As China’s population ages, medical robots and devices are booming

On October 25, the Chinese Academy of Sciences released a ranking of China’s 2022 top 50 robot companies. At the top of the list was Tinavi Medical Technologies 北京天智航医疗科技, and number three was MicroPort MedBot 上海微创医疗机器人, both medical robot companies producing surgical robots. (Rounding out the top five was industrial robot companies Estun Automation 南京埃斯顿自动化 and Boshiac Automation 哈尔滨博实自动化, and household robot company Ecovacs Robotics 科沃斯機器人.)

According to one estimate, China’s medical robot industry in 2022 is worth about 10 billion yuan ($1.37 billion). There are currently four main types of medical robots: Surgical robots are the most common, accounting for about 40% of all medical robots, followed by rehabilitation robots (for example used for stroke patients, and disabled and elderly people) at about 35%.

With China’s aging population, there is a large annual increase in the number of chronically ill patients, as well as people with disabilities and diseases who require surgery and rehabilitation. Hence the demand for medical robots is vast, but the market penetration rate of rehabilitation robots in China is still less than 1%, the research and development lead time is very long (an executive of one local medical robot company told a journalist that his company has been working on a robotic arm for 14 years), and of the high-end medical robots, foreign brands still occupy a full 80% of the market.

The market for medical devices is huge

Medical devices, on the other hand, are booming and a much bigger market: according to one estimate, the scale of the industry is set to exceed 1.71 trillion yuan ($235.71 billion) by 2025. Companies that produce devices for ultrasounds, endoscopy, orthopedics, electrocardiographs, and defibrillation have announced glittering third quarter results, for example:

• Mindray 迈瑞医疗, the market leader and producer of a wide range of medical devices, announced revenue for the first three quarters of 23.29 billion yuan ($3.19 billion), a year-on-year increase of 20%, and net profit of 8.10 billion yuan ($1.12 billion), an increase of 21%.
• SonoScape 开立医疗, a producer of endoscopy and ultrasound devices, announced revenue for the same period of 1.25 billion yuan ($171.75 million), an increase of 33%, and net profit of 245 million yuan ($33.63 million), an increase of 76%.

According to one analysis, the revenue of over 90% of medical device companies has increased in the first three quarters of this year. Another analysis found that the 113 A-share medical device companies collectively reported revenue of 168.97 billion yuan ($23.20 billion) for the first half of the year, a year-on-year increase of 30.02%.

As of October 28, 12 medical device companies have been newly listed on the A-share market this year. A total of seven of these companies have released third quarter reports, and six of these reported net profit growth while four more than doubled their net profit. MGI Tech 华大智造, for example, a producer of ultrasounds and sequencers and the largest of the new batch of listed companies, reported revenue for first three quarters of 3.29 billion yuan ($451.70 million), a year-on-year increase of 15.57%.

The government is spending money on hospitals and the tech they need

The main reason for the glittering performance of medical device companies is strong demand from hospitals. In November 2021, the National Health Commission released a comprehensive hospital capacity expansion plan for 2021 to 2025 that contained provisions for greatly expanding high-quality medical resources from the cities to the counties and rural areas, and to elevate the medical services of at least 1,000 county hospitals to the level of tertiary hospitals.

In September, the State Council announced a loan incentive policy of 1.70 trillion yuan ($233.40 billion) for the upgrading and renovation of equipment at public buildings, including universities and hospitals. Around 200 billion yuan ($27.45 billion) of this total was earmarked for hospitals. Hospitals now have the means to upgrade medical equipment, including new devices, at much lower cost if they make use of these subsidized loans. With a period of around two years and an interest rate of only 0.7%, if a hospital purchases medical equipment of 10 million yuan ($1.37 million), it will save at least 250,000 yuan ($34,324) in interest payments per year.

The loan subsidy is vital for China’s hospitals, many of which are cash-strapped, to upgrade expensive medical devices. In July 2022, the National Health Commission announced the results of a national review of hospitals, carried out in 2020, indicating that 43.5% of the 2,508 tertiary public hospitals participating in the evaluation were in a loss-making situation, while for 3,472 secondary public hospitals, the ratio was 40%. As a result, hospitals are now more willing to purchase more cost-effective domestically-produced devices, especially as there are more competitive local options available in certain segments: for digestive endoscopy devices, for example, the localization rate has increased from 5% a few years ago to 21% currently, as a number of Chinese companies have recently entered this field.