Reshoring and nearshoring – is China still relevant?

China has been an interesting opportunity and a dynamic environment this century. During COVID-19, it became a challenging international conundrum. While still one of the world’s largest medtech markets, it was difficult to further penetrate (or even understand), given the lack of access due to the closed markets. Add-in the current global political situation and the relationship with China has become even more complex.

For medtech manufacturers with established factories in China, it was OK providing there was an excellent management team in place. If that was lacking, it created extreme challenges given the need for China operations to support China business and provide supply for global operations for many businesses.

Before the pandemic, there was no question China was an international medical manufacturing powerhouse for components and finished devices. However, during the pandemic and due to the Chinese government policies, many companies have realized relying on China is no longer sustainable.

It begs the question: Is China still relevant as a medtech manufacturing location? Our response is it’s still highly relevant on multiple levels:

1. As a component supplier: Due to scale, China remains a highly reliable and efficient supplier of components globally. Many international medtech manufacturing companies still rely on China for high volume parts to support global production, regardless of location.

2. As an in-market manufacturer: Due to China’s government policies, there is incentive for products to be produced (or finished) within China for sale to Chinese clinics and hospitals. These guidelines make it critical for international medtech companies to maintain factories in China to support their regional/local sales efforts within the Chinese market.

We’re observing the pandemic has expedited what we’ve all known was an appropriate global manufacturing strategy before COVID-19 or the Chinese government’s greater control:

• As a global medtech player, an appropriate international production strategy is to manufacture in-region for the market served. For example:
  • For Asia, manufacture in China for the China market.
  • For North America, manufacture in the U.S. or Latin America for the U.S./Canadian markets.
  • For Europe, manufacture somewhere in the EU for the European markets

So, is China still relevant? Our response is it’s extremely relevant for global medtech companies as it’s very challenging to participate in the world’s second largest medtech market (China) without producing products there. China also remains a competitive source for high volume components to supply operations globally.

It’s clear that no international medtech player should rely solely on China production. It’s key that you’re diversified for in-region manufacturing for in-market sales. We wish you well in your execution of this critical strategy.

ABOUT THE AUTHORS: CEO Florence Joffroy-Black is a long-time MedTech M&A and marketing expert. She can be reached at florencejblack@medworldadvisors.com. Managing Director Dave Sheppard is a former medical OEM Fortune 500 executive and an experienced MedTech M&A professional. He can be reached at davesheppard@medworldadvisors.com. “Value = Strategic Fit + Timing® is a registered trademark of MedWorld Advisors.

MedWorld Advisors: https://medworldadvisors.com