"United Imaging was born into a world dominated by global giants and a solidified industry landscape... People are looking forward to a new option, injecting fresh blood into the industry." In August 2022, Shanghai United Imaging Medical Technology Co., Ltd. （联影科技，hereinafter referred to as United Imaging) officially landed on the SSE STAR Market, and at that time, Chairman Zhang Qiang revealed United Imaging's ambition to change the medical industry landscape in his open letter for the listing.
For years, China's medical device industry has been heavily reliant on imports, with the market being monopolized by foreign medical companies such as Siemens Healthineers(西门子医疗), GE Healthcare(GE医疗), and Philips Healthcare(飞利浦医疗). Chinese companies have a much lower market share than foreign companies, accounting for less than 20%. Compared to industry giants with a century-long history, United Imaging seems particularly young. Established in 2011, United Imaging's business is to provide, develop, and produce high-performance advanced medical imaging and radiotherapy equipment, as well as life science instruments for global customers, and offer intelligent digital solutions.
As a young medical device company, United Imaging achieved profitability for the first time in 2020 and has been listed for less than a year. In its 2022 annual report released in April this year, United Imaging's annual revenue reached CNY 9.238 billion, with a net profit of 1.656 billion yuan, ranking among the top tier of China's medical device industry. In order to achieve the ambition proposed at the time of listing, United Imaging has set its sights on the overseas market, joining the wave of China's medical device industry going global.
Medical Device Industry Goes Global, United Imaging Faces Intense Competition
In recent years, the aging population and the global pandemic have intensified the pressure on public health governance in various countries, raising public awareness of health and hygiene. Medical services and medical devices have become essential consumer demands, and the market size of the medical device industry at home and abroad has continued to grow. According to data from Roland Berger's "China Medical Device Industry Development Status and Trends" report, the market size of China's medical device industry is expected to reach CNY 958.2 billion in 2022, with a compound annual growth rate of about 17.5% over the past seven years. Precedence Research reports that the global medical device market size was USD 577.26 billion in 2022 and is expected to reach USD 850 billion by 2030.
Against this backdrop, an increasing number of Chinese medical device companies are recognizing the importance of internationalization, and "going global" has become a path to open up a second growth curve. EqualOcean finds that, among the 68 listed companies in the medical device ETF (159883.SZ) in 2022, 15 companies have more than 50% of their business overseas, including medical device industry leaders such as Chison Medical(祥生医疗), Novelbeam Tecnology(海泰新光), the overseas business of companies like Andon Health(九安医疗), Caina Technology(采纳股份), and Zhonghong Medical(中红医疗) accounts for more than 90%.
However, from a global perspective, the internationalization level of Chinese medical device companies is still low. Well-known companies such as Medtronic(美敦力), Johnson & Johnson(强生), Roche Diagnostics(罗氏诊断), and GE Healthcare(GE医疗) have extensive business distribution worldwide and maintain high market shares in their target countries. The proportion of their overseas business averages more than 50%, even approaching or exceeding 70%.
In this wave of going global, United Imaging's overseas performance is not yet competitive, showing characteristics of weak revenue and rapid growth. From 2019 to 2022, United Imaging's overseas revenue was CNY 0.98 billion, CNY 2.39 billion, CNY 5.11 billion, and CNY 10.78 billion, respectively. In 2022, overseas revenue increased by more than 100% year-on-year, and its proportion in total revenue exceeded 10% for the first time.
Targeting North America, Local "Top Student" May Not Necessarily Perform Well Internationally
The medical industry generally has high barriers to entry, and the high-end medical device industry in which United Imaging operates also has a high investment and high return business model. In 2020, the sudden outbreak of the pandemic led to a surge in demand for medical imaging equipment and pneumonia intelligent analysis systems. Coupled with factors such as national policy support, government subsidies, and product innovation, United Imaging turned a profit for the first time, achieving a net profit of 903 million yuan and maintaining a net profit margin of over 15% annually.
At present, United Imaging has established extensive and close cooperation with top domestic universities and hospitals, and maintains good government relations. It has won the "14th Five-Year National Key Project" and participated in top medical industry forums. In the field of medical imaging equipment, United Imaging's MR, CT, mobile DR products, and others rank first in the domestic market share of new products. Domestic substitution has been gradually realized for low and medium-end products, breaking the monopoly of foreign capital to some extent.
However, the "top student" United Imaging, which has achieved many results in China, only occupies a relative market control. To gain a larger profit margin, it needs to explore the vast international market. Whether United Imaging can successfully bring its domestic success to the international market, considering the differences in competitive environment, legal and regulatory environment, politics, economy, and culture, is a question worth discussing.
United Imaging has set its international market strategy as "one core, multiple wings, high-level, and full-line breakthroughs." United Imaging first targeted the North American market and chose the United States as its first stop for going global. Since 2013, United Imaging has successively established the North American R&D center, North American regional headquarters, training and brand exhibition center in the United States. The United States has become the place with the most complete R&D, production, and sales functions outside China.
In addition, United Imaging has expanded its market in Japan and Europe and strengthened cooperation with relevant parties along the Belt and Road countries in recent years. In March, United Imaging made its first European brand launch at the European Congress of Radiology (ECR) 2023. Prior to that, United Imaging had cooperated with medical and research institutions in various countries in Central and Southern Europe, covering Italy, Romania, Greece, Croatia, and more. At the same time, United Imaging also participated in the Arab Health exhibition, actively expanding cooperation with Central and Eastern Europe. Currently, United Imaging's products have entered clinical and scientific research institutions in more than 50 countries and regions worldwide.
The United States, with the world's most mature high-end medical equipment market, top-notch universities and hospital research support, relatively sound intellectual property protection rules, and market-based pricing, serves as a bridgehead for medical device companies entering the global market. Choosing the United States as the first stop is a necessary choice for United Imaging to become a "world-class medical innovation leader." In Japan and European countries, United Imaging's globally leading devices such as PET-CT have differentiated advantages in high-end markets, with high penetration rates in niche markets. Additionally, Central Asia, the Middle East, and North Africa are regions with high import dependence, which not only aligns with China's "Belt and Road Initiative" and "Going Global" strategy but also serves as an attempt to seize emerging markets and disrupt existing market structures.
From the perspective of overseas destination selection, United Imaging's layout is relatively clear. However, United Imaging's overseas business currently faces numerous challenges.
First, political instability. United Imaging has chosen the United States as its main focus for overseas expansion, but the current US-China relationship is unstable, with multiple trade frictions. Since the US-China trade war began in 2018, the US Trade Representative's Office has repeatedly announced tariff lists, including United Imaging's exported MR and CT products, as well as imported superconducting wires and X-ray tube components from the United States, which have increased supply chain and procurement costs. In the future, the unclear US-China relationship and trade frictions will impact United Imaging's profitability.
Second, a solid local cooperation resource network has not yet been established. United Imaging's overseas products mainly include imaging and radiotherapy equipment, medical imaging software, and services and training in some regions such as Japan. End-users include medical institutions, research institutes, and universities. Currently, United Imaging mainly improves its overseas brand recognition through participating in exhibitions and joining various associations, and has made some progress in the United States and Europe. However, in other emerging regional markets, there are only scattered resources, and the company is in the initial stage of building partnerships with individual private hospitals, medical groups, and medical suppliers. In the future, to better sell products, United Imaging needs to strengthen its connections with local core resources, increase investment in market research and localization, which is also a way to reduce sales and service costs.
Third, weak localization. Medical devices have high technical barriers, and international standards are unified, but cultural and language differences still need to be overcome in market expansion and sales. Currently, United Imaging has websites targeting global, European Union, Polish, and Japanese audiences, covering languages such as English, Polish, and Japanese. However, the number of languages is extremely low compared to the number of overseas markets entered. At the same time, United Imaging has not yet opened local service centers in many overseas markets, and after-sales support mainly relies on online solutions, the effectiveness of which needs improvement.
Technology Innovation Drives, United Imaging's Software Business May Become a Breakthrough in the Global Market
United Imaging's main business is divided into three sectors: imaging and radiotherapy equipment, intelligent information solutions, and services and training. From an equipment perspective, United Imaging focuses on high-end medical devices and technological innovation as its market selling points, accumulating over 4,300 authorized intellectual property rights and increasing the proportion of R&D investment in recent years, with R&D personnel accounting for over 40%. In recent years, United Imaging has successively launched the world's first 75cm ultra-large aperture 3.0T magnetic resonance uMR Omega, the world's first human body full-body 5.0T magnetic resonance uMR Jupiter, and the world's first Total-body PET-CT uEXPLORER. However, the ownership of high-end PET/CT, MR, and CT products, such as 3.0T and above MR equipment and 64-slice and above CT, is far lower than that of GE, Siemens, and Philips. At the same time, earlier established Chinese companies such as Mindray Medical(迈瑞医疗), Neusoft Medical(东软医疗), Wandong Medical(万东医疗), David Medical(戴维医疗), and Libon Instruments(立邦仪器) are also continuously innovating and iterating on medical imaging equipment.
Facing numerous domestic and international competitors, United Imaging has to transform its innovation achievements through heavy investment without changing the product logic, resulting in high competition costs and uncertain realization and conversion rates. In addition to equipment, United Imaging's intelligent information solutions include medical imaging software and UIHCloud, with several software products covering various body parts and featuring precise diagnostic functions already certified and launched in the market. United Imaging continues to increase its investment in scientific research, focusing on the integration of artificial intelligence, 5G, cloud technology, and other technologies with diagnostic equipment, pursuing "disruptive innovation." If efforts in this direction yield results and realize future scenarios, coupled with the advantages of big data development in China, United Imaging's product value will soar, and the company will enter a broader international market.
United Imaging's mission is "To Bring Equal Healthcare for All," embodying a strong sense of unity and a desire to fill the gap in domestic high-end medical imaging equipment and change the world as a Chinese high-end medical imaging company, extending its reach as a leader in the global medical industry. United Imaging's direction aligns with the trend of Chinese enterprises in the era of globalization, but in overseas practice, it still lacks sufficient time and resource accumulation. In the future, United Imaging, which aims to take the high-end route supported by technological innovation, should continuously strengthen its overseas construction and seek key innovative products to break the existing market structure.