The pervasiveness of electronics in the medical industry is increasing rapidly. The use of wireless communications, robotics, and software in this sector is expected to grow rapidly in the next three to four years.
At the same time medical original equipment manufacturers (OEMs) are under increasing pressure to restructure their growth strategies and product portfolios. Increasing demand for affordable medical devices, convergence of electronics, and rising cost pressures have helped bolster electronics manufacturing service (EMS) providers’ participation in the last few years.
Medical OEMs have the requisite knowledge of designing, marketing, and other core competencies. However, they require continuous investment to keep pace with advancing electronic content in medical devices and with manufacturing and quality tools. EMS providers have the ability to offer effective solutions to lower cost, while increasing quality, efficiency, value of innovation, time-to-market and supply chain management.
Increasing cost pressures and generating profits in low-to-medium volume manufacturing have been the prime drivers for OEM outsourcing. The affordable healthcare act and the excise tax that have come into effect in January 2013 are expected to be key drivers for short-term EMS growth. For EMS providers, this will pave the way for increased outsourcing to mitigate the impact of these additional cost burdens. Additionally, increasing electronic content within the medical industry has further bolstered EMS growth.
According to a soon-to-be-published Frost & Sullivan research, titled “EMS Opportunities in the Medical Industry,” the EMS medical market generated revenue of approximately $16.56 billion in 2012. The market is expected to grow at a CAGR of 11.0 percent between 2012 and 2019. The industry is witnessing rapid growth and demand in the remote diagnostics, patient monitoring, cardiovascular, neurology, consumer medical products, single use products, and other medical products.
Note: All figures are rounded. The base year is 2012.
Source: Frost & Sullivan analysis.
Electronics and medical product design are becoming more technical, which will increase opportunities for value engineering. EMS providers are also adept at refreshing older designs and updating electronic design and content within an existing medical device design. This helps lower cost and obsolescence issues associated with long product lifecycles. These factors will further encourage OEM outsourcing.
There are other non-traditional avenues of growth in the medical industry. For example, traditionally, there are two types of outsourcing in the medical industry. One is related to EMS and the other related to medical grade plastics and single use devices. Currently, both markets are converging due to increasing overlap between the two areas of outsourcing. Not many EMS companies, though, have gone after the medical grade plastics, but this trend is expected to increase very gradually over the next ten years. Medical grade plastics and single use devices present a sizable market in terms of revenue opportunity.