China's medical-device manufacturing industry today is much like the country's automotive market was 10 years ago, before the then-small sector took off. At least that's how Gao Xiaogang sees it.
Then, global carmakers were scrambling for good local suppliers, creating opportunities for those that got in early. Gao, head of injection molder Gerresheimer Wilden GmbH's China plant, believes the same opportunities exist now for early entry into the medical market: ``It is time to come here.''
Like Gao's employer, plastics firms involved in supplying the medical-device industry have been making significant investments in China in the past 18 months, driven by the global medical-device industry wanting to cut costs, and by a desire to tap into the country's growing domestic health-care market.
Those putting money in new plants or expansions of existing operations include some prominent U.S. molders: Interplex Industries Inc., Classic Industries Inc., GW Plastics Inc. and United Plastics Group Inc.
Others include Wilden, one of Europe's largest medical molders, French medical thermoformer Top Clean Packaging Group and GaleMed Corp., a Taiwanese plastics processor that claims to make 25 percent of the world's resuscitation masks and bags.
``As the [Chinese] currency moves up and people get richer over a 10- to 15-year period, we want to be here to supply that market,'' said Larry Wilton, chief executive officer for Oak Brook, Ill.-based injection molder UPG, which also recently upgraded its Chinese manufacturing to include contract sterilization and is aiming to boost medical work there.
``There is going to be a tremendous market here,'' he said. ``We see it right now dealing with American and European companies, and there are a host of Chinese companies coming up the learning curve.''
But there are risks, and some of the investment seems speculative, with capacity coming ahead of current demand.
Per capita health-care spending is also low, although rising, and intellectual property remains a significant concern. Some executives of U.S. firms said they see made-in-China copies of their medical-related products at trade shows in other parts of the world.
As well, quality and the regulatory systems can raise potential red flags. Western newspapers earlier this year said a Chinese firm passed off an industrial chemical as an ingredient for cough syrup, which ultimately killed more than 50 people in Panama. And China's state press reported in July that the country executed its top food and drug regulator in a corruption scandal.
Still, there was a general sense among plastics executives interviewed at MedTec China 2007 in Shanghai last month that they are looking to the country's medical market for business. Trade fair organizers said the country's medical-device market is growing 10 percent a year, with demand for higher-end devices rising 20 percent annually.
GW Plastics, based in Bethel, Vt., this year expanded its factory in Dongguan, anticipating demand in health-care work.
``We built a Class 8 clean room ahead of the demand and we tripled the size of the plant ahead of demand,'' said Ben Bouchard, GW vice president of international marketing. The company is taking that approach, he said, because China ``is a much faster-moving, dynamic market.''
U.S.-based Interplex Industries Inc. set up a small medical molding and manufacturing operation with a handful of presses and a Class 8 clean room at its Hangzhou, Zhejiang Province campus last year, to make minimally invasive devices.
It's the company's third medically oriented plant, joining facilities in the United States and Scotland.
The company sees global medical firms taking a stronger interest in Chinese manufacturing, said Rhona Ye, a sales engineer.
``Right now it is a trend that a lot of foreign companies in medical are looking at Chinese companies,'' she said.
And while concerns about unsafe products are grabbing headlines in the plastic toy market, some U.S. executives expect China's own medical manufacturing industry will make rapid improvements, and soon will start to be a viable center for making more sophisticated equipment.
Bill Ellerkamp, chief executive officer of tubing maker ExtruMed LLC in Placentia, Calif., recently spent two weeks touring domestic Chinese medical firms.
Ellerkamp, who majored in Chinese studies in college before embarking on a career in medical-device manufacturing, said he would have guessed before the trip that China would be 10 years away from tapping global markets in more exacting areas such as the catheter supply chain.
Now, he thinks it'll only take three to five years, at least for the manufacturing skill set to develop. And Chinese firms potentially could make their products for one-fourth the price of those made in North America, he said.
For distribution and sales skills, though, the Chinese firms lag global standards and are still 10-15 years away, a gap that creates opportunities, he said.
``It is not too late to enter the Chinese market,'' he said. ``I don't think the first movers have any advantage over the second movers or the fast followers.''
The U.S. injection molder with perhaps the largest investment in China, Nypro Inc. in Clinton, Mass., expects to more than triple health-care-related sales from its China factories in the next four years, from US$30 million to US$100 million annually, according to Thomas Taylor, Nypro's vice president of global marketing and business development for health care.
Worldwide, health care was about 23 percent of Nypro's roughly US$1.06 billion in sales in 2006.
But in China, medical-related sales lag, and are roughly 10 percent of sales, Taylor said. China accounts for about 30 percent of the company's total sales.
Gerresheimer Wilden, one of Europe's largest medical molders, with 450 presses, also said its long-term plan in China is to sell into the Chinese market.
``We believe that the future in China will be to produce in China for the Chinese market,'' said Jurgen Kaiser, managing director of international sales for Regensburg, Germany-based Gerresheimer.
Before 2000, China was 7-8 percent of the world's medical-device market, said Charles Tzeng, Greater China division director for Taipei, Taiwan-based GaleMed. Now, it's 12-15 percent, he said.
While the country is boosting health-care spending, executives said its local health-care market still can be tough to crack because it focuses almost single-mindedly on price.
International markets, by contrast, pay attention to price but also are focused on quality, said Tom Opielowski, vice president of UPG Asia. He is based at UPG's manufacturing complex in Suzhou, Jiangsu Province.
``Right now the domestic market [in China] is extremely difficult because it is focused on one thing - price,'' he said.
Nypro's Taylor said China also lacks a large home-grown medical products maker with international scale, a local version of a company like Johnson & Johnson, the kind of firm Nypro and others typically supply.
``What we are looking for is a large [original equipment manufacturer] to blossom out of this region that we would tie into,'' Taylor said.
Investment in China
The past 18 months have seen the medical-device supply chain from North America, Europe and other parts of Asia start to make sizable investments in China. Examples include:
Interplex Industries Inc., in Flushing, N.Y., opened a medical contract manufacturing plant with injection molding and clean room capabilities, in Hangzhou, Zhejiang Province, in April 2006. It joins Interplex medical plants in Scotland and Ohio.
GaleMed Corp., a Taiwanese molder of respiratory devices, plans to open a plant in Xiamen, Fujian Province, in October, with 15 injection presses and 250 employees.
Cartolux (Suzhou) Co. Ltd., a unit of France's Top Clean Packaging Group, opened a thermoforming plant in Suzhou in August 2006, with three lines. It's the first investment outside Europe for the firm, which said it's following some of its key customers, Europe's top drug makers.
GW Plastics, based in Bethel, Vt., dramatically expanded its plant in Dongguan.
U.S.-based medical molder Classic Industries Inc. opened a joint venture earlier this year with Hong Kong's Ace Plastics Co.
Tube maker Kelcourt Plastics Inc. in San Clemente, Calif., opened a small plant with two extrusion lines in Singapore last year.
Ensinger Engineering Plastics Co. Ltd., a plastics machining firm, in January opened a 50-person Shanghai operation targeting medical and semiconductor firms.
Injection molder Gerresheimer Wilden of Regensburg, Germany, plans to double capacity at its Dongguan facility next year.