Illumina's Fall Fuels Surge in Chinese Rival MGI Tech Amid National Push for Domestic Substitution

The day before the start of work in the Chinese Year of the Snake, the market for domestically produced gene sequencers welcomed a wave of immense prosperity.

On February 4, 2025, the Ministry of Commerce of China announced that it would add PVH Group and Illumina, Inc. to the Unreliable Entity List.This change was quickly reflected in the stock prices, with Illumina's shares plummeting over 20% successively, while MGI's market value surged by more than 10 billion.

According to the "Unreliable Entity List Regulations," after being listed, an enterprise may face one or more of the following measures: restrictions or prohibitions on engaging in import and export activities related to China; restrictions or prohibitions on investing in China; restrictions or prohibitions on the entry of relevant personnel and transportation vehicles; restrictions or revocation of work permits, stay or residence qualifications for relevant personnel within China; and fines of corresponding amounts based on the severity of the circumstances. To date, there is no clear information indicating that any entity has been removed from the Unreliable Entity List.

In the upstream of the global gene sequencing market, Illumina is a leading enterprise with a near-monopoly position. In recent years, the development of domestically produced gene sequencers has been on the rise, but in various细分commercial scenarios, they are still inevitably hindered by the barriers created by Illumina's first-mover advantage.Therefore, as soon as the news broke that Illumina had been added to the Unreliable Entity List, industry practitioners widely believed that the turning point for the accelerated replacement of gene sequencers produced in China had finally arrived.

Subsequently, the market enthusiasm of China-produced gene sequencing instrument manufacturers was instantly ignited, as they rolled out their flagship products to seize the significant market gap that could emerge if Illumina is squeezed out.

The impact of being included in the Unreliable Entity List this time may be far greater than Illumina, Inc. imagined.

The day after being included in the Unreliable Entity List, Illumina issued a statement saying that since entering the Chinese market, Illumina has long served the regional market and customers, and has been committed to promoting the development of genomics to improve human health. As an innovative company in the global gene sequencing field, Illumina has always adhered to market-oriented and rule-of-law principles in its global operations, strictly complying with the laws and regulations of all countries or regions where it operates, including China.

On February 6, Illumina released its latest 2024 financial report, announcing a 3% year-over-year decline in global revenue. During the investor meeting, Illumina's Chief Executive Officer Jacob Thaysen reiterated, "We believe that the opportunities in the Chinese market are immense, and we will swiftly address current challenges with the hope of finding solutions as soon as possible."

Jacob Thaysen also pointed out that China is an important market with a large population base and a relatively high degree of aging. With leading next-generation sequencing technology and innovative R&D pipelines, Illumina is currently well-serving Chinese customers and patients, and will continue to do so in the future. Wherever it operates, Illumina complies with all applicable laws and regulations.

However, the capital market did not buy into this statement.In the following several trading days, the stock price of Illumina continued to plummet on Nasdaq. On February 7 and February 10, the stock price of Illumina even opened lower with gaps for two consecutive days.

The reason behind this is that, although Greater China only accounts for 7% of Illumina's global revenue, this is the world’s second-largest gene sequencing market and also the fastest-growing and most promising segment for Illumina. According to Frost & Sullivan, the size of China's genetic testing market will grow from RMB 48.7 billion in 2025 to RMB 153.6 billion in 2030, with a compound annual growth rate (CAGR) of 25.8%.

For a long time, Illumina has established long-term cooperative relationships with many scientific research institutions, universities, and hospitals in China. Its equipment and consumables have been widely used in clinical fields such as non-invasive prenatal testing (NIPT), tumor gene testing, and infectious disease testing, bringing a stable growth expectation.

Despite an urgent update issued by Illumina on February 10, stating that the company takes the matter very seriously, has taken swift action, and is engaging in open and proactive communication with China's Ministry of Commerce and relevant departments, the decline in the capital market could not be contained. As of the close on February 11, Illumina's stock price fell from $131.1 before the announcement to $100.68, wiping out 23.2% of its market value.

At the same time, as one of Illumina's strong competitors, the stock price of MGI, China's leading gene sequencing instrument manufacturer, has surged for several consecutive days.On the last trading day before the announcement, MGI's stock price on the STAR Market was only 39.96 yuan. By February 12, MGI's stock closed at 63.83 yuan, with a cumulative increase of nearly 60%. On February 10, MGI's stock price hit the upper limit directly, and on February 12, it fell back after attempting to reach the upper limit again.

In response, MGI issued a special announcement on February 7, stating that the cumulative deviation of the closing price increase for the company's stock over three consecutive trading days—February 5, 2025, February 6, and February 7—exceeded 30%, which constitutes an abnormal fluctuation in stock trading. After conducting an internal review and sending inquiry letters to the controlling shareholder and actual controller, as of the date of this announcement, the company has no significant undisclosed information that should be disclosed. The company’s current production and operations remain normal, with no major changes occurring.

For years, the well-known love-hate relationship between Illumina and MGI has been widely recognized. On July 15, 2022, MGI issued a statement announcing that it had reached a settlement with Illumina regarding all pending lawsuits within the United States. As part of the agreement, Illumina would pay $325 million in net compensation to MGI's subsidiary, Complete Genomics, bringing a temporary end to the long-standing patent disputes between the two parties.

At this moment, while Illumina stumbles, MGI is welcoming its highlight in the capital market, seemingly another inspiring story of domestic substitution in China. However, as MGI's announcement states, there has been no significant change in production and operation. According to MGI's preliminary calculations, although the performance in the fourth quarter of 2024 is expected to narrow the losses, it is projected that for the entire year of 2024, the company will still be in the red, with a net profit attributable to shareholders of -670 million yuan to -554 million yuan.

For MGI and many other China-produced gene sequencing instrument companies, the impact of the Unreliable Entity List will fade, and the path of China-produced substitution is just beginning. The products and services themselves are the cornerstone for capturing the market.

In fact, even before the announcement of the Unreliable Entity List, Illumina's monopolistic position in the Chinese market had already begun to be challenged by domestically produced gene sequencing instrument brands.

On the one hand, MGI, a representative of domestically produced gene sequencers, has gained significant market share and surpassed Illumina in the growing market.According to the annual financial report, in 2023, MGI achieved a new sequencing instrument sales and installation volume of 695 units in China, accounting for 47.3% of the domestic upstream new installation market share in the genetic sequencing industry. For two consecutive years, MGI has surpassed Illumina in the new installation market share of domestic sequencing equipment, ranking first. On the other hand, Chinese-produced genetic sequencing brands such as GenoCare and Salus Medical have adopted technical approaches similar to those of Illumina, exerting pressure on the latter in the existing market.

Currently, an increasing number of gene sequencing users are actively opting for China-produced sequencing platforms. "The all-China ecosystem model can better meet qualification requirements, assist in R&D support, reduce operation and maintenance costs at this stage, and establish comprehensive industrial chain support and localized standardization systems in the long term," said Dr. Zhang Li, Director of the Beijing Brain Institute's Genomics Center, to VCBeat. Previously, during the process of upgrading the entire workflow of sample handling, sequencing, and data analysis with information technology and automation, the Beijing Brain Institute's Genomics Center conducted nearly two years of research and evaluated several construction models, including imported ecosystem alliances, all-China ecosystems, and service provider solutions. Ultimately, they chose MGI’s all-China ecosystem model to meet the quality and throughput demands of large-scale projects.

The global gene sequencing industry has always been highly concentrated. Previously, overseas gene sequencing brands such as Illumina, Thermo Fisher, and Pac Bio occupied over 90% of the market share, with Illumina consistently ranking first in the global gene sequencing market. According to a market report published by Grand View Research in 2020, the upstream market size of the global sequencing industry was approximately $4.138 billion in 2019. Illumina's revenue from related businesses was $3.068 billion, accounting for about 74.1% of the market share; Thermo Fisher's market share was approximately 13.6%, with related business revenue of $563 million. Other companies, including MGI, collectively held about 12.3% of the market share. In 2020 and 2021, Illumina’s global market share remained as high as 78% and 71%, respectively.

And this situation has gradually reversed with the rapid rise of domestically produced gene sequencing brands.Data shows that, calculated by annual revenue, Illumina's market share in China's gene sequencing instrument and consumables industry dropped from 64.5% in 2021 to 54.2% in 2023. According to the previously released Q1-Q3 report of fiscal year 2024, Illumina achieved a revenue of $3.268 billion, a year-over-year decrease of 3.37%, with a cumulative net loss of $1.41 billion. In particular, in Q3 of 2024, Illumina’s revenue in Greater China was $75 million, marking a year-over-year decline of 23%. By contrast, the market share of domestic brands such as MGI increased from 19.9% in 2021 to 32.6% in 2023.

Moreover, some media have noticed that gene sequencers developed based on Illumina's platform have not successfully passed the certification process of the National Medical Products Administration (NMPA) for quite a long time.

Since 2015, domestically produced gene sequencers based on Illumina's core technology, such as Berry Genomics' NextSeq CN500, Annoroad's NextSeq 550AR, and KingTek's MiniSeqDx-CN, have been successively approved for marketing and widely used in fields like NIPT and tumor NGS.

However, since 2020, such a development model has frequently encountered obstacles. In December 2020, Berry Genomics voluntarily withdrew its change registration application based on Illumina's NextSeq CN500 platform; in January 2025, Zhenyue Biotech’s application based on Illumina's Miniseq platform also received a termination of review notice from the National Medical Products Administration (NMPA). Additionally, in February 2023, Illumina's Nexseq 550 import product license change application was rejected. In January 2025, the registration process for the domestically produced Novaseq 6000 was also forced to terminate the review.

During this period, gene sequencers developed based on domestic platforms such as MGI, Genemind Biotech, and Solu Medical have been successively launched. According to incomplete statistics from VCBeat, more than 20 gene sequencers developed based on China's independent intellectual property rights have been approved for clinical use. Industry insiders revealed that gene sequencing service providers such as Zhenyue Bio and Burning Rock Diagnostics, after encountering obstacles in obtaining certifications based on Illumina’s core technology, have opted to develop corresponding products based on domestically produced sequencing platforms.

In China, domestically produced gene sequencing brands have long possessed the strength to compete with overseas brands, and Illumina's inclusion on the Unreliable Entity List has accelerated this process.

On the evening of February 5, an article titled "Illumina Added to Unreliable Entity List, GenoCare Bio’s Sequencer Product Line Offers Optimal Alternative Solution!" quietly circulated on social media. GenoCare Bio, a Chinese gene sequencing brand with a comprehensive product portfolio ranging from medium and low-throughput to high-throughput and ultra-high-throughput gene sequencers, has taken the lead in capturing Illumina's existing market share.

GenoCare adopts a reversible terminator sequencing method similar to Illumina's, enabling targeted replacement of several Illumina product series such as MiSeq i00, NextSeq 5, and NextSeq 2000. It covers multiple scenarios including pathogen detection, reproductive health, oncology medication guidance, and genetic disease diagnosis.

Subsequently, the marketing departments of domestic gene sequencing instrument companies such as MGI, Salus Medical, Espeed Micro Control, and Sikun Bio also took action. At the moment when Illumina suffered a heavy blow, they showcased their own strengths. Among them, MGI even directly released a free experience request form on its official WeChat account, inviting users to try out instruments and equipment in the laboratory for free or send samples to the customer experience center for Demo testing free of charge. Meanwhile, GenoMind Bio started collecting users' needs for replacing and upgrading sequencing platforms, stating that it would provide a complete set of solutions including comprehensive platform upgrade design, technical support, and testing cost subsidies.

However, for China-produced gene sequencing companies, becoming a cost-effective alternative to Illumina is merely an interlude during a special period. The more central commercial path should still focus on meeting users' upgrade and application expansion needs.

On the one hand, in clinical scenarios, purely switching instrument platforms may pose compliance risks.According to China's "Regulations on the Supervision and Administration of Medical Devices," the combination of test kits and instruments must be fully consistent with the information on the registration certificate to ensure accurate identification of the target substance and guarantee good precision and repeatability of test results, with reliable and consistent results from multiple tests. In China, reagents and their supporting platforms must be submitted as a whole for registration materials, and replacing the platform alone may lead to the invalidation of the registration. In the market, gene sequencing reagents approved for use, developed based on various sequencing platforms such as reversible terminator technology, combinatorial probe-anchor synthesis, and semiconductor methods, have limited options for directly switching to reagents from different platform brands through instrument substitution.

On the other hand, in scientific research scenarios, gene sequencing platforms need to continuously iterate to meet increasingly complex demands.Unlike clinical gene sequencing, which emphasizes stability and compliance, scientific research gene sequencing continues to advance in depth. The application scenarios for research-oriented gene sequencing are complex, needing to meet the demands of both fundamental research—such as whole-genome sequencing, transcriptome sequencing, and epigenome sequencing—and applied research—including drug target discovery, crop genome sequencing, biodiversity detection, and environmental microbiome analysis. Each type of research presents significantly different requirements for gene sequencing performance. Moreover, research gene sequencing places higher demands on throughput, speed, accuracy, and multi-omics integration. No single gene sequencer can efficiently meet all these diverse needs, making comprehensive, end-to-end sequencing solutions an emerging trend. This evolution in demand goes beyond what simple substitution logic can address.

Under the first major spotlight of the year, China's gene sequencing instrument companies are enjoying a rare moment of celebration. But after the festivities, achieving true domestic substitution may be the real challenge that the industry needs to collectively address.

References:

Lab Medicine Network: The Illumina Controversy Serves as a Warning: Simply Replacing Equipment in "Cost-Effective" Solutions Poses Regulatory Risks

James Bond of the Tech World: The "Crazy Surge" of Domestic Gene Sequencers: How Long Can the "Pseudo-Domestic" Fig Leaf Last?

Medical Observation: Illumina's Big Loss, The Celebration of Chinese Sequencing Manufacturers!