Why are home appliance giants crossing over into medical devices?

Recently, the entry of technology companies such as Huawei and Apple into the medical device field has sparked much discussion within the industry, while the pace of home appliance companies entering the medical device field seems to have emerged earlier.

Recently, the entry of technology companies such as Huawei and Apple into the medical device field has sparked much discussion within the industry, while the pace of home appliance companies entering the medical device field seems to have emerged earlier.

Midea invests 2 billion yuan in Wandong Medical

In early July this year, Wandong Medical issued an announcement stating that it plans to raise no more than 2.083 billion yuan through a non-public offering of shares. The controlling shareholder, Midea Group, will subscribe for all the A-shares in this non-public offering in cash, increasing its shareholding ratio to 45.46%. Affected by this, Wandong Medical's stock price surged 5.59% on July 6.

Less than half a year later, this is Midea Group's second investment. In February of this year, it acquired 29.09% of Wandong Medical's shares from the original controlling shareholder, Fish Leap Technology, and the company's actual controller, Wu Guangming. As of now, Wandong Medical's market capitalization is around 9 billion yuan, an increase of nearly 4 billion yuan since Midea Group took over. Two-thirds of the funds raised will be used for the research and development and industrialization projects of its main medical imaging equipment products. This mainly involves three core businesses: 444 million yuan for MRI (magnetic resonance imaging equipment), 356 million yuan for DR (direct digital X-ray machine) and DRF (dynamic digital X-ray machine), and CT (computerized tomography) following that. The industry generally believes that Midea Group is optimistic about Wandong Medical's imaging equipment, its resources in primary hospital channels, and its opportunities in domestic substitution.

This is not Midea's "first show" in the medical device field. As early as May 2017, Midea cooperated with Yaskawa Electric, a Japanese industrial robot manufacturer, in the Chinese market to produce and sell nursing and rehabilitation robots. In September 2017, Midea Group signed a strategic cooperation agreement with Guangzhou Pharmaceutical Group, focusing on medical robots, intelligent logistics, and health big data. On March 18, 2021, Hefei Midea Biomedical Co., Ltd. was established, with business scope covering the research and development, production, and operation of medical devices. According to Qichacha, the company is jointly controlled by Midea Group and Foshan Midea Air Conditioning Industrial Investment Co., Ltd.

Gree's intensive strategic layout

Many home appliance companies have crossed over into the medical device field, making this sector exceptionally hot. Gree entered the medical field the latest, but its various layouts have not stopped since its start. After a series of intensive layouts, Gree has now begun to exert its efforts in the high-end medical device market.

In February 2020, Gree Electric focused on solving the shortage of masks caused by the epidemic, announcing that it would begin manufacturing mask production equipment and other products to fight the epidemic. In March, Gree Chairman Dong Mingzhu's "Dong Mingzhu's Point" began selling Gree masks and air purifiers that claimed to kill the novel coronavirus, which was a solid step for Gree to formally enter the medical device field. In June 2020, the business scope of Zhuhai Gree Electric Appliances Co., Ltd. was changed, adding disinfection equipment and medical devices.

Shortly thereafter, Gree also invested 20 million yuan to establish Zhuhai Grejian Medical Technology Co., Ltd., whose business scope includes the design, manufacturing, and sales of medical and nursing personnel protective supplies, ultraviolet disinfection equipment, physiological parameter analysis and measurement equipment, and operating room infection control supplies. In addition, Gree has successively established medical equipment-related companies in cities such as Chengdu and Tianjin. Gree Electric Chairman Dong Mingzhu said that it will invest 1 billion yuan in the medical equipment field to develop high-end medical equipment.

Haier opens up another application market for low-temperature technology

Another home appliance company that has also deployed high-end medical devices is Haier Group. In October 2005, Haier Group established Haier Biomedical, a core R&D institution in the field of low-temperature refrigeration, focusing on the field of low-temperature storage equipment for biomedical applications. Haier Biomedical was listed on the STAR Market in 2019. It started with medical refrigerators and cold storage boxes, and now uses Internet of Things technology to develop innovative businesses such as "blood networks" and "vaccine networks." During the epidemic, Haier donated ultra-low temperature refrigerators, medicine cold storage boxes, and blood low-temperature operating tables to medical institutions.

 At the same time, in January 2019, Haier Group acquired the listed company Xingpu Medical Science for 1.829 billion yuan, which was later renamed Yingkang Life. Yingkang Life's flagship product is the Gamma Knife, which is 100% independently developed by its wholly-owned subsidiary. In 2019, sales reached 144 million yuan, a year-on-year increase of 68.16%. It is reported that the birth of the Masipu Gamma Knife not only broke the foreign monopoly but also significantly reduced the amount of Cobalt-60 used and the equipment Price through technological research and development, thus reducing the treatment costs for patients to a certain extent, which is of great significance.

Hisense is committed to creating visual equipment products

Hisense established a medical equipment company six years ago, with businesses covering medical displays, computer-assisted surgery systems, mobile nursing systems, digital operating room solutions, and color Doppler ultrasound diagnostic instruments. Hisense Electric, which mainly produces color TVs, was renamed Hisense Visual last year. It is possible that Hisense's medical business will be included in the listed company in the future.

TCL Group is involved in the field of medical imaging diagnosis

TCL Group had already tested the waters of the medical electronics industry as early as 2009, investing 31.09 million yuan to acquire some shares of Beijing Guoyao Hengrui Meilian. On July 10, 2012, TCL Group and private equity firm Haoran Capital jointly established TCL Medical.

After more than ten years of layout, TCL Group has become a medical imaging equipment supplier and medical diagnosis partner, providing one-stop medical imaging diagnosis and solutions; the business lines have expanded from the original X-ray products to DSA (digital subtraction angiography), MR (mixed reality), ultrasound, and medical imaging services (such as third-party imaging centers). Currently, TCL Group has established 5 medical imaging centers nationwide.

Foreign-funded veteran home appliance brands such as Philips and Siemens strengthen their layout in the medical field

Foreign-funded electronics companies have entered the medical equipment manufacturing field earlier. Philips disclosed in its fourth-quarter 2019 financial report that it would consider selling some of its home appliance businesses again to focus on the medical and health field. In the past few years, veteran home appliance giants such as General Electric in the United States and Siemens in Germany have transferred their home appliance businesses and focused on the medical electronics market.

The huge market increment and space have led many companies to enter the market

Why are home appliance giants targeting the medical device field? The underlying reason is the vast potential market and development space in the medical device field. High-value consumables, in-vitro diagnostics, and high-end medical equipment within the medical device sub-sector have high technological content and high profit margins, representing a battleground for major technological powers and large multinational corporations. In the 70 years since the founding of the People's Republic of China, China's medical device industry has experienced a development journey from nothing to something, from backwardness to catching up and even surpassing others. Since the reform and opening up, China's medical device industry has developed rapidly, with product categories gradually becoming complete, quality standards steadily improving, and innovation capabilities constantly improving. Data shows that from 2007 to 2017, the scale of China's medical device industry grew from 53.5 billion yuan to 445 billion yuan, with a compound annual growth rate of 23.6%, far exceeding the global growth rate of the medical device industry. In addition, according to IMS data, the scale of China's medical market surpassed Japan in 2015, and is currently the second largest medical device market in the world after the United States. The next ten years will be a golden decade for the development of China's medical device industry, and the industry scale will continue to grow. At the same time, encouraged by the success of foreign home appliance giants, Chinese home appliance giants are following suit, hoping to get a piece of the pie in this huge market.

The future of the domestic medical field is a long and arduous journey.

Judging from the current industrial layout of home appliance giants, most companies are based on their own strengths and develop across multiple fields. Starting from electrical principles and R&D capabilities, they maximize their technological advantages, which is also their natural advantage in cross-border transformation. At the same time, well-known home appliance brands have a deep foundation in reputation, so they will also have high market recognition if they transform into the household medical device field.

Currently, the domestic home appliance market has become mature and stable. Under the catalysis of various e-commerce festivals, the home appliance market has gradually fallen into a stalemate of competition, prompting many home appliance companies to change strategies and simultaneously cross over into other fields with huge development potential.Some industry insiders believe that home appliance companies' entering the medical device and other industries allows companies to achieve diversified development, explore new industrial spaces and product lines, and enhance the General Strength and risk resistance of enterprises.

However, as mentioned earlier, China's medical device field has only emerged since the 1970s. Currently, there is still a large gap between domestic and foreign mature technologies. The high-end domestic market for medical devices is still firmly occupied by foreign Brands. Many technological barriers are difficult to overcome in a short time. At the same time, the development, production, financing, and launch of medical equipment require a long investment period, which is completely different from the short-term return sales model of the home appliance market, which is a major challenge to their business model.

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