Positive Outlook for Digital Radiography Market in 2018, But Will it Last?

The world market for digital radiography (DR), comprising fixed and mobile systems and DR retrofit kits, grew by around 5% in 2017 and is forecast to increase by a similar amount in 2018. The market has been buoyed in recent years by the transition from analogue and computed radiography (CR) to fully digital systems, but in the mature markets like Western Europe, Japan and the US this trend has largely run its course and the growth rate is set to slow down to a near standstill in the coming years. The main regional growth trends are discussed below.

US – Legislation Kills the Analogue and CR Markets

In the US, the 2015 Consolidated Appropriations Act has increased the uptake of DR systems due to cuts in Medicare reimbursement for X-rays taken with analogue and CR systems. This has encouraged many of the remaining users of CR systems to make the switch to DR. Whilst some sites invested in new DR systems, many elected for a more affordable pathway to transition to DR and upgraded their existing systems with DR retrofit kits. The market for DR retrofit kits has grown strongly over the last two years, but it is forecast to decline from 2019 now that most sites have converted to DR. The market for DR systems is forecast to continue to grow in the coming years, albeit at a gradually reducing single-digit annual growth rate, as customers replace older systems to take advantage of the latest dose management and workflow efficiency technologies and as mobile DR systems are increasingly used in bedside imaging applications. Moreover, customers who invested in DR retrofit kits to meet the legislation requirements are likely to upgrade to DR systems over the coming years, as capex budgets become available.

The price of DR systems will continue to fall, due to fierce competition between flat panel detector makers and between the system OEMS, acting as a brake on revenue growth. The average price of fixed DR systems in the US market is forecast to fall by around 4% in 2018.

Brazil – Return to Growth After Several Years of Decline

Brazil is forecast to be one of the fastest growing markets for digital radiography in 2018, with growth fuelled by pent-up demand following the deep recession between 2015 and 2017. There is also a large installed base of outdated analogue systems that will gradually be replaced by DR. That said, the transition to DR will take many more years, due to the price sensitive nature of the Brazilian market and the lack of supporting infrastructure, such as imaging IT systems, in the more rural parts of the country. The annual growth rate for the DR market is expected to peak in 2018 at around 15% and then cool in the following years as the recent surge in investment in health care returns to the baseline.

Western Europe – Slight Uptick, but Low Growth Continues

The Western European market has mostly transitioned to DR and the outlook is for low single-digit growth. Much like the US market, dose management, cost of ownership and workflow productivity will be the main growth drivers in 2018, with advanced AI-driven tools, both for operational and clinical applications, becoming more important in the coming years.
The EU economy beat expectations in 2017 to reach a 10-year high at 2.4%. Growth is set to remain relatively strong in 2018 and ease slightly in the following years. As such, we expect to see peak growth for the DR market in 2018, at around 2.5%, with the prospect of anaemic growth, at best, in the following years.

Eastern Europe – EU Funding Continues to Drive Growth, but Will it Last?

The Eastern European DR market is heavily influenced by the availability of EU development funds for health care projects. The high level of funding in recent years has set a high baseline for the DR market, but recent announcements from Brussels that EU funding is to be shifted away from Central and Eastern Europe to the countries worse hit by the financial crisis, such as Spain and Greece, cast a shadow of doubt over the longer-term growth prospects for the region. On the plus side, the economic situation in many Eastern European countries is improving, but the net effect of the expected cuts to EU funding is expected to result in slower growth for the DR market.

Russia – Rising Energy Prices Drive Growth, But Geopolitical Risks Remain

The Russian DR market is in recovery mode after large declines in the last few years, with the recovery driven by increased government spending on the back of rising oil and gas prices and an expanding private sector. The market is forecast to grow at a high single-digit rate this year. However, tough sanctions, worldwide political isolation and a shrinking population represent major challenges to the Russian economy and there is a high risk that the current strong demand for medical imaging equipment will be relatively short lived.

Middle East – Turkish Delight May Turn Sour

In 2015 and 2016, low oil prices and political instability across the Middle East region led to a massive reduction in spending on healthcare. The Middle East market for DR returned to growth in 2018, largely on the back of improving oil prices. Assuming oil prices continue to strengthen, so too will the recovery in the DR market.

Turkey continues to represent a growth opportunity in the region, with growth driven by the Turkish government’s major reform initiative to transform its healthcare system into a universal health coverage model. However, the recent plunge in the value of the Turkish lira, which lost 17% of its value against the dollar between January and mid-May, will drive-up the cost of imported health care technology, such as DR.

Africa – Price and Market Readiness Continue to Hold Back DR

Outside of South Africa, there remains limited demand for DR systems in most African countries and analogue and CR systems continue to outsell their DR counterparts. The higher price of DR systems is a major factor, alongside the ‘readiness’ of many African countries to make the switch to digital. The shortage of trained technicians and clinicians, alongside a lack of digital infrastructure to support DR systems, remain key barriers to DR market growth. The transition to DR is expected to be long and gradual, with analogue and CR retaining the lion’s share of the general radiography market for several years to come.

India – The World’s Fastest Growing Economy, But Not Yet Ready for DR

India is on track to be the world’s fastest growing major economy in 2018 and increased government and private investment in health care has resulted in a flourishing market for health care technology. However, it is also one of the most price sensitive markets. Moreover, rural parts of the country (around two-thirds of the population live in rural areas) lack the infrastructure to convert from analogue to DR. CR remains the preferred option for customer looking to upgrade their analogue systems to digital, but the Indian health care market is developing at a fast pace and the shift to DR will accelerate in the coming years, particularly as dose management becomes a higher priority and DR systems become more affordable. In the short-term, higher growth is forecast for DR retrofit kits than DR systems, due to the ease of upgrade and lower cost.

China – DR Market Growth Starting Slow Down

China is the biggest market for DR in the Asia region and the market has grown rapidly in recent years, partly due to the availability of lower cost DR systems from domestic manufacturers. The market is forecast to see continued growth in the coming years, but at a slowing rate as the market matures. The Chinese DR market is forecast to grow by around 7% in 2018, with mobile DR systems seeing the strongest demand, particularly in the larger cities.

Conclusion

In a market environment of slowing growth and increasing competition, vendors need to innovate to protect their margins and market share. Image quality and dose management are now seen as a “given” by most customers, offering little opportunity for differentiation. In the short-term, workflow, productivity and operational efficiency will be focus areas for product development, with vendors offering enhanced analytics capabilities to help radiology departments measure and improve their asset management, operational performance, quality assurance and practice management. Moving forwards, more advanced machine learning and AI capabilities will be embedded in DR systems, with an initial focus on tools that improve workflow and productivity by offloading routine tasks and supporting on high volume cases.

DR vendors are encouraged to implement a coherent strategy for AI or risk facing a ‘race to the bottom’ price war.

About Signify Research

Signify Research is an independent supplier of market intelligence and consultancy to the global healthcare technology industry. Our major coverage areas are Healthcare IT, Medical Imaging and Digital Health. Our clients include technology vendors, healthcare providers and payers, management consultants and investors. Signify Research is headquartered in Cranfield, UK.

More Information

To find out more:
E: simon.harris@signifyresearch.net
T: +44 (0) 1234 436 150
www.signifyresearch.net