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Signify Premium Insight: Made In India – Population and Policy

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Recently, Indian modality manufacturer Trivitron Healthcare announced that it will launch an Indian-made CT system and MRI system in FY2022-23.

The move adds to a growing trend for medical imaging vendors, both domestic and international, to increasingly focus on producing products in the country. GE HealthCare, Siemens Healthineers and Philips are among the vendors typifying this trend, with each of them having recently expanded manufacturing and other operations in the country.

The Signify View

India has represented a considerable sales opportunity for health tech vendors for a long time. An enormous and growing population, with a burgeoning middle class, whose members increasingly have the means to spend more money on healthcare, as well as a recently offered public health insurance fund, means the country has featured heavily in the growth plans of many vendors for some time. There are, however, several essential considerations that need to be factored in to maximise this opportunity.

Among the most significant is a policy which grants domestic firms preferential market access, which stipulates that one third of tenders should be awarded to a local company, provided it meets certain requirements. As a result, vendors which do not conduct any manufacturing processes in India could be at a distinct disadvantage compared to those that do, causing them to miss out on lucrative deals as healthcare spending in the country increases. This could impact different vendors in different ways, with some choosing to establish facilities outright in the country, while others, such as GE HealthCare, have chosen to form joint ventures with domestic players, in GE HealthCare’s case, Wipro, to gain local expertise and resource.

Enabling Access

Beyond determining which vendors will be able to secure tenders, the regulations around market access are also likely to influence the complexion of the market. Foreign companies, for instance, will still be able to win 50% of tenders valued at over five million rupees, on the condition that they are able to offer the lowest bid. They are then able to win the remaining balance of the tender, provided no local supplier can match the lowest bid. Such conditions elevate the importance of price in tenders, a move which will hinder those whose manufacturing facilities are in areas with higher costs, or who face higher costs for logistics, for instance, while making devices more affordable for the country’s providers.

Increased affordability can have a dramatic impact on the adoption of high-end imaging technology. Trivitron compatriot Innvolution, for example, has focused on increasing the affordability of catheterisation laboratory systems. This has paid dividends for the vendor, which has seen sales of its cath lab solutions increase from 179 units in 2019, to 550 units in 2022. A dramatic growth curve that could be replicated by a vendor offering more affordable CT and MRI systems.

Focusing on affordability also marks a sensible strategy for India. When the providers in many other countries have looked to expand their install base, they have frequently turned to Chinese vendors. This has been particularly true for more price-sensitive modalities such as X-ray and ultrasound, although increasingly, with the likes of United Imaging, more advanced modalities such as CT and MRI are also widely available from Chinese suppliers. This presents a number of barriers. The two nations have a broadly amicable economic relationship despite turbulent border relations. However, India, like many other countries, is also concerned by an overreliance on Chinese-made products, lest it become overly beholden to the country.

More pragmatically, as the healthcare spend increases within India, and healthcare provision is extended to hundreds of millions of people, the economic opportunity is sizable. A reliance on products from China, or indeed, any other nation, sees capital leaving the country rather than being reinvested into India, providing employment, supporting domestic technological innovation and being returned in the form of taxes. Furthermore, a stipulation for a greater proportion of tenders to be fulfilled by Indian companies, also means that foreign vendors are being forced to invest in the country. Spending money on infrastructure, creating jobs and bolstering other smaller local vendors offering business services.

The benefits can also extend to product specifics. In India, some software vendors tailor products to meet the needs of Indian clinicians. The same could be true of hardware, with Indian manufacturers able to make products that are particularly suited to the Indian hospitals which will buy them. This is a strategy adopted by other vendors in other parts of the world. One of the reasons Canon Medical and Shimadzu do so well in their domestic market of Japan, for instance, is their willingness to tailor solutions to their local customer base.

Vendor Value

While such a ‘made in India’ strategy promised (but, depending on how the strategy is appraised, hasn’t necessarily delivered) clear benefits to the country, it has for the most part also proved attractive to vendors.

Often one of the highest costs a company faces is its wage bill. While there are numerous countries around the world that can offer cheap labour, non can offer vendors this cheap labour alongside such an enormous domestic market. According to The World Bank, India’s population is around 1.38 billion. China, the only country with a higher population, has around 1.41 billion citizens. So, although domestic potential is similar, wages are much cheaper in India than China, a well-established manufacturing hub. What’s more, India is set to overtake China as the world’s most populous country, as soon as 2023, according to the UN.

Focusing on manufacturing sites in India will allow vendors to better compete with domestic companies on price, while facilitating better sales networks and closer relationships to the rapidly growing Indian customer base. These centres will also allow a vendor to produce systems at scale, enabling them to enjoy the economies of scale when selling to other countries where price is the central concern.

A further benefit, which is arguably increasing in importance, is that the focus on Indian manufacturing centres will allow imaging vendors to diminish their reliance on production and sales in China. Given current obstacles in Western relations with China, such as disputes around Taiwan, bilateral sanctions and fears of security risks, this will offer reassurance to Western vendors.

United 2.0?

Despite these advantages, there are still risks for international imaging vendors. Trivitron, spurred on by made-in-India policies and propelled further by the upcoming launches of its MRI and CT systems, could, along with compatriot vendors like Allengers and Innvolution, for example, grow into major international vendors, or, at least, grow to be painful thorns in the side of GE HealthCare, Philips and Siemens Healthineers. They could hope to follow in the footsteps of some rapidly growing Chinese vendors, including United Imaging. Founded in 2011, the vendor made its ambitions clear from the outset by tempting countless engineers and technicians away from its better-established international competition. Such a move enabled it to grow rapidly, with the vendor now bringing in around $1bn in revenue annually, and challenging more established competitors in several markets.

Trivitron could aspire to a similar growth trajectory. The company and its domestic peers would naturally look to grow, with global scale essential over the longer term to be able to compete with larger rivals, both on price, but also on its ability to innovate, offer new products and secure new deals. If Trivitron, for example, rather than long-established Western vendors is better able to capitalise on the vast opportunity its domestic market presents better than its rivals, it or its peers could grow into medical imaging heavyweights.

Aside from these competitors, there are also other risks, with, for example, occasional volatility of the rupee, poor transport infrastructure in parts of the country, the relative prevalence of corruption in India, and even corporate espionage and IP theft. However, these are challenges that must be faced.

India is among the clearest opportunities for imaging vendors, both international and domestic, to grow. These companies need to focus on growing their Indian footprints and increasing production in the country to best capitalise on the country’s rising tide. Against this backdrop, Trivitron’s new launches are essential, allowing the vendor to, for the time being at least, grow alongside its much larger rivals.

About Signify Premium Insights

This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. This content is only available to individuals with an active account for this paid-for service and is the copyright of Signify Research. Content cannot be shared or distributed to non-subscribers or other third parties without express written consent from Signify ResearchTo view other recent Premium Insights that are part of the service please click here