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this article is written based on public information and is for information exchange only and does not constitute any investment advice.

in the complex international situation, all disputes are for the right to speak.

discourse power does not only refer to the right to speak, but also implies the influence of speech. in ancient times, the words of emperors were called "imperial edicts", not because of how philosophical their words were, but because they held powerful armies and their demands must be obeyed unconditionally by others. in modern society, although feudal emperors no longer exist, there is still "discourse hegemony" between countries, but this "hegemony" is no longer verbal, but has transformed into economy, culture, and ideology.

the strategic competition act of 2021, the chips and science act of 2022, and the biosecurity act of 2023. behind these "reasonable and well-founded" bills is actually the "coercion" implemented by leading powers using their discourse power.

chips, cxos, gene sequencers, the iron curtain has been drawn, and the only way out is to be independent. similar to the semiconductor industry, my country also has obvious shortcomings in the field of medical imaging. the three giants of ge healthcare, siemens healthcare, and philips (referred to as gps) still dominate the market, and breaking the monopoly is imperative.

we must and will eventually take the autonomy of medical imaging into our own hands.

01

one device, one generation

medical imaging equipment is a "slow-paced" industry.

the so-called "slow" is reflected in two aspects. on the one hand, the technical threshold is high and capital is not willing to intervene easily. if companies want to achieve results, they must improve their internal strength. on the other hand, the product replacement cycle is long and the selling price is often millions or even tens of millions of yuan, which means that hospitals are destined not to replace equipment easily.

the service life of a magnetic resonance imaging system (mr) or x-ray computed tomography system (ct) is usually about ten years. when a hospital purchases a medical imaging device, it often also conducts targeted personnel training, covering three roles: diagnostic doctors, maintenance technicians, and nursing staff, with a total of more than ten people.

since there are certain differences between equipment from different brands, medical imaging equipment has extremely high sunk costs. once a hospital decides on a brand of equipment, they will not easily change the brand of equipment in subsequent purchases for the sake of convenience and accuracy, which subtly forms extremely important user stickiness.

my country's medical imaging industry started relatively late. in contrast, european and american companies have formed significant brand competition barriers by virtue of their first-mover advantage. this is why my country's medical imaging equipment has always been firmly dominated by european and american companies, especially in the high-end field, where they have almost reached a monopoly.

in such a "slow-paced" industry, domestic latecomers will undoubtedly face severe challenges. product quality, operating habits, and brand value are all areas that domestic manufacturers need to continuously improve.

a ten-year cycle and a million-dollar price tag: behind a piece of medical imaging equipment is the youth of a generation of medical professionals and half the life of a generation of ordinary people.

02

“using what you want” doesn’t work

long-term reliance on european and american brands is destined to be a dead end.

although european and american companies have been deeply involved in medical imaging equipment for many years and have rich industry experience and r&d capabilities, their products may not be suitable for the domestic market in the long run. this is a result-oriented matter, determined by the overall medical environment, and simply "taking what is available" will not work.

in the us medical system, commercial insurance is the core force of medical payment, which is based on a mature business logic. for patients, due to the high cost of imaging diagnosis, patients are not very willing to undergo examinations, so the daily use frequency of medical imaging equipment in us hospitals is not high, showing a typical low frequency and high unit price. almost all european and american brands of medical imaging equipment are designed and developed based on this business model.

figure: us hospital income structure in 2022, source: huafu securities

however, the situation is quite different in the domestic medical system. because commercial insurance is not mature, its payment proportion is almost negligible. the national medical insurance bureau, as the main payer, bears great payment pressure. every day, a large number of patients need to be examined in chinese hospitals. the equipment needs to run around the clock. the patient throughput is large and the operation load is heavy, showing a clear high frequency and low unit price.

two completely opposite needs, but using the same machine, is obviously not in line with the objective law of long-term development of things, and will inevitably diverge over time. of course, european and american medical diagnostic equipment can temporarily meet the needs of chinese hospitals, but the continuous optimization space behind this cannot be ignored.

only manufacturers that are rooted in china and always understand the real needs of hospitals can further iterate products that truly meet domestic needs. in my country, the medical industry is not a simple commodity, and the logic behind it should not be completely based on business logic, but should consider the actual situation.

china's pharmaceutical industry must go its own way, and this is particularly evident in the field of medical imaging.

03

if you are "stuck in the neck"

medical imaging companies sell not only equipment, but also a whole set of services. if they suddenly encounter a bottleneck, the consequences may be beyond imagination.

the equipment is expensive, and the service cycle is ten years long, which means that maintenance service is an inevitable key option. this can be seen from the financial report of united imaging healthcare: in the 2023 financial report of united imaging, it recorded a total revenue of 11.171 billion yuan, and the maintenance business revenue was as high as 1.069 billion yuan, accounting for 9.6% of the revenue.

this is the case for united imaging medical, a new domestic force, not to mention overseas giants with a long history. maintenance services are naturally one of the options. in 2023, the revenue from maintenance services of gps medical imaging equipment will account for approximately 30%-40% of its overall medical imaging business revenue.

figure: proportion of united imaging medical's repair business, source: company financial report

in addition, the operating system and related parts are also very likely to encounter "bottleneck" links. if we do not have autonomy, we will lose our voice for fear of "bottleneck". this is not alarmist, but a real case that has occurred in the medical device industry.

bgi is a global pioneer in gene sequencers, but its rapid growth was built on the back of a bottleneck. bgi group used to purchase gene sequencers, but the gene sequencers it bought at a cost of over 100 million us dollars were subject to extremely strict restrictions from the manufacturer: the original normal reagent price later directly increased by 40%, and the replacement of parts was also blocked and embargoed, and even moving the equipment in the office building was prohibited.

all this points to a cruel fact: without autonomy, we will be controlled by others in every way.

based on this, if the chinese medical imaging industry wants to have a say, it must first achieve autonomy and control. otherwise, there is always a risk of being "choked", with price increases at the least and blockades at the worst.

04

the rise of domestic power

the competitive barriers established by gps are gradually disintegrating, and chinese companies represented by united imaging healthcare and neusoft medical are rising.

according to medical procurement data, in the national medical imaging equipment procurement bidding in 2023, united imaging medical mr won 24% of the bids, surpassing philips' 13%, second only to ge healthcare and siemens healthcare's 27.3% and 26.6%. neusoft medical accounted for 4.9%, and although the absolute value of the share was not high, it doubled year-on-year compared with 2022.

figure: domestic medical imaging market share in the past two years, source: cmb international

in terms of ct, united imaging healthcare has a greater advantage, with a market share of 29.2%, making it the company with the highest number of winning bids in the country. ge healthcare, siemens healthcare, and philips have market shares of 22.3%, 13.6%, and 8.3%, respectively. neusoft medical has a share of 12.2%, ranking fourth in the country. it is not difficult to see from these data that united imaging healthcare and neusoft medical have completed their breakthrough and initially have the strength to compete directly with european and american companies.

core components are an important part of gps monopoly. industry leader united imaging medical has made targeted arrangements for this: self-developed and self-produced three key technologies: ct detectors, tubes and high-voltage generators. the performance of the self-developed space-time detectors, bipolar ct tubes and high-voltage generators are all at the industry-leading level.

with the continuous breakthroughs of domestic medical imaging companies in the high-end market, they have the strength to compete head-on with gps. for example, the industry leader united imaging healthcare has achieved breakthroughs in batches of its high-end products in top hospitals in mature markets in europe and the united states, and has also begun to make breakthroughs in the global overseas market. the construction of a global service network covers more than 70 countries and regions, and there are more than 20 global central warehouses. neusoft medical has also established 11 overseas branches in many countries around the world, with a historical installed capacity of more than 45,000 units.

it is precisely because of the continuous efforts of domestic medical imaging manufacturers that the localization rate in the fields of ct and mr has continued to increase, which has ensured our right to speak. the right to speak is not equal to discourse hegemony. we are fighting for the right to speak in medical imaging in order not to be oppressed by discourse hegemony.

because we have autonomy, we can embrace ai technology and continuously iterate high-end products; we can truly integrate industry and medicine and fill clinical gaps; we can go global and compete in the international market. only by having the right to speak can we not be controlled by others and continue to improve the core competitiveness of china's medical imaging industry in the world.