Can China’s Minimally Invasive Surgical Device Companies Build Global Leadership Through International Expansion?

For Chinese minimally invasive surgical instrumentsFieldFor enterprises, going global has become an imperative path for transformation.

First, the national government has promoted the normalization of centralized procurement. Products in niche segments of minimally invasive surgical instruments, such as staplers and ultrasonic scalpels, have been successively included in these procurement programs, leading to a significant reduction in terminal selling prices and impacting companies’ revenue and profits.

Secondly, winning bidders are gradually consolidating their market share, while non-winning bidders have nearly lost their presence in the centralized procurement regions. To survive and grow, many non-winning enterprises are compelled to seek opportunities abroad and explore new avenues for development.

Finally, centralized procurement has compressed the domestic market size, lowering the market ceiling. To seek new growth points, leading Chinese manufacturers need to proactively expand overseas, leveraging globally competitive products to carve out a niche in larger markets and grow into international corporations.

Nevertheless, it should not be overlooked that domestic minimally invasive surgical companies still lag significantly behind multinational medical device enterprises. For instance, in the endoscopy market, multinational corporations such as Olympus dominate the majority of the market share, while Chinese manufacturers hold a relatively low domestic market share and are at an even greater competitive disadvantage in international markets. In the ultrasonic scalpel market, Johnson & Johnson captures the bulk of the global market, leaving considerable room for Chinese manufacturers to increase their market share.

Although established multinational medical device companies such as Johnson & Johnson, Medtronic, and Olympus dominate the market, Chinese minimally invasive surgical companies are still striving to find opportunities, aiming to break through in overseas markets and capture market share.

From the results, in recent years, overseas revenue of companies in China’s minimally invasive surgical device sector has continued to rise, with the proportion of overseas revenue in total revenue gradually increasing. This indicates that Chinese minimally invasive surgical device companies have gained a foothold in overseas markets and are steadily expanding their achievements.

It is expected that China will also give rise to global leading enterprises in the field of minimally invasive surgical instruments in the future.

The minimally invasive surgical instruments market primarily includes sub-sectors such as ultrasonic scalpels, staplers, endoscopes, hand-held instruments, sutures, biomaterials, hernia repair, and tumor ablation.

In the field of ultrasonic scalpels, the renowned overseas brand Johnson & Johnson holds a monopolistic position. Currently, although other companies are competing in the market, Johnson & Johnson still dominates more than 60% of the global market. In China, Johnson & Johnson accounts for over 80% of the domestic ultrasonic scalpel market.

However, a number of Chinese companies have independently developed ultrasonic surgical devices. Leading firms among them, such as Genesis, ESM (EziSurg), and Surgnova, have already launched global strategies and are exporting domestically produced medical devices worldwide. In the global market, they are gaining overseas market share from multinational corporations like Johnson & Johnson by leveraging product differentiation and price advantages.

In the surgical stapler niche segment, leading domestic enterprises such as Touchstone International Medical Science Co., Ltd., David Medical, Dongxing Medical, Panther Healthcare, and Rich Surgical have all achieved breakthroughs in overseas markets.

In 2021, Touchstone International Medical Science Co., Ltd. achieved overseas sales revenue of RMB 65.7897 million from its surgical staplers and other products, representing a year-on-year increase of 56.45%. David Medical recorded overseas revenue of approximately RMB 100 million, an 8.58% year-on-year growth compared to 2020. In the first half of 2022, David Medical’s overseas revenue surged by 150.41% year on year.

Furthermore, Panther Healthcare is a well-established leading enterprise in the field of surgical staplers, having built an overseas sales network comprising more than 70 distributors. From 2016 to 2020, it ranked first among domestic surgical stapler brands in export volume. According to reports, the proportion of Panther Healthcare’s overseas sales revenue increased from 22.7% in 2018 to 29% in 2019, and further rose to 40% in 2020.

In the field of endoscopy,Olympus, Karl Storz, Stryker, and other overseas giants collectively account for 90% of the domestic endoscopy market. Currently, with the continuous iteration and upgrading of endoscopes, innovative products such as 4K endoscopes, fluorescence endoscopes, single-use endoscopes, and capsule endoscopes have emerged. Chinese endoscopy companies have seized this opportunity, launched related products, and are making inroads into the global market. Customs data shows that at present, both the import and export values of endoscopes in China are on an upward trend.

For example, Aohua Endoscopy’s overseas revenue accounted for 39.58%, 32.85%, and 36.85% of its total revenue in 2018, 2019, and 2020, respectively. In 2021, Nanwei Medical’s total sales in the Americas exceeded RMB 300 million, representing a year-on-year increase of approximately 50%, with Latin America and Canada achieving a 133% year-on-year growth. Sales in Europe, the Middle East, and Africa reached RMB 296 million, a year-on-year increase of 34.55%, marking a historic high in growth rate. Overseas revenue from the Asia-Pacific region amounted to RMB 80 million, reflecting a year-on-year increase of nearly 80%.

Scivita Medical Technology Co., Ltd. entered into a strategic partnership with Fujifilm in November 2022, under which Fujifilm serves as the exclusive distributor for Scivita MedicalDisposable Electronic BronchoscopeSales and business development in several major European countries.

In addition to the aforementioned niche sectors and companies, many other enterprises—including Tiansong Medical, Mindray Medical, OptoMedic, and Genesis—have exported their minimally invasive surgical instrument products overseas, accelerating their global expansion.

Upon analysis, we find that minimally invasive surgical companies adopt varying international expansion strategies: some establish their own sales teams, while others rely primarily on distributors; some target developed markets in Europe and the United States, whereas others focus on developing countries...

For example, Micro-Tech has been deeply engaged in the field of digestive endoscopy diagnosis and treatment for many years. It has established wholly-owned subsidiaries in the United States, Germany, the United Kingdom, France, and Japan, and has built a stable marketing network in the United States, Europe, and other regions. In 2021, Micro-Tech recruited hundreds of new employees, bringing the headcount at its U.S. subsidiary to over 100 and its European regional staff to over 60.

Unlike Micro-Tech, David Medical has developed over 40 distributors in the international market, selling its stapler products to more than 100 countries worldwide through distribution channels.

Industry insiders state: For companies that build their own sales teams, although this approach requires substantial investments of time, effort, and cost, as well as a higher level of management capability, it enables direct access to frontline clinicians worldwide. This facilitates close communication with clinical experts, provides insight into local clinical pain points, allows for the timely acquisition of clinical feedback, and ensures rapid response to physicians’ needs.

In this way, companies with in-house sales teams can gain physicians’ recognition through their product quality, service capabilities, and rapid response, thereby building their brand and ultimately becoming internationally renowned enterprises with strong reputations.

It is worth noting that cultural norms, local customs, and economic environments vary significantly across regions, placing exceptionally high demands on a company’s global management capabilities. For instance, there are substantial differences between the United States and China; in the U.S., labor costs—including salaries and insurance premiums—are considerably higher, and the potential for unionization further complicates management. These factors pose significant challenges for companies seeking to build their own global sales teams.

For companies that opt for the distributor model, although it is challenging to directly engage with clinicians worldwide, obtain direct feedback from clinical experts, or maintain strong interaction with overseas physicians, they can concentrate on research and development and manufacturing, distribute their products globally at a lower cost, and achieve higher revenue and profits.

For smaller enterprises, it may be more appropriate to adopt a distributor model. However, for long-term development, they need to establish their own sales teams after achieving growth, in order to enhance their brand and service capabilities.

Meanwhile, some companies are adopting a compromise approach. Previously, Panther Healthcare built an overseas sales network comprising more than 70 distributors. Now, the company is implementing a localization strategy by establishing local marketing and sales teams to better understand clinicians’ needs, and serving overseas hospitals and physicians through professional training and education, as well as on-site support in operating rooms.

This also demonstrates that for domestic minimally invasive surgical companies to achieve greater success in internationalization and globalization, establishing their own sales teams is an inevitable path.。

When selecting overseas markets, companies evaluate multiple dimensions, including the regulatory approval difficulty for medical devices, market size, growth potential, and competitive pressure in each region.

According to statistics from the China Chamber of Commerce for Import and Export of Medicines and Health Products, the United States, the United Kingdom, Germany, and Japan are China’s major export markets, accounting for 47.3% of total exports. Among them, the United States ranked first among all export markets in 2020.

Broadly speaking, most Chinese minimally invasive surgical companies sell their products to South America, the Middle East, Europe, the Asia-Pacific region, Africa, and other markets. For instance, Touchstone International Medical Science Co., Ltd. primarily exports its stapler products to 32 overseas countries and regions, including Italy, Spain, Austria, Brazil, South Korea, the United Kingdom, and Australia; David Medical focuses on selling its stapler products to Europe, Latin America, and the Middle East; Dongxing Medical’s stapler products are mainly sold to countries such as Brazil, Iran, South Africa, and Saudi Arabia...

Emerging markets in regions such as Latin America and Africa are still developing, with relatively weak legal and regulatory compliance. Chinese-made minimally invasive surgical instruments hold a significant price advantage, making it easier to penetrate these markets. However, since markets in Latin America and Africa lack evaluative authority, companies and products that dominate these regions still find it difficult to break into the developed markets of Europe and the United States.

In addition to targeting emerging markets, some companies have chosen to make direct inroads into developed markets such as the United States and Europe. For instance, Surgnova has entered the European and American markets by leveraging the positioning and clinical application characteristics of its independently developed innovative products, including ablation systems, irreversible electroporation (IRE) therapy devices, and 3D electronic thoraco-laparoscopes. Genesis has focused on penetrating markets in Europe, the Americas, and South Korea, capitalizing on the high-quality performance of its minimally invasive surgical products.

Markets in developed countries such as Europe and the United States have high entry barriers and stringent laws and regulations, but they offer large market sizes and hold sway over evaluation standards. After successfully penetrating these developed regions, related companies and products are expected to gain easier access to other global markets by leveraging their reputation and brand recognition established in Europe and the United States.

However, Europe and the United States represent one of the most challenging markets to penetrate. Industry insiders note that developed countries in these regions impose stringent quality requirements on medical devices, are more discerning toward products from other countries and regions, and even harbor biases against offerings from certain nations.

In light of this situation, domestically produced minimally invasive surgical devices must compete by leveraging their clinical advantages and product quality. This requires Chinese manufacturers to possess strong innovation and R&D capabilities as well as robust quality management systems.

For companies content with modest success, entering regional markets such as Latin America and Africa can rapidly boost revenue and profits, whereas penetrating the European and American markets poses significant challenges. For highly innovative enterprises with strategic global expansion goals, prioritizing entry into the European and American markets may be a more advantageous approach.。

Industry insiders stated, “Doctors and experts in developed countries in Europe and the United States may harbor biases against domestic brands, potentially perceiving their products as being of low quality, poor performance, and suboptimal clinical efficacy.”

To address potential biases, high-quality products and their clinical advantages are the greatest strengths driving the global expansion of Chinese-made minimally invasive surgical devices.On the one hand, domestic minimally invasive surgical companies need to pass the quality management system audits conducted by regulatory authorities such as the EU CE and the US FDA, ensuring that their products remain safe, reliable, and consistent in quality regardless of production scale.

On the other hand, Chinese minimally invasive surgical companies have innovated next-generation products. These innovative products may gain the favor and recognition of overseas clinical experts by virtue of their significant clinical advantages. For instance, while Olympus monopolized the global market for reusable endoscopes, domestic enterprises introduced innovative products such as single-use endoscopes. These devices offer distinct clinical benefits by ensuring low costs while eliminating the risk of cross-infection. Leveraging products like single-use endoscopes, Chinese endoscopy companies have broken into the market, driving sales of associated accessories for single-use endoscopes, which in turn has boosted sales across other product lines within these companies’ portfolios.

In addition, to address potential biases, Chinese companies are expanding into overseas markets through mergers and acquisitions of foreign enterprises and strategic collaborations with them.For example, by acquiring overseas companies in the same field, a company can gain access to previously unavailable technologies and quickly obtain the acquired company’s sales channels, thereby entering the corresponding market more rapidly and establishing its brand. In May 2020, Scivita Medical Technology Co., Ltd. acquired ARS, which helped Scivita establish a robust R&D center overseas and attract a large pool of high-quality local R&D talent.

Strategic collaborations with overseas enterprises can also help mitigate biases as much as possible. For instance, Touchstone International Medical Science Co., Ltd. partnered with the renowned German medical device company B. Braun to promote and sell its stapler products in 27 countries, achieving remarkable results.

It is also important to note that domestic enterprises should adopt differentiated brand positioning when promoting in different markets. For instance, positioning as a Chinese domestic brand may yield favorable results within China; however, maintaining such positioning in international markets may lead not to orders, but to prejudice.

In communication, minor details can also introduce bias among clinical experts. If the language in product brochures is not localized and the printed text does not align with local reading habits, it may provoke aversion among physicians. For example, in Germany, vertical text is read from bottom to top.

Overall, to break through market biases and gain recognition from medical experts, it is not only necessary to have high product quality and strong clinical advantages, but also to implement a localization strategy by hiring local personnel and understanding local culture and customs.

Since November 2018, Boston Scientific Corporation, a global leader in medical devices, and its subsidiaries have repeatedly filed patent infringement lawsuits in the United States and Germany against Nanwei Medical’s hemostatic clip products, leveraging their patent barriers.

Wang Xin, Chairman and CEO of Genesis Medical, once stated: “In the process of expanding medical device exports overseas, attention must be paid to patent FTO (Freedom-to-Operate) analysis. By analyzing valid patents and invalidated prior art, companies can avoid infringing on others’ patent rights and facing punitive damages.”

We observe that Chinese minimally invasive surgery companies are actively establishing patent barriers overseas. In addition, the case of Micro-Tech Endoscopy serves as a valuable reference for other industry players.

On October 19, 2021, the global patent litigation between Micro-Tech and Boston Scientific, which had lasted for nearly three years, finally came to an end as both parties signed the Settlement and License Agreement. The agreement stipulates that Boston Scientific grants Micro-Tech a five-year patent license based on its hemostatic clip patents; Micro-Tech shall pay Boston Scientific an annual patent license fee of USD 2.4 million by July 31 each year from 2022 to 2026.

Micro-Tech believes that reaching a settlement with Boston Scientific has broken through the patent barriers for its hemostatic clip products in the European and American markets, thereby gaining time and space to leverage its channel advantages and further expand marketing efforts in these regions.

However, in our view, the cost of settlement is not low; a $12 million patent licensing fee over five years is by no means inexpensive. Taking 2020 data as an example, the patent fees paid to Boston Scientific accounted for approximately 1.17% of Micro-Tech’s audited operating revenue and 5.93% of its audited net profit in 2020.

If MicroPort’s overseas sales experience rapid growth in the future, this could still prove to be a worthwhile investment.

In fact, the recent global patent litigation and settlement serve as a warning to Chinese minimally invasive surgical device manufacturers: expanding overseas requires more than just product development; it also tests a company’s comprehensive capabilities, including patent portfolio strategy and channel barriers.

There are still many issues worthy of in-depth discussion regarding the global expansion of minimally invasive surgical devices. Going forward, VCBeat will continue to closely monitor the minimally invasive surgical device sector and its international market expansion.