GE HealthCare Completes Spin-off as $18 Billion Medical Giant Charts New Course on Nasdaq

On November 9, 2021, GE, which claimed to have defined the “American Era,” announced its spin-off plan. Over the next three years, GE will split into three separate companies, with the parent company focusing on aviation, while the energy and healthcare segments will be spun off as two independent entities.

Last night at 10 p.m., GE HealthCare completed its spin-off and officially listed on the Nasdaq (stock ticker: “GEHC”). At the close of its first trading day, GE HealthCare’s shares rose 7.79%, ending at $60.36, with a real-time market capitalization of $27.45 billion (approximately RMB 189 billion).

Compared to the expected outcomes in the secondary market, the “de-diversification” of representative diversified multinational corporations appears more thought-provoking. As GPS converges on the same outcome through different paths, is the “Byzantine model” of global industry coming to an end? Is the traditional expansion model of multinational corporations no longer viable?

In the debate surrounding this move, some view the split as a concession to the market by multinational corporations and an inevitable step in the digital transformation of industry. Others argue that GE’s maneuver is merely a corporate management adjustment aimed at restructuring debt, boosting valuation, and spinning off high-quality businesses for focused development, without entailing any fundamental innovation in its business model.

However, regardless of the perspective, no one denies that, given the current era, GE’s spin-off is an inevitable move, and the post-spin-off GE is poised for a new beginning.

From an electric lighting company in the 19th century to a multinational conglomerate spanning healthcare, home appliances, aviation, and other industries in the 21st century, GE’s business scope has continuously evolved. Electric lighting, power generation equipment, refrigerators, washing machines, jet engines, computers, MRI systems, finance, news... GE has touched upon every aspect of modern residential life.

However, while a diversified business portfolio offers breadth, it struggles to achieve depth, making it difficult for multinational corporations to sustain the continuous development of all technologies over the long term. Over time, underperforming divisions accumulate, and bureaucracy becomes entrenched. In the 1980s, GE was mired in institutional rigidity, stagnant innovation, and brain drain, with multiple divisions failing to generate profits for decades.

The arrival of legendary CEO Jack Welch brought a major turning point to GE. Upon taking office, he implemented sweeping reforms at GE, reducing the original eight management layers to three or four, divesting 25% of its subsidiaries, eliminating more than 100,000 jobs, and consolidating 350 operating units into 13 core business divisions. He also sold off assets worth nearly $10 billion, striving to ensure that each remaining division achieved unparalleled excellence.

The reforms of that era share certain similarities with today’s corporate spin-offs, as both aim to eliminate redundancies that naturally arise from diversification, enabling companies to refocus on their core values.

The difference lies in the fact that during an era of wild, unregulated technological growth, the broadest application scenario for a newly discovered technology or innovation was not necessarily its initial use case. For instance, CT technology, now widely used in clinical imaging diagnosis, originated from aerospace technologies developed for satellite image processing. Conversely, as X-ray technology matured, it subsequently fed back into and advanced the field of industrial inspection.

Today, the paradigm has shifted from identifying application scenarios for existing innovative technologies to developing innovative technologies tailored to specific application scenarios. As each industry erects high technological barriers, the efficiency of technology transfer across diverse business units declines, the potential for technology reuse drops sharply, and cross-departmental communication is no longer a necessity. Thus, rather than describing today’s GE as a single entity spanning healthcare, aviation, and energy, it is more accurate to view GE HealthCare, GE Aerospace, and GE Vernova—each a leader in its respective field—as collectively constituting an industrial giant in terms of scale.

Under the current circumstances, a split has become inevitable.

For a high-quality sector like healthcare, the spin-off means an independent decision-making layer. It means no longer needing to adjust sales strategies to improve financial statements during the company’s stagnation periods. It also means that GE HealthCare has gained more focused capabilities, centering on precision medicine and striving for excellence in niche segments.

At its core, spin-offs are a tool; for enterprises, the purpose of employing such a tool is to generate greater value.

At an Investor Day event held on the eve of the spin-off, GE HealthCare unveiled its mid-term financial targets for the post-listing period for the first time, projecting mid-single-digit organic growth by mid-2023, an EBIT margin of 10% to 20%, and free cash flow conversion exceeding 85%.

GE Healthcare’s Interim Financial Targets for Fiscal Year 2022

This is a relatively conservative growth target. In the first six months prior to the spin-off, GE Healthcare’s four divisions—Imaging (CT, MRI, molecular imaging, X-ray, women’s health, and image-guided therapy), Ultrasound, Patient Care Solutions (patient monitoring systems, etc.), and Pharmaceutical Diagnostics (contrast agents and radiopharmaceuticals)—generated $8.8 billion in revenue, representing a 2% year-over-year increase.

GE Healthcare’s Imaging and Ultrasound segments are the primary drivers of revenue growth. As the company’s largest revenue-generating segment, the Imaging division achieved semi-annual revenue of $4.76 billion in 2022, surpassing the $4.63 billion recorded in the same period of 2021, thereby sustaining its upward trajectory despite the global economic contraction in 2022.

Meanwhile, the Imaging segment also received the largest share of R&D investment from GE HealthCare. Peter Arduini, President and CEO of GE HealthCare, highlighted six key products slated for future R&D focus—photon-counting CT, 3D cardiac image guidance, portable ultrasound, oncology molecular imaging, MR platforms, and the Edison platform—four of which belong to the Imaging segment.

Such investments have already yielded returns within the department’s domain. In late 2022, Arduini stated that digital platforms, including software connectivity tools and AI-integrated products, were currently generating approximately $1 billion in sales across all of GE HealthCare’s business segments. Given the current pace of AI implementation, this new technology is poised to become a new revenue pillar for GE HealthCare’s Imaging segment in the coming years.

Ultrasound Division: Relatively Small in Scale, Yet Best in Overall Performance. In the first half of 2022, GE HealthCare’s ultrasound business generated $1.64 billion in revenue, a 7% year-on-year increase, contributing the largest share of growth to the entire company.

Since acquiring BK Medical, a renowned provider of advanced surgical visualization technologies, for $1.45 billion in 2021, GE HealthCare has further strengthened its capabilities in intraoperative imaging and surgical guidance with ultrasound. This move accelerates the integration of ultrasound into the entire perioperative workflow—pre-, intra-, and post-surgery—delivering more coherent diagnostic and therapeutic tools and technical support to clinical practice, while expanding the addressable market for ultrasound equipment.

Meanwhile, the development of artificial intelligence is also reestablishing the position of GE Healthcare’s ultrasound portfolio. According to Roland Rott, CEO of Ultrasound, AI holds immense potential to reshape physician productivity by effectively reducing ultrasound scan time and helping GE Healthcare open up new markets. Taking the Venue series of clinical ultrasound systems as an example, these products use color cues to indicate whether acquired image planes are standard, thereby addressing issues of image consistency. By leveraging neural network algorithms and deep learning technologies, they intelligentize the diagnosis and assessment workflows. Their effective value has already been validated in critical care settings within intensive care units (ICUs) during the fight against COVID-19.

In contrast, the patient care solutions and pharmaceutical diagnostics sectors have seen sluggish growth, with even slight contractions in certain quarters. Nevertheless, both are aligned with the trajectory of modern medicine—the former being closely tied to clinical care awareness among physicians and patients, and the latter linked to the breadth of molecular imaging applications. Consequently, GE HealthCare has maintained substantial investment in these two areas, exemplified by its recent $80 million investment to add a new production line at its contrast media facility in Ireland.

This is the advantage of setting conservative targets. Under lower growth expectations, GE HealthCare has provided its Patient Care Solutions and Pharmaceutical Diagnostics segments with some breathing room. As the impact of the COVID-19 pandemic gradually dissipates, these two high-potential segments are poised to stand out through long-term development and become new key growth drivers for GE HealthCare.

With sustained R&D investment, GE HealthCare appears intent on transcending the market’s conventional expectations, trading short-term low growth for a robust technological foundation. In the past, shareholders favoring short-term gains often viewed stagnation in high-quality business units as an extremely dangerous signal, thereby curbing corporate investment. However, with its independent control structure now in place, GE HealthCare can pursue this strategy more resolutely and over a longer horizon, capturing value from long-term development.

Due to the lack of time for validation, we are currently unable to assess the extent of technological advantage that GE Healthcare’s strategy of seeking distant solutions over nearby ones may bring. However, in the supply chain and sales segments that constitute its market capitalization, GE Healthcare has also made distinctive decisions and reaped substantial rewards.

An analysis of GE’s annual reports in recent years reveals that the proportion of overseas revenue in its aviation, energy, and renewable energy sectors has consistently fluctuated within a certain range. In contrast, the overseas revenue from its healthcare business has shown steady growth, rising from 54% in 2016 to 59% in 2021.

The emphasis on cross-border business is evident from the recent performance of GE HealthCare China.

In recent years, the rise of numerous innovative medical devices in China, coupled with the “domestic substitution” trend driven by policy support, has jointly squeezed the market share of multinational corporations. However, thanks to GE Healthcare China’s proactive implementation of its three major strategies—“comprehensive localization, digital empowerment, and win-win collaboration”—GE Healthcare China generated a total revenue of $2.7 billion in 2021, representing a year-on-year increase of 16.4%.

Specifically, GE Healthcare has successively established five global production bases in China. These facilities not only meet the demand for equipment worldwide but also support GE Healthcare’s R&D initiatives, achieving true localization in China.

Today, these R&D teams, rooted in local Chinese teams, have launched more than 100 innovative products to the market. The Beijing base develops and manufactures imaging equipment such as CT scanners, X-ray machines, angiography systems, and surgical C-arms; two out of every three GE CT scanners globally are produced here, and high-end 256-slice Revolution CT scanners and premium mobile X-ray machines are already in mass production in Beijing. Shanghai hosts a contrast media production base, with its contrast agents consistently ranking first among Chinese medical device exporters for many years. Tianjin is home to a magnetic resonance imaging (MRI) system production base, where one out of every two MRI systems sold by GE worldwide comes from the Tianjin factory, and localization of high-end 3.0T MRI equipment has been achieved. In Wuxi, an R&D and production base for clinical care devices—including ultrasound systems, ventilators, anesthesia machines, ECG monitors, and patient monitors—has been established. Ultrasound products manufactured there account for 40% of GE’s global ultrasound sales, with cumulative shipments exceeding one million ultrasound transducers, and full-line domestic production has been realized for cardiac, general-purpose, and obstetrics/gynecology ultrasound series.

GE Healthcare China’s “comprehensive localization” is neither “working behind closed doors” nor mere “technology introduction.” It drives the joint development of China’s high-end manufacturing sector and fosters a collaborative R&D model that combines “global expertise with local technological innovation,” thereby gaining acceptance in the Chinese market and becoming a source of sustained growth for GE Healthcare’s multinational operations.

Whether through organizational restructuring, pursuing long-term R&D strategies over short-term gains, or achieving “full localization” in supply chain and sales, GE HealthCare continues to embody leadership in the healthcare sector, consistently staying at the forefront of medical technology innovation.

The same holds true for GE today. A closer examination reveals that it has long shed the bureaucracy and redundancies of the 1980s and no longer carries the substantial financial risks accumulated around the turn of the 21st century. Yet it still commands three core value pillars—aerospace, healthcare, and energy—remaining an unshakable force in the industrial sector.

Therefore, GE’s breakup is not the end of an era, but merely an inevitable evolution in the current environment.

As GE abandons its outdated expansion model and rebuilds an organizational structure tailored to its needs, this newly launched giant will be able to sail further.