02 August 2022

Although data from 2018 suggested that the "medical device industry" which encompasses both medical devices and medical equipment accounts for only 1% of Thailand's GDP, this industry is a rising star because it is growing along with an aging society where people live longer but still need constant healthcare and treatment. In addition to being promoted as one of the key target industries in the Eastern Economic Corridor (EEC) while the COVID-19 pandemic is approaching a 2-year anniversary, all of these factors undeniably contribute to the unstoppable boom of the medical device industry in Thailand.

Krungsri Research had conducted an analysis of the medical device industry in Thailand and stated that Thailand is currently the 17^th largest exporter and importer of medical devices in the world and the first in ASEAN. The 2019 data reported that Thailand’s production of medical devices increased by 1.4% from 2018, while the capacity utilization rate was quite high at an average of 73.4%. The domestic market value and export value of Thailand’s medical device industry in total was 60.6 billion baht. This figure can be divided into 50,000 million baht for domestic sales (82.5%) and 10,600 million baht for export (17.50%).

It is estimated that this industry will grow on average during 2021-2022 at 6.5% as a result of various factors including an increasing number of patients with chronic diseases such as heart disease, cancer, and diabetes, as well as the growing number of the elderly population. These factors have increased the need for ophthalmic and orthopedic devices because they reduce impaired vision and hip fractures in the elderly population. Obviously, there is an investment in hospital businesses across the country, especially in the EEC area and even in secondary provinces like Sisaket with both the newly constructed and the existing hospitals with extended facilities. Government policies provide attractive benefits for investors in this segment, such as tax exemption on imports of parts or raw materials for use in research and development, and measures to expedite investment in various medical-related industries such as medical devices to manage covid-19. There will be an offer to reduce corporate income tax by 50% for 3 years, and many other benefits.

The BOI disclosed that applications for promotion from entrepreneurs in the medical industry throughout 2020 have increased in both the number of projects and the investment value, with 83 projects, or a jump of 177% from 2019 with a total investment value of 22,290 million baht, an increase of 165%. In the first nine months of 2021, the medical industry had an investment value of 59,210 million baht, which is a continuation of investment due to the COVID-19 situation. As a result, the demand for products used to prevent COVID such as rubber gloves has increased substantially. This is the second highest investment after the electrical and electronic industry.

Meanwhile, the establishment of a genomics medical testing center which is part of the Genomics Medicine Promotion Zone at Burapha University (Bangsaen) requires a large number of medical tools and equipment to test a variety of genomes. This has attracted entrepreneurs with relevant expertise to come to invest in the areas allocated by the EEC to receive special benefits. For example, businesses that receive corporate income tax exemption benefits from 5-8 years up will receive an additional 2-year corporate income tax reduction of 50%. Businesses with targeted technology development and supporting activities which have already been exempt from corporate income tax for 10 years, will receive an additional 1-year corporate income tax exemption.

According to the latest data in 2019, consumable medical equipment such as wound dressings, medical rubber gloves, catheters, and tubes/syringes accounted for 88.3% of Thailand's total medical device export value. The main export markets were the United States, Japan, the Netherlands, and Germany. Most of the manufacturers and exporters were multinational companies that have come to invest in Thailand to sell back to their own countries such as Japan, the United States, and France. Most of them are medical equipment and suppliers which have similar proportions at 42.7% and 40.5% respectively, such as ophthalmology products, brain electrocardiogram ultrasound machines, X-ray machines, and heart monitors among others. The main sources of imports include the United States, China, Germany, and Japan.

There are currently 595 manufacturers of medical devices and equipment registered with the Department of Business Development (latest data as of May 2020). Of these, 96.5% are SMEs with a revenue share of 29%, and the rest 3.5% are large corporates with 71% of revenue share.

It is obvious that the medical devices and equipment industry in Thailand is growing steadily due to the government’s supportive measures like corporate tax-exempt/reduction, incentives for import of raw materials, parts, and machinery. The open market policy that began in 2015 has also enabled Thai entrepreneurs to develop commercial products with the published results from established research institutes or higher education institutions in the country to meet international standards. At the same time, the government has allocated approximately 40,000 square meters of space in the Eastern Economic Corridor Innovation Zone (EECi) to support the expansion of the medical device industry and has been encouraging bilateral cooperation between the public and private sectors for R&D in the area as well.

It is commendable that the Thai R&D industry, as well as the academic sector, have both played a role in driving the medical device industry.  The Institute of Scientific and Technological Research of Thailand under the Ministry of Higher Education, Science, Research and Innovation (TISI) has established a “Comprehensive Medical Device Analysis and Testing Service Center” to support and build a strong foundation for Thai entrepreneurs in importing and exporting medical device products of international standards, and to promote consumer confidence while reducing production costs, deficits and trade barriers. More importantly, the center is tasked with driving the Thai economy forward in a sustainable manner through science, technology, and innovation.

On top of these, there is a goal to promote the Thai medical device industry during 2021-2025. This is to protect and encourage Thai entrepreneurs to be able to compete with foreign counterparts. This framework aims to increase the procurement of medical devices from the Thai innovators by at least 30% of all the products derived from domestic R&D, or to generate income and economic impact of approximately 40 billion baht within 5 years through the use of science, technology, and innovation in the production of standardized local medical devices, to reduce the import of medical equipment, to enhance the competitiveness of the industrial sector, especially the SMEs. The goal also includes the distribution of income and helps reduce social inequality in the accessibility to international-standard medical equipment. For example, the Thailand Institute of Scientific and Technological Research, The Ministry of Higher Education, Science, Research and Innovation (TISTR) has established a “Comprehensive Medical Device Analysis and Testing Service Center” to support and build a strong foundation for Thai entrepreneurs in importing and exporting medical devices of international standards.

The fact that the government is proactively issuing several policies to prevent the medical device market from being dominated by foreign brands provides Thai entrepreneurs with bright growth opportunities.

In terms of personnel development to support the rapid growth of this industry in accordance with the government's roadmap towards Thailand 4.0, there are many educational institutions that have developed a curriculum in this particular field, such as the Faculty of Engineering at Mahidol University which has opened an international program for 35 biomedical engineering students to train them to become capable personnel with expertise in the innovation of medical devices who can create world-class quality research.

In addition, the government has continued to support this industry. During 2016-2020, the Department of Industrial Promotion has upgraded the medical device industry to more than 400 cases. For example, the development of continuous air supply equipment for full-face masks by TMDD Company Limited which the Department has supported the development of raw materials, the battery, the system to adjust the airflow rate, and the compatibility with the viral and bacterial filters among many other things. In 2021, the goal was to support the growth of approximately 100 entrepreneurs and personnel in the medical device industry.

As for the global medical device industry, Fortune Business Insights expects the global medical device industry to grow to $657.98 billion by 2028, or 5.4% from 2021, which was $455.34 billion. When divided by category, Orthopedic medical devices had a 7.3% market share in 2021 as a result of an increase in the number of elderly people worldwide. It is also estimated that 303 million elderly people worldwide are currently suffering from osteoarthritis.

Nowadays, prominent global key players include Medtronic PLC, Abbott, Siemens Healthineers, Koninklijke Philips NV, Stryker Corporation, F. Hoffman-La Roche, Becton Dickinson, GE Healthcare, and Boston Scientific, many of whom have been operating in Thailand for many years. For example, Abbott with diabetes care products as flagship products, and GE Healthcare who offers technology and medical services that are transforming the next generation of patient care. GE has more than 2,500 diagnostic imaging devices installed at more than 600 hospitals in Thailand and is known for being a pioneer in the field of medical devices in Thailand. In 2016, GE had signed an agreement with Bumrungrad Hospital to supply the first MRI 3.0 Tesla Model in Thailand. Later in 2018, GE announced an agreement to supply the first Revolution CT-512 slicer and the first MRI 3T Architect in Thailand to Siriraj hospital.

Regarding guidelines for global competition, most of the key players will focus on introducing new products and collaboration to drive continued market growth and secure their market position. Some big companies also achieve these goals through introducing new innovations and taking over other businesses. For example, in January, the English company Smith & Nephew had partnered with Movemedical from the US to expand their inventory automation solutions and improve the customer experience. Another example is Koninklijke Philips NV from the Netherlands who launched a new Abdominal Aortic Aneurysm (AAA) to help provide doctors with more patient-friendly treatments for the disease responsible for 175,000 annual deaths worldwide in comparison to the existing AAA standards.

Meanwhile, plastic manufacturers especially those who manufacture general-purpose commodity plastics such as Polyvinyl Chloride (PVC), Polypropylene (PP), and Polyethylene (PE), who benefit directly from the growth of the medical industry since these plastics are often used to make medical devices such as blood pouches, artificial blood vessel, surgical gloves, syringes, artificial heart valves and cane handles, will get to meet with manufacturers of medical tools and equipment for further discussion on partnerships.

Finally, if you would like to keep up with news about the medical device industry as well as other interesting movements in the industrial world, please stay tuned for our next ME Blog!
 

Sources:

www.krungsri.com/th/research/industry/industry-outlook/Other-Industries/Medical-Devices/IO/medical-devices
www.boi.go.th/index.php?page=press_releases_detail&topic_id=127519&language=th
www.fortunebusinessinsights.com/industry-reports/medical-devices-market-100085
www.tistr.or.th/tistr/newsboard/shownews.php?Category=newsboard&No=1812
www.thaipr.net/education/3113069