Tag Archives: United Imaging

Signify Premium Insight: United Imaging: Self-Awareness and Strategic Dilemmas

Chinese Imaging giant Shenzhen United Imaging recently released its first annual report since the vendor listed publicly in August 2022.

The figures appeared positive, with the vendor achieving a year-on-year revenue growth of more than 27%, at RMB 9.24bn (US$ 1.32bn), while net income rose almost 17% to RMB 1.66bn (US$237m).

This growth comes as United Imaging endeavours to expand into new markets, offering both new products, but also increasing its focus on international markets; an ambition reflected in the fact that the operating income the vendor derived from international markets increased by 110% compared to a year earlier, against an increase in operating income of less than 20% for its domestic business.

Does, however, the vendor’s performance and strategic priorities suggest the vendor is finally ready to go toe-to-toe with its international competitors?

Signify Premium Insight: Neusoft Medical to Float on United Imaging’s Rising Tide

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Chinese medical imaging modality vendor Neusoft Medical has revealed its continuing ambitions to list publicly, and has announced that, for the fourth time, it plans to launch an IPO.

The vendor, which has three times failed to float, once in Shanghai and twice in Hong Kong, hopes that this time will be different. The move is being sponsored by investment banks CICC and Goldman Sachs, with the vendor hoping the fundraising will enable it to continue growing, both domestically and abroad.

The Signify View

With three previous attempts at listing publicly made already, Neusoft Medical has made it clear that raising funds through a public offering is central to its growth ambitions. Becoming a leading medical imaging vendor is, after all, an expensive business. This could be particularly true for Neusoft Medical given its modality portfolio.

At the heart of Neusoft Medical’s growth to date is its range of CT systems. Of the vendor’s total revenues, which for the first six months of 2022 accounted for RMB1.5b (~$210m), 56 percent were derived from sales of CT systems. This is far ahead of any other business line, with equipment service and training, GXR (General X-ray) and MDaaS (Medical Device as a Service), the next largest segments, accounting for 14.5%, 8.9% and 6.2% respectively.

Such a reliance on CT system sales would have been a significant asset during the peaks of the coronavirus pandemic. This is especially true given the vendor’s dependence on its domestic market. In 2021, the company derived more than 83 percent of its revenues from China. China was the first country to  feel the impacts of Covid 19. CT was used as the primary diagnostic imaging modality in the country, so those vendors that were able to quickly deliver CT systems to Chinese hospitals were able to capitalise on the rapid increase in demand. This is reflected in Neusoft Medical’s results, with CT system revenues almost doubling from around $114m in 2019 to almost $221m in 2021.

This recent Covid-catalysed rally is one of the reasons why Neusoft Medical is eager to list publicly as soon as possible. The demand in the country quickly accelerated the vendor’s growth, provided a flattering portrait to show potential investors. The reality may however be somewhat more sedate. The exceptionally high growth in China in recent years will mean that many providers’ CT system needs have recently been met, potentially tempering the opportunities for the vendor in coming years.

Certain Strengths

Despite this, there are some reasons to be optimistic. Neusoft Medical will benefit from government policy which promotes Chinese medical imaging vendors potentially giving it an advantage in some situations over international competitors such as GE HealthCare, Philips and Siemens Healthineers.

There are also other opportunities for Neusoft Medical to secure growth. Its cloud-based MDaaS (Medical Data and Devices as a Service) for instance differentiates the product from its domestic competitors, giving providers a reason to choose a system from Neusoft Medical, rather than one of the many other CT system vendors in China. The offering also helps to secure sticky recurring revenues, that are less susceptible to fluctuations in markets, and changes in demand.

Moreover, by offering some cloud capability, Neusoft Medical can hope to open up new markets. Away from major urban centres in China, as well as in other emerging markets that Neusoft Medical may look to target, there is often a shortage of radiographers and radiologists, which renders the procurement of additional CT capacity unnecessary, given that providers will be unable to utilise it. If cloud and AI tools reduce the requirement for expertise at these sites, and allow doctors to collaborate with experts remotely, then Neusoft Medical may be able to sell additional systems to providers that would otherwise have been unable to utilise them due to a lack of resource.

These opportunities could become more significant with the added capital afforded by listing publicly. The vendor’s research and development spending is relatively low, for example, and could benefit from the added capital. The vendor spent 14.4% of its revenue on research and development in the first six months of 2021. As a percentage this is in line with some of its competitors, but in absolute terms it is a small figure. At $10.4m it is dwarfed by that of United Imaging, which in the first six months of 2021 spent $60.7m on R&D, let alone that of major international competitors such as GE HealthCare, Philips and Siemens Healthineers, which spend many times that amount each year.

Finding a Niche

Investing in research and development makes sense for the vendor. While it is unlikely to challenge the top-end of the CT imaging market, by investing in technologies such as cloud and AI it can still hope to differentiate itself from other competitors and establish itself as a competitive vendor offering some advanced capability in an affordable package. While this is unlikely to worry top vendors in established markets, Neusoft Medical could still carve out a niche for itself in second and third tier hospitals in China, as well as in some emerging markets across the world.

This latter ambition will, however, remain a challenge. Providers in emerging markets, as with providers in developed markets, tend to prefer products from large, reliable international brands with good support networks and post-sale service. This is true even if it means forgoing some extraneous features. Such preference does, however, also highlight another area where Neusoft Medical may choose to invest the money from its IPO: its sales and support operations.

Currently the Chinese vendor relies heavily on distribution partnerships. While this is an efficient way to be able to offer products across a wide range of markets, a vendor is not always able to guarantee the neutrality and knowledgeability of the distributor, nor the ability and dependability of its after-sales support and service. Further, by sharing sales revenues with a distributor, Neusoft Medical will have to accept lower margins. This might be worth the trade-off if it allows Neusoft Medical to facilitate sales further across the world, and potentially compete in more volatile markets in which it would be unwise to overly invest, but in most cases, over the longer term, it will become a hindrance. Sales made through distributors have also been a source of accusations of bribery and improper conduct, allegations which, whether true or not, could impact Neusoft Medical’s reputation by association.

Opportunity Knocks

This will become particularly acute as Neusoft Medical strives, as it must, to scale. To continue to grow, the vendor must establish itself as an alternative to the many other vendors offering increasingly affordable CT systems. To do this it needs to scale to be able to continue to invest in the product to differentiate itself, and to be able to leverage the economies of scale to be able to improve its returns. Improving margins will be of particular importance given that a sizeable proportion of its profits weren’t a result of product sales or service contracts, but were in fact derived from other sources, such as government grants and foreign exchange gains. In 2021, for example, of the vendor’s $48m net profit before tax, $40.5m is a result of ‘other income’.

Such strategic focuses and such spending priorities could, over time help Neusoft Medical continue to establish itself as an attractive vendor in the Chinese and some other emerging markets, which offers reasonable technical prowess at affordable prices. What is ultimately having a more direct impact on Neusoft Medical’s prospects, however, is something the vendor has no control over.

Earlier this year United Imaging, China’s biggest domestic medical imaging vendor, listed publicly on Shanghai’s STAR index. While that vendor has a different focus to Neusoft Medical and aspires to target medical imaging’s most technically advanced segment and secure sales in developed markets, it bears some similarities to Neusoft Medical. Significantly, its listing, which netted more than $1.6bn for the vendor, was oversubscribed more than 3,500 times. This means that Neusoft Medical will benefit from the excitement that United Imaging’s listing will have raised and capitalise on the strong prospects for the Chinese medical imaging market that the public company touts. Moreover, it will also offer an opportunity for those investors that were unable to put their money into United Imaging to bet on a similar alternative, which competes in many of the same markets, and will benefit from similar market conditions as United Imaging.

Given this rising tide, despite the severity of some of the challenges facing Neusoft Medical, it could still capitalise. As demonstrated by its repeated attempts to go public, listing does appear to be the only way forward for the Chinese vendor, and now, when the conditions are in its favour, represents the firm’s best opportunity yet to realise its ambition.

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Signify Premium Insight: United Imaging Gives the Public what it Wants

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As 2021 drew to a close, Chinese medical imaging vendor, United Imaging, made clear its intention to list on Shanghai’s technology – STAR index in 2022. This ambition was last week realised, when the vendor made its debut on the bourse.

Demand for shares in the company was high, with the firm’s IPO massively oversubscribed, and an increase in share price of as much as 75% when the company made its debut on the index. The offering will net the vendor more than $1.6bn, with the firm stating it will use the cash to fund research and development, production and marketing.

The Signify View

Even before United Imaging announced it was going to list publicly at the end of last year, the move seemed like the natural progression. The vendor has grown incredibly quickly since being founded in 2011, and now brings in around $1bn in revenue annually. To continue to grow, raising capital was necessary as it bids to compete with the largest international imaging vendors.

To do this, the vendor will have several priorities for its newly-raised funds, chief among them is product development. In the first instance, this means investing in the development of products that will allow it to better compete with GE HealthCare, Philips and Siemens Healthineers. United Imaging has been more successful compared to its domestic peers, thanks, in part, to its focus on high-end imaging rather than just cost competitiveness as is more typical of its domestic peers. To continue its arc of success this should remain a priority.

United Imaging therefore will likely invest in products to compete with other vendors’ most premium products, such as photon counting CT. CT is, by far, United Imaging’s biggest product line, accounting for around half of all revenue. As the next generational evolution of that modality, offering a flagship photon counting CT system and, over time, enriching its lineup with photon counting detectors, enables United Imaging to continue to compete on a comparable footing. In a similar vein, other paths being trod by other vendors such as helium-free MRI, and high-Tesla MRI represent necessary product development directions if United hopes to truly be thought of a competitor to other international vendors.

Portfolio Planning

In addition to continuing the development of product categories in which United Imaging is strong, the vendor will also need to address the gaps in its portfolio. As hospitals are increasingly looking to enter broader multi-modality imaging deals, they are turning to vendors which can address the majority of their imaging requirements and offer holistic solutions. United Imaging will therefore need to address the gaps in its line-up with modalities like angiography, mammography and ultrasound, for example, which currently represent significant omissions. Developing products in these modalities and addressing these gaps in its portfolio could therefore represent an opportunity beyond sales of those modalities themselves.

Another aspect of product development, which, pragmatically at least, is arguably more important than the portfolio offered by the vendor, is integrated production. For their advanced imaging lines, the likes of GE, Philips and Siemens, make almost all components themselves. This gives them more granular control over product, enables them to react to adversity in supply chains and external shocks and helps them to control costs and quality more tightly. United Imaging on the other hand still relies on external suppliers for many core components. The vendor therefore is likely to invest some of the fruits of its listing into bringing production of those components in-house. This is particularly true for components that are produced outside of China, with trade barriers and geopolitical tensions making dependency on international supply chains risky.

Turning Away from China

Beyond the products themselves, United Imaging also needs to invest in sales and service infrastructure internationally. United Imaging’s revenues have, so far, come almost entirely from its home market. The vendor would do well, however, to prioritise international growth. Chinese policies which focus on centralised purchasing are likely to depress the average selling prices of modalities in the country, given United Imaging’s strong dependence on these Chinese market, even a relatively small decrease in selling price could have a significant impact on profitability.

Furthermore, scale is crucial for success of the vendor. Even though United Imaging spends a relatively high proportion of its revenue on research and development, its actual spend is far outstripped compared to its much larger rivals. The only way it will be able to reduce this deficit and compete at the upper echelons of medical imaging is by selling significantly more medical imaging systems. It is unrealistic for such an increase in sales to come from its domestic market, particularly given the fact that many Chinese providers purchased additional CT systems and brought forward purchasing plans during the Covid 19 pandemic. Such hospitals, which have recently acquired new CT equipment are unlikely to make additional purchases in the near future, until the installed base is ready for replacement. There will be some growth as the state continues to invest in expansion of healthcare in China, but this offers nowhere near the opportunity afforded by international markets.

International Coordination

The specifics of this international expansion do, however, present some challenges. United Imaging aspires to compete at the premium end of medical imaging with the likes of GE HealthCare, Philips and Siemens Healthineers. However, to truly compete with these vendors, United Imaging must make inroads in mature markets such as the US and Western Europe. These markets are particularly difficult for United Imaging to displace incumbents. In these markets, providers are primarily concerned with image quality, and the quality of service they receive, with promises of minimal downtime for example, a significant benefit to hospitals. Doctors in these markets will also impede United Imaging’s progress, with many professionals lacking the motivation or availability to learn how to use a different vendor’s equipment, particularly if there is no significant benefit in terms of performance. Strong brand loyalty by the end user market in such developed nations further restricts penetration possibility and market access for new vendors.

This reluctance to adopt United Imaging’s solutions in mature markets could force the vendor to direct its efforts towards developing markets, including countries in Africa, and members of the Commonwealth of Independent States, including Russia. However, though these markets offer a better opportunity for United Imaging to realise sales, the markets themselves hold far less potential than other mature markets. As such, even though United Imaging will find the markets fruitful, they won’t be able to offer the vendor the scale it needs to truly compete with its established international rivals.

What’s more in these lower-value markets, where cost competitiveness is more significant, United Imaging could also start to lose out to other vendors, which don’t have the same lofty aspirations and instead are focused solely on producing affordable systems. Other Chinese vendors and Indian vendors such as Triviton, for example, could squeeze United Imaging in some markets by offering even more affordable advanced imaging systems.

Shares for the Future?

Despite these challenges, United Imaging’s achievements must be acknowledged. The speed at which the Chinese vendor has grown, and the range of advanced imaging products it now offers is impressive. It has also effectively capitalised on external trends. It has benefited significantly from Chinese state support, its government’s ‘buy local’ procurement policies and increased healthcare spending. The vendor has also benefitted from Covid 19, with revenues for its CT product line, a key modality used in Covid care, increasing by more than 150% between 2019 and 2020 largely as a result of increased covid spending. It has then rode this wave to its IPO, also benefitting from investors’ willingness to put money into healthcare firms, which are seen as something of a safe haven.

Even with these advantages and United Imaging’s execution, the road ahead is still difficult. $1.6bn is a lot of money, but it will only go so far. Even with this cash, United will struggle to match its international rivals’ development, which will make it hard to compete with them in developed markets, which will make scaling at the rate needed to maintain development difficult. In the meantime, it can target emerging markets, but the longer it is seen as a cost-focused vendor servicing less technically-demanding markets, the harder it will be to make the leap to the top tier markets, and the less chance it will have of competing with the established market leaders.

These constraints mean that United Imaging will likely have to settle for less prodigious growth over the coming years. Developing additional products and bringing component production in-house will offer significant benefits, but these will only truly be realised over time. More fundamentally, United Imaging also needs to home in on its targets. Can it really stand shoulder to shoulder with GE HealthCare, Philips and Siemens Healthineers? Or should it look to strike out and ace its own, unique approach. These are issues which, even given the money raised, listing publicly can’t solve.

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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.

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Signify Premium Insight: Is United Imaging Ready to Disrupt?

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Chinese medical imaging giant United Imaging has announced it has received a contract from US-based group purchasing organisation, Vizient. The deal expands the number of modalities United Imaging offers through Vizient, adding its entire digital radiography and MRI systems to the agreement for its CT portfolio made last year.

As the largest member-driven group purchasing organisation in the US, Vizient says it represents more than $100bn in annual purchasing volume to its members, which include academic medical centres, paediatric facilities, community hospitals, integrated health delivery networks and nonacute providers. In entering into an agreement with Vizient, United Imaging expects to be able to better compete in the US market.

The Signify View

As far as ambitions go, becoming a superpower in the global medical imaging market is a big one. For United Imaging, though, it is an ambition that is not only desirable, but essential. The Chinese vendor has enjoyed staggering growth. Since being founded in 2011, the vendor brought in around $900m in revenue in 2020 and is still growing, displacing other companies to gain significant market share in its domestic market. This may have been achieved with favourable government support, as well as policies, and state subsidies, but there is no denying how impressive the rise has been.

However, it’s not enough. Unlike almost all of its Chinese peers, United Imaging has decided not to focus on the value end of the market. Instead of offering lower cost alternatives to systems from the ‘big three’: GE Healthcare, Siemens Healthineers and Philips to gain traction in its domestic, and other developing markets, United Imaging envisions itself a technology leader. A purveyor of top tier hardware and software solutions to compete directly with the world’s leading vendors, on an equal footing. This ambition, is, however, reliant on scale and penetration of new markets.

The Chinese market alone is not big enough to support the high cost of developing top tier medical imaging systems. With its total revenue little over a twentieth of its established rivals, United Imaging just doesn’t have the same comparable resource to invest into technological development, a fact that no percentage advantage in R&D spend will address. While United’s R&D spend to revenue ratio of 14.76% in 2020 is at first sight impressive, this equates to around $132 million which is a fraction of the $1.4 billion invested by Siemens Healthineers in its FY20. If the vendor is to continue growing, and improve upon its first ever profit of $14.5m in 2020, it needs to expand globally, with the US market key to that push. Breaking into the US market is also critical as the vendor grows, with the scale it brings also enabling United Imaging to keep manufacturing costs low from a higher volume of sales. This explains importance of the Vizient partnership.

The Tool for the Job                                                                                                                                 

Setting, and achieving, growth ambitions are two very different things. To tackle the US market as it needs too, United Imaging essentially has three tools at its disposal. The first is the price it charges providers. It could undercut established rivals, even using the funding from its recently approved IPO to operate at a loss in a bid to displace the entrenched competition. This would be a poor strategy. United Imaging is unlikely to be able to compete on price right away given its lack of manufacturing scale and the sales activities it must invest in to target new markets. Moreover, it needs to continue to show improvements in its bottom line to justify its lofty $15 billion valuation and retain the confidence of its new investors, post IPO.

Another strategy to differentiate itself is through its technology. United Imaging has made some headway in this regard. Unlike some of its competitors, the vendor offers advanced whole body PET CT scanners. It also offers technically progressive systems in other advanced modalities such as MRI and CT, although it still lags behind its major competitors at the very pinnacle of the market. United Imaging’s capabilities also extend beyond hardware, with the vendor boasting several Chinese NMPT Class III-cleared AI algorithms in its portfolio. These products are impressive, and in some cases give United Imaging an edge over its longer established peers. However, these advantages are, in many cases, slight and specific to certain products rather than across its portfolio, and therefore unlikely to persuade a provider to switch its allegiance and break ties with its current vendor. This is especially true given the fact that any technical edge is likely to be short lived, with GE Healthcare, Philips and Siemens Healthineers poised to quickly eliminate any advantage that is costing them sales.

Service Secret

The third tool is an innovative approach to service and business models which are likely to be United Imaging’s key to breaking into the North American market. If the Chinese vendor can attain near technical equivalence with its established competition, despite its smaller R&D budget, then its smaller size and lack of established customer base could enable it to be more agile in offering innovative business models. This service innovation could take many forms, but there is evidence that the Chinese vendor is already heading in this direction. One initiative that United Imaging boasts is its ‘All-In’ product purchases. These configurations see medical imaging systems sold fully equipped with all software and functionality for the life of the product included from the outset, a move which United Imaging claims offers clinical flexibility and investment transparency. United Imaging also offers an All-In approach to service, with packages available that, for example, include unlimited CT tube coverage and enhanced training. In a similar vein is the vendors’ ‘Upgrades for Life’ option which aims to ensure that customers’ software and firmware is always up to date. Under the programme all new systems have the same software as in the vendor’s highest end scanners. In addition, all of this software is, at no extra charge, cascaded to United Imaging’s entire range at no further cost.

With initiatives such as these United Imaging is purposefully distancing itself from the affordable transactional sales model that epitomises many of its compatriot vendors. Instead, it is better positioning itself to meet the needs of large Western providers, and using such sales programmes in an attempt to establish itself as a trusted partner of the kind that can compete for large network-wide tenders, rather than simply being a supplier of medical imaging hardware. The funding of this expansion is set to be achieved through the vendor’s upcoming IPO, which will help pay for such sales activities until the vendor is able to derive the revenues it targets.

The Need for New

Such purchasing options are interesting and could bring opportunity to United Imaging. However, penetrating North American healthcare systems and displacing entrenched competition still represents a formidable challenge. After all, continuing to purchase from GE Healthcare, Philips or Siemens represents a safe and risk-free option. Even if the total cost is higher or upgrades and service are less flexible, these established vendors will never be considered a bad option. Therefore, United Imaging cannot settle for just being a competitive alternative, it must differentiate itself, standing head and shoulders above the entrenched competition in some regard. This is necessary to make the risk and disruption of switching worth it to a provider.

There are companies in other industries that have successfully disrupted established oligopolies. Huawei, another prominent Chinese vendor, has risen to a position of dominance in the telecoms equipment market, replacing better established rivals Nokia and Ericsson to claim the top spot. Huawei achieved this by hiring talent from competitors, investing in R&D (with the help of the Chinese government), offering exceptional technology at competitive prices, and being able to complete massive telecom equipment deployments ahead of schedule and under budget.

Tesla is another firm that rose to prominence in a market packed with dominant giants. Despite being founded in 2003, the firm already has a market capitalisation around four times that of its nearest rival, Toyota, despite having revenues of only around a fifth, at $54bn in 2021. It achieved this feat by investing heavily in its own production facilities, developing attention grabbing technologies such as autonomous driving, and taking an innovative approach to car ownership, including a direct-to-customer sales model and the creation of its own electric charging network.

Time to Transform

By signing an agreement with Vizient, United Imaging will be more strongly positioned to increase its presence in the United States, but it will not be transformative. Judging by the examples of Huawei and Tesla, United Imaging still has work to do on that front. At present, its efforts are better described as competitive rather than truly disruptive, as is necessary for it to have the same impact as Huawei and Tesla have had on their respective markets. United Imaging’s service-based initiatives are a solid start on this front, but, on their own at least, are unlikely to be enough to convince a provider to fully switch allegiance. Regardless, these initiatives, along with competent technology across the board, as well as several areas of excellence such as PET CT will increasingly render United Imaging a threat, giving the Chinese challenger the chance to get its foot in the door.

GE Healthcare, Siemens Healthineers and Philips should not rest comfortably, however. Only a decade ago it seemed implausible that a challenger such as Huawei or Tesla would have been able to disrupt their respective markets, but such change can happen quickly. What today is a single deal for United Imaging, could, in ten years, be seen in retrospect as a tipping point. GE Healthcare, Siemens Healthineers and Philips need to be primed, but whether they actually have to act is up to United Imaging.

 

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