GE Splits Global R&D into Three Independent Centers, Accelerating Focus on Precision Healthcare

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Recently, the Medical Device Family learned that,GE announced that its Global Research Center will evolve into three independently operated Advanced Research Centers, continuing to conduct innovative research in Niskayuna, New York, and Bangalore, India, with a focus on three key areas: precision healthcare, energy transition, and future aviation., respectively serving GE HealthCare, GE Vernova, and GE Aerospace*.

In 1900, Thomas Edison established the GE Laboratory (General Electric Research Laboratory) in a barn behind the home of GE's then-chief engineer, recruiting innovative scientists from across China to collaborate with.Spanning over 130 years, from laboratory-driven industrial civilization to the establishment of the first and second GE Global Research Centers, GE has consistently been committed to leading technological breakthroughs through innovation and propelling the world forward."GE Global Research Center is the innovative engine that enables GE to always lead the industrial sector," said Larry Culp, Chairman and CEO of GE and CEO of GE Aerospace.

01

Regarding the Split

GE Healthcare Announces New Plan

On July 18, GE unveiled the new brand identities for its three planned globally leading investment-grade public companies to be formed through spin-offs. These three companies will focus on the three growth sectors of healthcare, energy, and aviation, respectively.

GE Healthcare Business Will Use New Name GE HealthCare;GE's energy business, including renewable energy, power generation, digital services, and energy financial services, will be merged and operate under the new name GE Vernova; GE Aerospace will be the brand name for GE's aviation business. The three new companies will continue to benefit from GE's approximately $20 billion brand value and global recognition. After the division of GE's research center, it will also continuously strive for a smarter, healthier, and cleaner future.

Future Aviation:Promote the Application of the World's First Ceramic Components in Advanced Aviation Engines such as LEAP and GE9X

Precision Medicine:With cutting-edge materials, miniaturization of medical devices, and advanced diagnostic technologies, GE Healthcare strengthens its leadership in ultrasound scanning, magnetic resonance, and CT imaging.

Energy Transition:Helping HA Gas Turbine Set World Record for the Most Efficient Gas Turbine Globally

As planned, GE will execute the spin-off of GE Vernova, its energy business, in early 2024. Currently, GE’s energy business and customers account for one-third of the world's power supply, and it will continue to focus on improving the reliability, accessibility, and sustainability of energy. GE Vernova has an installed capacity of over 7,000 gas turbines and 400 gigawatts of renewable energy equipment globally. The new brand identity, GE Vernova, symbolizes the company's commitment to upholding quality, valuing partnership collaborations, and leading industry innovation.

After completing the aforementioned business split, GE will become a company focused on aviation as its core business, named GE Aerospace.Currently, GE Aerospace has 39,400 in-service commercial aircraft engines and 26,200 in-service military aircraft engines worldwide. Building on this strong business foundation, GE Aerospace will play a key role in the historic recovery of the aviation industry and is committed to shaping the future of flight.

Combined with GE’s iconic lettering, the new company name GE Aerospace, and a completely new brand color “Vast Blue,” symbolize the company’s continuous pursuit of breakthroughs. Building on its deep-rooted heritage in aviation, the company presents a future-oriented vision—establishing competitiveness and leadership in aerospace and defense. After the business spin-off is completed, GE Aerospace will retain ownership of the GE brand trademark and grant long-term licensing rights to the other two companies.

GE Chief Marketing Officer Linda Boff stated: "Over the past six months, we have conducted a series of comprehensive customer-oriented research to analyze the importance of the GE brand for the three planned independent companies. Based on extensive market research and data analysis, we have fully validated that the GE brand and its century-old monogram represent the continuity of innovation, symbolize global customers' trust, the honor of the team, and the company's appeal to future talent. Therefore, we are extremely proud that the future three companies will carry forward GE’s innovative DNA to drive the future of the industry."

The three standalone companies will all benefit from more focused business operations, more tailored capital allocation, and more flexible growth strategies, thereby driving long-term growth more effectively as well as realizing brand value.

Notably, after the spin-off of GE Healthcare is completed, it will be listed on the Nasdaq Global Select Market under the stock code "GEHC."By listing on the Nasdaq Stock Exchange, GE HealthCare will benefit from Nasdaq's market image as a hub for innovative, technology-driven public companies, especially within the healthcare sector.

GE Plans to Complete the Spin-off of Its Healthcare Business in Early 2023. The independent healthcare business will drive innovation in the field of precision medicine, focusing on improving patient outcomes and the level of disease diagnosis and treatment, addressing the significant challenges faced by patients and clinicians.GE Healthcare has an installed base of 4 million units worldwide, performing over 2 billion patient exams annually. It will continue to lead the forefront of innovation in the healthcare industry, caring for vital moments in life.

02

GE Healthcare to Debut Early Next Year

Focus on Precision Solutions

GE also announced the target to complete the spin-off of its healthcare business in the first week of January 2023, with the exact timing subject to final approval by the GE Board of Directors and other customary closing conditions.GE has long been a leader in the large medical equipment field, known as one of the "Big Three" alongside Philips and Siemens Healthineers. GE Healthcare was the first in the industry worldwide to launch high-end medical equipment such as commercial cyclotrons, translate-rotate CT scanners, and whole-body MRI systems.

Data shows that the three major businesses of GE Group are of similar scale. According to the 2020 annual report, GE's traditional energy segment revenue was $17.6 billion, new energy business revenue was $15.7 billion, aviation business revenue was $22 billion, and healthcare business revenue was $18 billion.

On the surface, among GE's three major business segments, the energy business is the strongest, and the healthcare business is the weakest. However, in reality, the net profit margin of GE's traditional energy sector is only 1.6%, the aviation business has a net profit margin of just 5.6%, and the new energy sector is even loss-making. Only GE Healthcare has achieved a net profit margin of 17%.

However, the spin-off of GE Healthcare has been on the agenda for a long time.In 2018, GE was removed from the Dow Jones Industrial Average. In June of the same year, GE announced its plan to spin off its healthcare division to focus solely on energy and aviation. Kieran Murphy, then CEO of GE Healthcare, immediately stated: "Independence will drive growth for GE Healthcare."

GE has indeed divested assets and restructured its business multiple times since 2018. In February 2019, GE spun off its biopharmaceutical business under the life sciences division, selling it to Danaher for $21.4 billion. In its annual report, GE stated that apart from selling businesses, it had no better solution to address leverage challenges.

The announcement shows that GE has made significant progress in improving its financial condition and operational performance, with a strong development momentum. GE will continue to focus on strengthening business operations to achieve long-term profitable growth, thereby realizing high single-digit cash flow profits by 2023. GE plans to use the proceeds from the recent spin-off of GE Aviation Financial Services (GECAS) to significantly reduce debt. While committed to reducing liabilities, GE will systematically carry out strategic capital deployment.

Among them, GE Healthcare's operational focus is to drive innovation in the field of precision medicine, addressing critical disease and clinical diagnosis and treatment challenges. It serves as a hub for the majority of medical diagnoses; concentrates on the development of equipment business while expanding into the profitable service business; provides products and services in diagnostics, interventional imaging, critical care, treatment planning, and digital solutions; with an installed base of over 4 million.。

In February this year, GE released its 2021 annual report. The report showed that the total revenue of the GE Group was 71.1 billion US dollars. Among the four major business segments of aviation, healthcare, renewable energy, and power, only healthcare achieved positive growth. However, the growth slowed down due to the impact of the divestiture of GE BioPharma.

Data shows that in 2021, GE Healthcare's business segment achieved revenue of $17.7 billion. Of this, equipment accounted for 51%, customer orders reached $19.6 billion, increasing by 5% year-over-year, with profits at $2.97 billion, decreasing by 3% year-over-year. The profit margin declined due to supply chain issues and inflation.

Healthcare Systems (abbreviated as HCS, including imaging, ultrasound, life care solutions, enterprise software and solutions, abbreviated as HCS) generated revenue of $15.7 billion, increasing by 2% year-over-year, accounting for 89% of GE Healthcare's total revenue; Pharmaceutical Diagnostics (abbreviated as PDx, including contrast agents and nuclear tracers) generated revenue of $2 billion, increasing by 13% year-over-year, accounting for 11% of GE Healthcare's total revenue.

Global equipment reaches 4 million installations, with 2 billion patient scans annually. GE Healthcare expects supply chain challenges to last until the first half of 2022 at most and is confident in the long-term sustainable growth of the business.

Latest StrategyGE Healthcare stated that it is driving organic growth through innovation. Focused on precision solutions, from precise diagnosis to targeted treatment and then to accurate monitoring, its goal is to achieve precision solutions by integrating the entire patient data process from clinical diagnosis and treatment to health management.At the same time, it is believed that ultrasound will experience mid-single-digit growth over the next three years, second only to enterprise digital solutions and medical imaging.

The financial data from 2021 shows that among the four major business divisions of the GE Group, GE Healthcare was the only division to achieve positive growth in performance. Previously, regarding the spin-off plan, internal voices at GE Healthcare believed that profits used to be centrally allocated by the group, but now the more profitable GE Healthcare would be able to shed this burden. Former GE Healthcare CEO Murphy also stated in an article that the spin-off plan "is an exciting moment, marking the arrival of opportunities to accelerate precision healthcare for hospital clients and patients."

03

Focus on China

Full Localization of R&D

In the past, diversification meant different businesses being diversified together. In the future, GE will achieve broader development in a specific industry. The driving force for this growth comes from a focus and concentration on its field. GE Healthcare is the business unit that has undergone the most thorough localization in China.

GE Healthcare officially started its business in China in 1979 and established its first office in Beijing in 1986. In 1991, GE Healthcare formed its first joint venture in China, Hangwei General Electric Medical Systems Co., Ltd., in partnership with the former Ministry of Aerospace Industry and the Ministry of Health in Beijing.

GE Healthcare China now has five major factories, nearly 7,000 employees, including a team of approximately 1,200 R&D and application engineers. Every day, more than 20 million Chinese patients benefit from GE Healthcare's products and technologies.

In China, GE Healthcare is continuously deepening its strategy of comprehensive localization, digital empowerment, and win-win cooperation, meeting the growing and diverse needs of high-end, grassroots, and non-public healthcare markets in terms of products, channels, services, supply chains, and more.Currently, GE Healthcare has built up the capability for the research and development and production of medical equipment in China, covering everything from entry-level to high-end. Since 2011, the China team has locally developed and launched over 100 innovative products into the market:

The Beijing site develops and manufactures imaging equipment such as CT scanners, X-ray machines, angiography systems, and surgical machines. Two out of every three CT scanners GE produces globally are made here. The high-end 256-slice Revolution CT and premium mobile X-ray machines have already gone into mass production in Beijing.

Shanghai has a contrast agent production base, and its produced contrast agents have ranked first among China's exported medical device enterprises for many years.

Tianjin has a production base for magnetic resonance imaging systems. For every two magnetic resonance products sold globally by GE, one comes from the Tianjin factory, which has already achieved the localization of high-end 3.0T magnetic resonance equipment in China.

In Wuxi, there is a research and production base for clinical care equipment such as ultrasound, ventilators, anesthesia machines, electrocardiogram monitoring, and patient monitors., accounting for 40% of GE Healthcare's global ultrasound sales volume. It has cumulatively shipped over one million ultrasound probes and achieved domestic production of the full range of ultrasound series in China, including cardiac, whole-body, and obstetrics and gynecology ultrasound.

"Comprehensive localization in China" is one of the core strategies of GE Healthcare China. GE Healthcare’s "comprehensive localization in China" refers to the full-chain, full-series, and full-line product localization., From economy to high-end, localized innovation, R&D, and manufacturing can all be achieved in China, with customized products for China to meet the needs of Chinese users; through continuous, high-end domestic innovation for iteration, allowing Chinese users to simultaneously access the most advanced global medical technologies and products; by upgrading the domestic supply chain to drive the collaborative design of high-end medical device manufacturing, enhancing the upstream and downstream of the industry chain. Overseas markets even need to import GE Healthcare's locally developed technologies and products from China.

As GE Healthcare continues to deepen its operations in China, it will fully adhere to the strategies of comprehensive localization, digital empowerment, and win-win cooperation. It aims to leverage the synergistic advantages of global resources and locally manufactured products, significantly enhancing the research, development, and advanced manufacturing capabilities of medical devices produced in China. At the same time, GE Healthcare will further increase its investments in China.

For example, the GE Healthcare's fifth-generation full-body ultrasound Fortis series is a model product developed and manufactured in China, benefiting users worldwide.The core R&D team of the Fortis series consists of more than a dozen R&D engineers from the Wuxi base, while also integrating the ultrasonic R&D team strengths from the US, Japan, and South Korea. The development and launch of the Fortis series new products took only 14 months.

Voluson Product Family

GE Healthcare's domestically produced high-end obstetrics and gynecology ultrasound systems, Voluson™ E8, Voluson™ E10 (referred to as the domestically produced premium E8, E10)In line with the leadership and consistent quality standards of GE Healthcare globally, in addition to featuring innovative technologies such as the third-generation curved convex matrix probe eM6C G3, the second-generation fetal heart quantification analysis FetalHQ 2.0, and micro-perfusion volume (quantitative) imaging Slowflow3D—some of GE Healthcare's latest ultrasound probes and imaging technologies—it also integrates a variety of intelligent applications specifically designed to meet the clinical needs of obstetric and gynecological ultrasound in China. With its robust ultrasound technology platform, excellent image quality, and the manufacturing capabilities of the Wuxi site, it establishes the "China-produced gold standard" in the field of obstetric and gynecological ultrasound diagnostics.