and are benefiting
from reduction in operational costs. Although the cost of distributing products
back into the European market are high, shifting the manufacturing locality is
nevertheless a clever move for European medical devices companies as they will
be well-placed to increase penetration of the massively underserved Asian
market.
The trend towards outsourcing
production activities is also on the rise, with medical device companies in Asia
taking care to produce high-quality products for the European market. In fact,
Asian companies have taken several steps towards ensuring better and constantly
improving quality standards as this increases uptake and acceptance in European
countries.
China and India are emerging as
the most favoured destinations in Asia in this respect. The increasing awareness
in both countries of the need to conform to international manufacturing
guidelines and standards makes them ideally suited to handle outsourcing of
medical devices production.
Meeting such standards can also
help in easing any concerns that healthcare providers in the European market may
have about the products being inferior or second-rate merely because they are
less expensive. With healthcare providers constantly implementing
cost-containment measures, purchasing less expensive medical devices that
nevertheless meet certain quality requirements may prove an attractive option.
"When assessing the
attractiveness of China and India for manufacturing of medical devices, China
has a much higher relative appeal as investment in infrastructure and global
foreign direct investment are high," adds Ms. Staniforth. "However, there is a
greater availability of skilled labour in India, which could sway companies into
investing in manufacture there instead."
Some European manufacturers are
choosing the partnership route and forming alliances with well-established Asian
companies. These companies are likely to have good material supply relationships
in place, thereby giving manufacturers an edge in terms of negotiating power.
The major logistical task is likely to relate to the shipping of finished
products either to a holding warehouse close to the point of sale or to the
customers themselves.
The massive differences in
language and culture between Asia and Europe might also pose a major challenge
to European companies. English is the preferred language of business in Asia and
much of its workforce, especially in countries such as India, is fluent in this
language. Therefore, European companies might be compelled to use English for
business communication in Asia even if it is not their first language.
However, the biggest challenge
that European companies are likely to face is with regard to intellectual
property (IP) protection, as current patents do not hold global significance. As
a result, there is a significant risk that other manufacturers might copy their
products as well as mass-produce them at lower costs and sell them in the
domestic market.
"European companies must
therefore ensure that they conduct business only with manufacturing
organisations that understand and appreciate the importance of IP protection,"
says Ms. Staniforth. "In Asia, contract research organisations (CROs) -
essentially research and development (R&D) outsourcing companies - are starting
to introduce IP standards to increase confidence levels within the foreign
investment community as well as promote greater outsourcing interest in both R&D
and manufacturing in Asia."
Contact for more details :
Radhika Menon Theodore, Corporate Communications, at
rmtheodore@frost.com
*****
|
