Philips Medical Systems, which supplies defibrillators and X-ray machines, predicts China will soon surpass Japan to become its second-largest market next to the United States.

 

The unit under Dutch industrial giant Royal Philips Electronics achieved double-digit growth in China last year.

 

T.L.V. Kumar, chief operations officer of Philips Medical Systems Asia Pacific, said he expected sales in China to expand more than 10 percent annually in the next few years, largely outpacing the global average of approximately 5 percent.

 

Philips Electronics has been putting more emphasis on developing its lucrative healthcare segment, which is expected to be a major contributor to the company's profits. The giant that makes products from TVs to hairdryers said it recognized the potential for growing its medical businesses in China.

 

"We are making a concerted effort to grow our healthcare business," said Kumar.

 

China's healthcare market is currently valued at approximately US$1.2 billion, and in the next five to seven years, China is expected to surpass Japan, making it the second largest market for medical equipment in the world.

 

China has a strong demand for low to mid-range healthcare products. David Jin, CEO of Philips Medical Systems China said about 75 percent of the country's medical equipment market is made of middle- and lower-range products.

 

"The market opportunity is immense and the winning companies will be those who tailor solutions to the unique circumstances of China and the diversity of facilities that exists here," said Jin.

 

As many medical imaging technologies are considered too expensive for the Chinese market, Philips has strengthened its ability to offer lower-cost products through its partnership with Shenyang-based Philips-Neusoft Medical Systems Co Ltd, its only joint venture outside the United States and Europe.

 

"Given China's call for more affordable medical services and the government's pledges to increase investment in the sector, the lower-end category bodes huge market opportunities," said Jin.

 

The joint venture is mainly engaged in developing and manufacturing medical imaging systems. Philips Medical expects to expand its revenue by approximately 30 percent annually over the next five years.

 

With a major focus on the domestic market, the Philips-Neusoft plant will start to export products to South Korea, Southeast Asia, the Middle East and Africa in the second half of this year, said Jin.

 

Jin said the joint venture this year will not only increase its production volume, but also the types of products to satisfy the overseas market.

 

Jin refused to reveal the sales figures in China last year, but said the Chinese market accounted for nearly 10 percent of the global market last year.

 

(China Daily March 15, 2006)