Medical device revenues to dip in 2020 as R&D expenses rise

The push for domestic production will divert more funds into research and development to cushion against trade tensions.

Asia’s medical device markets can expect their profits to dip in 2020 as the drive for firms to amp up their domestic production will push for an increasing allocation of funds to research and development (R&D) in order to improve productivity and stay competitive, a report by Fitch Solutions revealed.

In Malaysia, the government is placing greater emphasis on luring investments in advanced technology and capital intensive industries and in 2018 launched the Industry4WRD national policy on Industry 4.0. The policy, which sets Malaysia’s vision for the manufacturing sector for the next 10 years, is expected to drive digital transformation of the country’s manufacturing and related services sectors.

Additionally, in March 2019, finance minister Lim Guan Eng launched the “MYR3b Industry Digitalisation Transformation Fund”, which offers companies an interest subsidy of 2% annually on the financing taken to upgrade their production technology.

Meanwhile, South Korea is prioritising the use of big data analytics and AI to drive innovation. As part of its ‘growth through innovation’ plan, the government is to invest $1.4b (KRW1.5t) in developing a digital platform for big data analytics and AI, and will work to connect government departments, companies, universities and research institutes to maximise their capacities.

“In the healthcare sector, the country plans to use the medical records of its 50 million citizens to establish a big data medical platform by 2020, which will support the development of innovative drugs and smart fusion medical devices,” Fitch Solutions said.

The report also noted that Samsung Medison's share of the global ultrasound market remains comparatively modest at 5.6%. “To help get its global expansion plan back on track, Samsung Medison increased R&D expenditure by 15.8% in 2018 to $51.6m (KRW56.8b), representing 17.4% of revenues, up from 16.2% in 2017,” Fitch Solutions noted.

As a result, higher costs contributed to a decline in profitability, with operating income falling by around two-thirds in 2018, down to $2m (KRW2.2b).