Today, the majority of the conversation regarding the exponential growth of the electronic component market centers around the automotive and IoT markets. Electronic cars, smartphones, and any consumer electronic device that connects to the Internet and collects data requires quality components and semiconductors. No market analyst can be taken seriously without mentioning these industries, and they are expected to remain primary market drivers well into 2021 and beyond.
Ten years ago, however, things were different. The place now held by the automotive and IoT markets was then held by the medical industry. With the national conversation centered on providing higher quality, more personalized care at more affordable prices, analysts looked at the potential of the healthcare industry as the next great frontier for electronic components and semiconductors. Following the market crash in 2008, however, healthcare OEMs were somewhat stunted in their abilities to introduce new products while maintaining the long-term service agreements already in place. Even worse, sudden lack of buyer demand for electronic components and semiconductors left many suppliers and component manufacturers with no choice but to focus all of their investments into newer, high-growth, high-margin components that are not applicable to older-generation medical devices. To cope, most healthcare OEMs turned to third party vendors to retrieve obsoleted components for equipment that could be well over 20 years old, paying a premium in the process despite often questionable transparency.
It is only until recently that escalating demand and a (slowly) increasingly supply are approaching the equilibrium necessary to incentivize innovation, and it’s time that analysts consider the potential of the healthcare industry once again. “On average,” wrote management consulting firm McKinsey & Company in 2017, “analysts forecast that revenue at large medical-device companies will grow by between 4 and 5 percent a year over the next few years, considerably more than the 2 percent overall annual market growth recorded over the past five.” Since this was published, growth has actually moved beyond 5 percent, going by KMPG data, the medical device industry is expected to reach a global annual sales benchmark of $300 billion by 2030.
Where is the primary growth in the medical device industry expected to be? Interestingly, many project the growth to come not from highly specialized medical equipment, but from disposable, single-use devices, which are quickly utilizing integrated electronics to collect data and provide quick, personal, and accurate care at a much more manageable cost. These devices can include anything from surgical devices to patient-used medical products such inhalers or diabetes self-management devices, and require careful considerations in regards to battery life, accessible electronic interfaces, and even Wi-Fi capabilities – each of which present new challenges and opportunities for component manufacturers. As this technology begins to appear in more lower-cost devices designed for individuals who are now preferring more direct control over their personal health, this sector of the market alone is expected to be valued at over $90 million by 2025.
This new trend presents a generational opportunity for medical device manufacturers to adopt a new model for their products moving forward. High-end devices with a limited buyer market and long-term service agreements eight years or longer will never be obsoleted entirely, but the opportunity to enter a relatively new market that features products with a shorter shelf life, more current technology, and no need to commit to service commitments of any kind should be enticing. And by relying on more generic, widely-available electronic components, not only would they be able to more consistently manufacture devices that reflect the most advanced tech on the market, but they could do so by purchasing direct from the component manufacturer. Third-party vendors, and the risks they bring, would render themselves obsolete.
To help healthcare OEMs ease into such a transition, EDX provides solutions that can both secure replacement units for legacy products, and purchase large quantities of available and obsolete inventory direct from the component manufacturer without any strain on the customer’s working capital. The healthcare industry is rapidly changing and will continue to do so, but regardless of the business model or market our customers choose, EDX has the capabilities to maintain an important role in their supply chain for years to come.
Without a doubt, the diagnosis for healthcare is incredibly positive – and it certainly warrants equal consideration along with automotive and IoT as one of the highlights of the booming electronic component industry.