Stryker China Unveils Localization Strategy Amid China's Healthcare Industry Boom

April 19–20, 2023 | Shanghai, China: The 2023 China Health Industry Summit by NewGen Capital Concluded Successfully. Themed “At the Right Time, All Things Grow—Embracing the Golden Age of the Health Industry,” the summit gathered hundreds of distinguished guests, including renowned domestic and international experts, scholars, industry leaders, and innovative entrepreneurs, to jointly explore the next two decades of China’s health industry.

The summit hosted nearly 10 themed forums and fireside chats, interspersed with the release of the “White Paper on China’s Health Industry 2023” and company roadshows. It not only showcased the development trends and latest achievements of the health industry to the sector, but also provided intellectual support and practical guidance for promoting technological innovation and industrial upgrading in the health industry.

As global leaders in the medical device industry, Ye Yongmei, Head of Treasury and Business Development for GE Healthcare China and CEO of Healthcare Financial Services; Zhou Yijing, Vice President of Strategic Marketing and Business Development for Stryker China; Jin Jia, Vice President of Strategic Innovation and Business Development at BD (Becton, Dickinson and Company); and Wu Liyue, Senior Director of Business Development for Boston Scientific China, were jointly invited to attend the summit. During the roundtable forum titled “The China Chapter of Multinational Corporations,” they shared insights on localized innovation in the Chinese market.

The Chinese market has become a “battleground” for companies worldwide. According to the report Current Status and Trends of China’s Medical Device Industry published by the international management consulting firm Roland Berger, the size of China’s medical device market is projected to reach RMB 958.2 billion in 2022, with a compound annual growth rate of approximately 17.5% over the past seven years. As the world’s second-largest market, China’s medical device sector undoubtedly offers substantial market space and growth potential.

Although multinational corporations, as key players, have contributed to the Chinese market and boosted industrial development by leveraging their globally leading technologies, products, and business philosophies, they still face new challenges. These challenges stem from increasingly stringent domestic regulations over the past decade, the gradual standardization of centralized procurement, and the rapid emergence of local Chinese enterprises. To secure a firm foothold in the Chinese market, these companies must precisely identify their strategic direction; only then can they avoid being overwhelmed by the wave of “domestic substitution” and leverage their competitive advantages to accelerate growth.

Facing Challenges,Zhou Yijing, Vice President of Strategic Marketing and Business Development for Stryker China, outlined Stryker’s overall strategy for localization in China.

Zhou Yijing stated, “From the perspective of overall development strategy,”Stryker’s current strategy is to closely align with national policies and strategic directions to serve the market and address practical challenges. While ensuring product quality and diversity in its portfolio, the company adheres to the concept of covering the entire diagnosis and treatment pathway, striving toward localization, refinement, and innovation., and further leverage global resources to achieve localized development in China. After setting the general direction, Stryker alsoThree Key Points of the Localization Strategy: First, Flexibility; Second, Speed; Third, Selecting the Right Products.Through the integration of these three elements, efforts are being made across the entire process, from R&D to local manufacturing., adopt a more flexible and agile mindset to deliver localized, refined, and innovative products while simultaneously developing the market.

At this forum, Wu You, Partner at China Meridian Capital and Head of the Healthcare M&A Group, raised a key issue: “How can multinational corporations better establish collaborations with domestic companies?”

This issue also reflects the growing trend of collaboration between multinational corporations and domestic manufacturers in the current industry development. Through such partnerships, multinational companies can better adapt to the characteristics and evolving dynamics of the Chinese market, reduce operational costs, improve efficiency, expand market reach, navigate regulatory requirements, and deliver products and services that more closely meet the needs of Chinese patients. However, successful implementation of this strategy still requires a clear roadmap and direction.

Zhou Yijing stated, “To seize opportunities in the Chinese market, it is essential to continuously adjust development strategies and identify a viable approach for operations in China. For Stryker, flexibility, speed, and accuracy constitute the core of its localization strategy in China. With innovation as the foundation and customer needs as the ultimate objective, Stryker’s primary development strategy is clearly defined. As a multinational corporation, we must first address issues at their source, then further reduce costs and enhance efficiency. To ensure the effective implementation of this strategy, rigorous control and thorough integration must be applied at every level, encompassing manufacturing facilities, teams, and partners.”Stryker’s localization strategy in China is reflected not only in product R&D and manufacturing, but also in deep collaboration with local enterprises, marking a further upgrade of its localization efforts in the Chinese market.”

Based on Stryker’s strategy and current industry trends, the company has formulated a relatively detailed localization implementation plan for China.

This includes accelerating the introduction of Stryker’s global innovative products. By strengthening coordination between Chinese regulatory registration and U.S.-based R&D, we aim to shorten the time required to bring Stryker’s innovative products to the Chinese market, thereby launching the latest R&D achievements in China as soon as possible. We will also enhance local collaborations. By partnering with domestic medical device manufacturers, we will leverage their advantages in manufacturing speed, local R&D capabilities, and supply chain efficiency, while integrating Stryker’s forward-looking vision and extensive expertise in the medical device sector to accelerate the generation of innovative outcomes. Furthermore, we will implement localized R&D. Through local research and development and manufacturing, we will truly meet the needs of Chinese physicians and patients, enabling timely product development, optimization, and iteration.

The 2022 collaboration between Stryker and Haitai Xin Guang serves as the best proof of Stryker’s deepening local innovation partnerships and its implementation of the aforementioned strategy.

In this local innovation partnership, both parties leveraged their respective strengths. Stryker boasts leading medical technology capabilities globally, with deep expertise, a mature business model, and a professional marketing system in the endoscopy market, holding a dominant position worldwide. Meanwhile, Haitai New Light is a domestic manufacturer specializing in medical optical imaging devices, with unique expertise in medical imaging technology. By combining their strengths, the two companies jointly developed an integrated endoscopy system solution tailored to the needs of the Chinese market, providing advanced endoscopic technology to Chinese doctors and patients, and further meeting surgeons’ demand for localized solutions.

At the 2022 China International Import Expo (CIIE), Stryker debuted “Saijing,” a new-generation endoscopy solution co-developed with Haitai XinGuang. This was the first endoscopic camera system tailored specifically for the Chinese market through their collaboration. As the partnership deepens, the second-generation product is set to launch in the second half of this year, accelerating product iteration while expanding into more domestic niche markets.

The fruits of this collaboration are also reflected in Haitai Xin Guang’s financial performance, with its revenue achieving high growth in both 2022 and the first quarter of 2023. Moreover,“Analysis Report on Haitai Optoelectronics’ 2022 Annual Report and Q1 2023 Quarterly Report” indicates that Haitai Optoelectronics’ revenue growth is expected to continue in the future, driven by the ramp-up of Stryker’s new-generation products.

Zhou Yijing further stated, “The Chinese market has undergone tremendous changes over the past two to three decades. Domestic pharmaceutical and medical device companies in China not only demonstrate high efficiency and speed in product R&D, competitive product costs, and mature manufacturing systems, but have also given rise to ‘leading domestic enterprises’ in many fields, making the future development of the market highly promising.”Stryker aims to drive localization through an open innovation model, injecting technological momentum and commercial vitality into the value-oriented transformation of China’s entire medical technology ecosystem.. In the future,Stryker will also focus on core areas such as medical devices and orthopedics, continuously expand its local strategic partnerships, and collaborate with Chinese manufacturers to create innovative solutions tailored to the needs of the Chinese market., continuously enhancing the accessibility of high-quality medical technology solutions to meet unmet needs in the Chinese market.”

According to Stryker’s 2022 annual financial report, the company achieved net sales of $18.4 billion in 2022, with organic net sales growth of 9.7%. Notably, its Medical and Neurotechnology segments delivered double-digit net sales growth across all business areas in emerging markets, reaching a total net sales volume of $10.6 billion. The Orthopaedics and Spine divisions also demonstrated strong global performance, with organic net sales growth of 7.0%. It is particularly worth noting that Stryker’s organic net sales growth in international markets has outpaced that of the U.S. domestic market for five consecutive years, underscoring the sustained momentum of its internationalization strategy.

How Did Stryker Achieve a Breakthrough Against the Trend and Realize a Leap in Performance?

Zhou Yijing shared insights from the perspective of Stryker’s local strategic planning in China. She stated that Stryker has accumulated nearly 82 years of expertise in the medical device sector, establishing a leading advantage. The company not only boasts a comprehensive product portfolio with unique and innovative offerings in surgical, neurosurgical, and orthopedic fields, but also provides a complete range of models for each individual product. Meanwhile,Stryker attaches great importance to business expansion in the Chinese market and aims to fully leverage its extensive product portfolio. Through acquisitions, partnerships, and local R&D, the company seeks to launch more localized products that meet the practical needs of healthcare institutions at all levels while offering a favorable cost-performance ratio., benefiting a broader patient population.

For the Chinese market, the company is pursuing three key strategies: first, accelerating the introduction of global innovations to shorten product time-to-market; second, establishing deep strategic partnerships with leading domestic niche players across the entire diagnosis and treatment workflow to leverage the advantages of Chinese manufacturers and accelerate the output of innovative achievements; and third, strengthening local R&D capabilities by building local R&D teams and manufacturing facilities, thereby better meeting the needs of Chinese doctors and patients through localized research, development, and production, and providing products tailored to the requirements of healthcare institutions at all levels.

Clearly, as one of the few companies worldwide with the capability to cover the entire healthcare process, StrykerWe must not only provide a comprehensive portfolio of products and solutions through independent R&D, but also accelerate product commercialization by collaborating with local enterprises, pursuing mergers and acquisitions, and other means.

Zhou Yijing stated: “For partners, Stryker first seeks alignment in philosophy and complementary strengths throughout the entire process.Secondly, partner companies must possess mature and leading capabilities in technology and in understanding Chinese patients. Finally, they should be able to integrate the best resources of both parties to achieve a synergistic effect where “1+1>2.” This is fundamental to rapidly translating concepts into products and promoting China-developed products to international markets, thereby allowing high-quality products to benefit patients worldwide.

All beautiful encounters in this world happen at just the right time. Although multinational medical device companies continue to face severe challenges, deepening collaboration with Chinese manufacturers will usher in a dawn of recovery and hope. Together, they will weather the winter and step into the next golden two decades of China’s healthcare industry.