Tariff Turmoil Sparks Existential Shift in China's Medical Device Industry

Tariff Fluctuations Over 20 Days: Another Turning Point for China's Medical Device Industry

With differentiated tariff policies, the United States originally intended to push for the return of its own manufacturing industry while forcing countries to take sides between China and the US, thereby piecing together a new global economic landscape that serves American interests.

However, in this confrontation, the high-end medical device manufacturing industry, where the United States holds an advantageous position, was not on the exemption list. Under significant price hikes, it has instead provided new opportunities for breakthroughs in China's innovative medical devices.

To sort out the hidden risks and opportunities behind tariffs, VCBeat interviewed ten entrepreneurs and investors in the innovative medical device field.

Under the crisis, everyone's expectations for the future development of domestically produced medical devices are mixed with their own joys and sorrows. But they all believe that, in order to eliminate the uncertainty brought by de-globalization,A new ecosystem for medical devices centered around risk management has begun to emerge.。

Within a few years, it will drive supply chain transformation and provide a solid foundation for China's rapidly growing innovative medical device industry.

By breaking down the impact pathways of tariff events on medical devices, we can categorize the research subjects into three aspects: "fully self-developed," "fully imported," and "partially self-developed."

The situation of medical devices that are "fully imported" or "fully self-developed" is relatively straightforward.

For instance, in细分fields such as腔镜手术机器人, certain high-value cardiac耗材, and certain diagnostic reagents, the United States maintains its position as the global leader due to its technological advantages, with no equivalent products available domestically or internationally. In the short term, China either has to halt procurement or bear the financial burden of forced imports.In any case, it will have a certain negative impact on the supply of high-end medical services and the exploration of cutting-edge medical research in China, and countermeasures cannot be made in the short term.。

For some medical aesthetics devices, mid-to-low-end medical equipment, and other products, China already possesses mature technology and supply chains, achieving "full independent research and development." These devices have long struggled to gain significant market share due to challenges related to branding and distribution channels. However, with tariffs in play, they are now encountering their best opportunity.

Take the radio frequency beauty device Thermage as an example. This is an import-dominated, highly concentrated market, with leading manufacturer Solta Medical occupying 30% of the domestic market. By the end of 2024, Yushi Technology and Weimai Medical successively obtained Class III medical device registration certificates. If the tariff policy remains persistently high, Solta will have no choice but to either build a factory in China or concede this market.

"Partially Self-Developed" Medical Devices Face a More Complex Situation. For example, in the case of CT scanners, a common piece of equipment, many manufacturers have mastered most of the core technologies, but certain components in the X-ray tube and detector still need to be imported from Europe and the United States.

Currently, the core components in the tube that rely on imports mainly include targets and bearings.

According to Hu Yuan, co-founder of Yiteng Technology:We can independently design the structure of the target disk and confirm parameters such as the target angle and target surface. However, how to weld the target surface with graphite and how to merge TZM and tungsten-rhenium layers—these processes are still more advanced overseas, especially for mid-to-high-end target disks. There is still room for improvement in domestic technology in China.。”

The situation with bearings is similar. Currently, in China, core technological challenges in ceramic bearings and liquid metal bearings have been overcome, but specific manufacturing still requires the assistance of overseas companies.

In terms of materials, ceramics for manufacturing bearings and beryllium sheets used as window materials need to be imported. Particularly for metals like beryllium, their distribution is concentrated in countries such as Brazil, Russia, India, and the United States, with U.S. production accounting for about 60% of the global total. Although beryllium deposits have been discovered in China in recent years, if this metal experiences a significant price increase or supply disruption, it could have a considerable impact on the country’s manufacturing industry.

More on CT Detectors. Shang Haiming, founder of Beephoton TECHNOLOGY(Changzhou) Co., Ltd., stated: “Chinese companies have overcome many technical bottlenecks faced in mid-to-high-end detectors, but high-precision ADCs, PDAs, power supplies, and some chips in the detectors still need to be imported from Europe and the United States. The domestic supply chain is still relatively weak in these areas.。”

Fortunately, many "partially self-developed" medical devices and their supply chains are not dominated solely by the United States. Although shifting from the U.S. to Japanese and European supply chains may take some time, it does not pose a "bottleneck" risk.

Compared to imports, the impact on exports is relatively smaller. In 2024, medical devices exported from China to the United States include disposable medical consumables, home-use equipment, rehabilitation aids, and dental instruments. Under tariff pressure, such companies may have to temporarily abandon the U.S. market and wait for the day when policies improve.

In response to the direct pressure from tariffs and the potential risks hidden in the trend of de-globalization, the most straightforward approach is to fully relocate the supply chain domestically, achieving comprehensive self-research and self-production.

SMARTBEAM General Manager Hu Yinfu is optimistic about the underlying capabilities of China's manufacturing industry. In his view, it would take only 2 to 3 years to fully replicate the entire supply chain involved in the core components of CT scanners in China. Specifically for X-ray tubes, it could be achieved within 1 to 2 years.

Dependence on the vast majority of key components and raw materials.

However, he does not believe that complete localization of the supply chain is the best solution at present.

"The manufacturing of large-scale mechanical equipment usually requires the cooperation of various countries, which is a more efficient approach and also economically beneficial for all parties involved."We should still focus more energy on the innovation and breakthrough of emerging technologies., we cannot directly resort to low prices to take over all of others' businesses just because some business has high added value; in many cases, it will only trigger stronger trade protectionism.。”

More importantly, building one's own supply chain also entails a certain level of risk.

"The current price of the entire CT market remains relatively stable, and prices have hardly been affected by tariff policies, indicating that companies can generally find coping strategies. In this situation, investing in the upstream market of core CT components may not eliminate risks but instead create more risks," said Shang Haiming.

"Such components are mostly developed by cross-industry enterprises. The scale of the single medical market is relatively limited, but the technical difficulty is not low, making it hard to justify R&D investment. Therefore, without sufficient cash flow and a substantial user base, it is difficult for a company to outperform mature suppliers in Europe, Japan, or other countries and regions during the initial establishment phase."

At the same time, tariff policies themselves are highly flexible. If companies decide to build new non-critical supply chains out of concern for tariffs, the construction process would take at least a year, and the substitution process would require several months to a year. No one can accurately predict how tariffs will change a year from now.

Li Chenxi, partner of Ansure Family Office, believes: "Compared to individual companies completely rebuilding mature industrial chains on their own, leading companies in the industry should form ecosystems with upstream Chinese enterprises possessing core technologies, university research institutes, and investment institutions, rather than solely relying on individual efforts, to accelerate breakthroughs in core components with high technological barriers.For some independent and smaller companies, a better strategy is to deepen their ties with the global supply chain so that they can find "alternatives" when a new crisis hits, maintaining stability in the supply and demand of products as well as the pricing system.

Of course, for some high-end reagents and high-end imaging equipment, innovation is the only solution to resolve "bottleneck" issues and mitigate the risk of supply disruptions. Today, SMARTBEAM and Beephoton TECHNOLOGY(Changzhou) Co., Ltd. have already addressed most of the problems that were once difficult for domestic manufacturing to tackle through self-research or collaboration with quality suppliers. However, further advancement in cutting-edge technologies will require more enterprises within the industry chain to work together.

On the other hand, opportunities. When U.S.-exported medical devices lose price competitiveness due to China's tariff countermeasures, domestic companies will benefit to some extent from the vacated market share. For instance, OEM manufacturers such as Yiteng Technology, SMARTBEAM, and Beephoton TECHNOLOGY(Changzhou) Co., Ltd. are accelerating negotiations with system integrators to explore the possibility of directly replacing imported X-ray tubes with domestically produced ones.

But the medical field has its seriousness.In practice, compliance-related restrictions make it difficult for most companies to absorb the incremental market within a few months. It takes at least a year to seize the opportunities brought by supply chain changes.。

Taking CT as an example again. Hu Yinfu told VCBeat: "According to the current 'Measures for the Administration of Medical Device Registration and Filing' and the 'Regulations on the Supervision and Administration of Medical Devices', the X-ray tube, as a core component of the CT system, any changes in its model, brand, or supplier fall under the adjustment of the 'structure and composition' section of the medical device registration certificate. This requires applying for a registration change with the regulatory authorities. If an original equipment manufacturer wants to replace the existing Varex Imaging X-ray tube, they must apply for a registration change, which generally takes about six months to one year to complete the modification of the medical device registration certificate."

Due to this limitation, those OEMs that began seeking to make their supply chains safer after the pandemic will not be particularly anxious when tariffs arrive. On the contrary, if a company relies on a single supplier or is heavily dependent on the U.S. supply chain, it will face a painful period of transitioning core components in the short term.

It can be predicted,After this tariff crisis, while retaining the original import channels for core components, OEMs will additionally seek cooperation with some domestic manufacturers capable of providing core components with the same technical specifications. This approach helps to avoid the risk of supply disruption and ensures they can seize opportunities as quickly as possible.This naturally brings new markets for core component manufacturers in China.

For core component manufacturers such as X-ray tubes and detectors,承接下游的增量业务 also involves taking on risks.

The sales volume of CT tubes for a single domestic enterprise is approximately 100 to 200 units, while the total sales volume of a single model of CT tubes nationwide is 200 to 400 units. According to estimates by Sunlight Ronghui Capital, the market capacity for CT tubes in China will exceed 30,000 units per year by 2025. The demand for incremental business far exceeds the current scale of these enterprises, necessitating a significant expansion in production capacity by tube manufacturers.

But products like X-ray tubes are not the same as consumer electronics. "It's impossible for a company to increase its production capacity from 1,000 this month to 10,000 next month," Hu Yuan told VCBeat. "Expanding the production capacity of X-ray tubes involves adding equipment, training personnel, and more. It takes three months to train a worker familiar with the industry in China, so the gap in between won't be short."

There are currently signs of easing in U.S. tariffs on China.Upstream enterprises need to formulate cooperation strategies with downstream manufacturers in advance before deciding to directly build factories and expand production, jointly enduring the painful period of switching components, which may better balance the risks and benefits of tube manufacturers.。

In this tariff war, although MNCs with American backgrounds such as GE Healthcare, Medtronic, and Intuitive Surgical are at the center of the storm, there is already a trend of spillover to European and Japanese companies.

To avoid the impact of regional policy changes, many MNCs in the aforementioned countries or regions have made significant efforts to hedge these risks. Examples include building factories in multiple countries or actively promoting localization strategies, leading to the "Made in China" production of high-end medical devices. Although these preparatory measures cannot entirely offset the reduction in their market share caused by conflicts, they have indeed bought them some time for recovery.

Taking GE Healthcare as an example, this medical device company has established a complete industry-academia-research team in China. Particularly in CT technology, GE Healthcare's Beijing Imaging Manufacturing Base is already one of the largest imaging equipment manufacturing bases globally, supplying over 100 countries and regions. For every three CT units sold by GE Healthcare globally, two are produced in Beijing's Economic-Technological Development Area.

Leveraging GE Healthcare's global factory layout, it can gradually bypass the United States by importing components from factories in other regions around the world. Some core components, such as the liquid metal bearings in the tube, can only be sourced from factories in the U.S., which to a certain extent increases the production cost of the entire machine as well as maintenance costs. GE Healthcare can retain its channels and stabilize prices through subsidies and concessions.

But faced with the issue of identity recognition, GE Healthcare and many other MNCs can only find no solution in the short term.

It may take them months or even longer to gradually regain trust, or they may temporarily withdraw from the Chinese market, resulting in a "lose-lose" outcome for both the market and enterprises.

Regardless of the final outcome of the tariff conflict, a new ecosystem for endogenous medical devices centered around risk management is inevitable. This will drive China's medical device supply chain towards becoming more localized and diversified, thereby creating more opportunities for domestic companies.

But it also should be noted that,This endogenous ecosystem must adhere to innovation as its core, rather than trade protectionism or the blind rejection of MNCs.。

In 2000, GE Healthcare approached Liaoning Cast Metal Materials Development Co., Ltd. to invite them to produce high-quality aluminum alloy castings used in ultrasound and other equipment. With the support of GE Healthcare, Cast not only significantly improved its production capacity, staffing, and technology but also achieved leapfrog progress in the research and development and manufacturing of high-end aluminum alloy materials by introducing digital technology.

After more than 20 years of development, today's CAST has expanded its business to countries such as the United States, Japan, France, and Israel. Its annual average business volume has grown 90 times compared to 20 years ago, further driving the industrial upgrading of China’s entire ultrasound manufacturing sector.

Therefore, even in today's digital and intelligent era, we still need the presence of MNCs to maintain a balance of competition and cooperation, working together to resolve industry challenges.

After all, the short-term trend of de-globalization cannot stop the long-term inevitable progress of globalization. Only by allowing innovative elements to flow freely within a larger scope can we accelerate continuous breakthroughs in medical devices and benefit more patients.

On May 9, VCBeat and Ansure Family Office will co-host a medical device design and manufacturing conference, with offline exchanges taking place in Suzhou. The event will also delve into how China's imaging innovation companies are progressively achieving breakthroughs in core technologies to challenge international giants. Everyone is welcome to scan the code to register.