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Signify Premium Insight: Re-born in the USA

This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. The content is only available to companies that have subscribed to this paid-for service. To view other recent Premium Insights that are part of the service please click here.

Canon has recently announced its intention to redouble its efforts on the medical imaging market in the US, with the launch of Canon Healthcare USA.

With the new subsidiary, Canon aims to accelerate the growth of its medical business in the US, as part of its ongoing ‘Excellent Global Corporation Plan’. The vendor hopes to improve its competitiveness across medical imaging, noting that its CT, MRI and Ultrasound businesses, as well its X-ray component businesses were particular areas of focus.

Under the plans, Canon will establish Canon Healthcare USA at a new location in the Cleveland area and will see the new venture take over a portion of product sales and service from Canon Medical Systems, which until takeover by Canon in 2016, traded as Toshiba Medical. The move will put it in tighter competition with the likes of GE HealthCare, Philips and Siemens Healthineers, but, will the Japanese vendor be able to hold its own?

The Signify View

The United States has long been the world’s most lucrative medical imaging market. As such for any medical imaging vendor harbouring any grand ambitions, it is inevitable that the region must, sooner or later, be targeted. Canon already has a sizable presence in the US, carving out a reasonable market share in several key modalities. In ultrasound, for example, Canon can lay claim to the fourth highest share of the North American market in 2021, with a market share of seven percent. Similarly, in the North American MRI market, Canon can boast of market share of around five percent, while the vendor lays claim to around nine percent market share in CT, once taking the number four spot in both.

However, as a vendor with grand ambitions, Canon is seeking to significantly improve these figures. According to one press release from the vendor, for example, Canon hopes to ultimately capture “the number one share of the global CT market at an early stage”.  With such focus in place, Canon was bound to make a bolder move, and there were several reasons why it chose to make it now.

One of the factors providing impetus for Canon to focus on the US market at present is simply, that it’s where its best growth prospects lie. The vendor has, in the past focused much of its effort at its home market, targeting sales in Japan. This has been rewarded with the vendor capturing a significant market share across modalities in its domestic market. However, government spending in Japan has declined, leading to tougher market conditions in its home market, and a resultant decline in demand. This has been exacerbated by global market conditions and supply chain and logistics challenges. These factors combined mean that Japan does not represent the opportunity it may have done in the past.

Location Selection

There are, of course, other markets where Canon could have focused in order to grow. The US is, after all, perhaps the most fiercely fought market in world. However, there are a many reasons that make other markets less appealing. Europe, for example, is difficult to navigate, with the continent’s fragmentation into numerous individual markets making it complex for a vendor to efficiently tackle. Emerging markets offer considerable growth opportunities but are volatile, and, particularly at a time when the world is facing significant macroeconomic challenges, are a far riskier proposition than may be palatable.

Further to this, and despite the establishment of a new subsidiary, Canon also has some presence in the US. Between Canon Medical’s sites and sales networks that were made available through the Toshiba acquisition, as well as the Ohio base of recent Canon acquisition Quality Electrodynamic Devices, the foothold the Japanese vendor already has in the market, offers an attractive base from which it can grow.

What’s more, having this network, even if slight compared to its chief competitors of GE HealthCare, Philips and Siemens Healthineers, makes Canon a more viable option in the US. While there are some differences in the image quality and capabilities between systems from different vendors, in many cases these are slight, with advantages in technology being, for the most part, temporary. With this being the case, providers must look to other factors, including total cost of ownership, when making their purchasing decisions. As such the after-sales service and support that Canon can offer with its already established network, bolstered by its new subsidiary, will allow it to compete on a more even footing with the other players in the market.

A Tailored Fit

In addition to better serving customers, having this greater presence will also enable it to tailor products, and their marketing to better target American customers. Canon has indicated plans on this front, highlighting that as part of the launch of its new American subsidiary, it will partner with medical institutions to research the utilisation and implementation of its more advanced medical imaging systems. This will not only help introduce Canon’s products to new customers in the in US, and, the vendor will no doubt hope, foster some positive sentiment among the radiology community, but it will also allow Canon to ensure its products can fit seamlessly into American hospital’s imaging workflow.

This could be particularly important for photon-counting CT. At present only Siemens Healthineers and Samsung Neurologica have solutions approved by regulators and commercially available. Canon has been making efforts in photon counting CT, having purchased Redlen Technologies in 2021, in part to secure supply of semiconductor technology necessary in producing photon counting CT detectors, and having prototype installations active in Japan. Canon’s strides in this nascent market, along with a greater focus on the US, could enable it to become one of early market leaders in the young technology. Maintaining its presence over the long term would still be a challenge as the likes of GE and Philips release their own systems but getting to market quicker and establishing an installed base earlier, would at least give it the advantages of incumbency. While Siemens Healthineers and GE’s positions in the broader CT market are far higher than any other vendors, such, a move by Canon could help displace Philips for third, with the Dutch vendor harbouring a market share only slightly higher than that of Canon.

The Scale of the Problem

Ultimately, however, these facets of Canon’s strategy fall into a much greater trend which is particularly pertinent for all Asian vendors. Above all else these vendors need scale. In its latest financial results, Canon forecasts full-year revenues of $3.9bn for FY 2022 in its medical segment. A significant figure but still only around a third of what Siemens made in 2022 in its Imaging segment alone. Canon is a significant global player, but it still lacks scale compared to its market-leading competitors. This lack of scale in healthcare, which is affecting other Asian vendors, including compatriots Fujifilm, Shimadzu and Konica Minolta, as well as other Asian vendors including Samsung, United Imaging and Mindray, makes competing at the top that much harder. With smaller revenues, Canon has less to invest in the research and development that it needs to fight at the top, it has less resource to pour into portfolio expansion and software solutions which will allow it to compete for broader enterprise-wide tenders; it also is less able to maintain the same density of service and maintenance teams, perhaps offering larger vendors an edge as equipment downtime and managed service elements become increasingly important to providers.

These challenges will have to be faced, but, in the near term, increasingly focusing on capitalising on the lucrative US market, and using a new subsidiary to realise the opportunities it offers, provide a sensible first salvo in what is sure to be a lengthy campaign.

About Signify Premium Insights

This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. The content is only available to companies that have subscribed to this paid-for service. To view other recent Premium Insights that are part of the service please click here