-
- News
- Books
Featured Books
- smt007 Magazine
Latest Issues
Current IssueIPC APEX EXPO 2024 Pre-show
This month’s issue devotes its pages to a comprehensive preview of the IPC APEX EXPO 2024 event. Whether your role is technical or business, if you're new-to-the-industry or seasoned veteran, you'll find value throughout this program.
Boost Your Sales
Every part of your business can be evaluated as a process, including your sales funnel. Optimizing your selling process requires a coordinated effort between marketing and sales. In this issue, industry experts in marketing and sales offer their best advice on how to boost your sales efforts.
The Cost of Rework
In this issue, we investigate rework's current state of the art. What are the root causes and how are they resolved? What is the financial impact of rework, and is it possible to eliminate it entirely without sacrificing your yields?
- Articles
- Columns
Search Console
- Links
- Events
||| MENU - smt007 Magazine
2012 Medical Devices Outlook
June 26, 2012 |Estimated reading time: 10 minutes
Editor's Note: This article originally appeared in the May 2012 issue of SMT Magazine.
Despite claims to the contrary, the medical electronics semiconductor market has hardly been recession-proof, especially with regard to the high-volume home medical segment. In fact, the entire medical semiconductor market has largely followed the same ups and downs as the rest of the semiconductor industry, with total shipments declining slightly in 2011 after spiking in 2010. Also, for 2012, year-to-year growth should be much in line with the previous year. However, over the next several years it is projected that this will continue to be a high-growth market, with demand spurred on by a wave of new government-approved ultra-portable and implantable products and booming regional demand from emerging areas such as Brazil, Russia, India, and China (BRIC), as well as sustained demand from more mature regions such as the EU, Japan, and the U.S.
Table 1: Worldwide medical semiconductor market forecast.
While innovation is crucial in this market, medical electronics must be primarily designed for the long term, with many applications requiring long-life platforms that are available for 10 years or more. With this in mind, system developers must select those components that will not only have a life cycle through the longer-than-usual design cycle (which can exceed 12 months), but also through a potentially lengthy FDA approval and as many as 10 years of production. Safety and reliability are two other features that must be included in component designs, as failure could have potentially life-threatening repercussions for the consumer. Finally, chip suppliers must also contend with the high operating and R&D costs, rising competition, and stringent government regulations in this industry. But despite these restraints, the medical market will continue to be a lucrative and fast-growing source of sales for those firms that choose to remain.
The most prevalent area of innovation includes portable medical electronics, in which most products are currently going through lengthy governmental approvals. Many of these items, such as the new Withings Blood Pressure Monitor, are meant to improve patient monitoring while they are separated from physicians. The Withings monitor is on the leading edge of a large group of medical devices that will be aimed at keeping a large amount of real-time statistics for physicians to analyze. A majority of these innovations are being integrated into cell phone applications to improve accessibility. This adoption of portable monitoring equipment is contributing to the growth in medical sensors revenue. The sensors and MEMS segment will likely experience a 9% compound annual growth rate (CAGR) over the next five years.
Figure 1: 2012 worldwide medical semiconductor revenue share by product type.
The high level of innovation currently taking place in the mobile computing and smart phone market is having a trickle-down effect on the implantable medical market. Specifically, advances in IC miniaturization/integration, lower power operation and architectures, and a greater cost savings are being extended into the implantable industry. For example, specialty semiconductor supplier Cactus Semiconductor, a specialist in the design of ICs for both implantable and portable medical devices, recently partnered with Freescale Semiconductor to focus on the design of SoCs specifically for an innovative new generation of active implantable medical devices (AIMDs). While the market for implantable medical products still isn’t very large, $352 million by the end of 2012, it is expected to experience rapid growth with a 10% CAGR over the next five years.
The microcontroller (MCU) segment is also a strong growth market with regard to medical semiconductor revenues. Specifically, most medical suppliers favor 16-bit and 32-bit MCUs more than their 8-bit counterparts, due to their higher performance benefits and, in recent years, rapidly falling costs. It is expected that revenue for microcontrollers in the medical market will reach $505 million in 2012. Recent MCU products for this market include the new Kinetis L series from Freescale, announced in March 2012, which is targeted specifically at portable medical systems. This MCU family combines the peripheral sets, enablement, and scalability of the existing Kinetis line of 32-bit MCUs while leveraging the inherent low-power and high-performance features of the ARM Cortex architecture. This product exemplifies the overall semiconductor industry trends that also are in the medical market, namely, moving toward smaller and more precise energy-efficient chips.
Sensors are another high-growth segment, and growth rates here only trail the MCU and optoelectronics markets. Optoelectronics, including LEDs and optocouplers, leads the medical market with an 11% CAGR and is expected to reach $255 million by the end of 2012. Innovations in the imaging sector, such as Phillips’ recently FDA-approved combined PET/MRI scanner, are in high demand because of their flexibility and cost-saving attributes. On the distant horizon, technologies such as the integration of CLI technology into endoscopes, which can increase resolution of PET scans, will make a dramatic impact in optoelectronics. Semiconductor suppliers would be wise to take advantage of chips and innovations in medical optoelectronics because it’s the market’s strongest growth segment and there are multiple ICs that are required to be used in conjunction with the specialized optoelectronics products.
In terms of regional trends, the U.S. remains the single largest market for medical electronics spending. Even so, the country still boasts some of the highest health care costs in the world which result from its higher administrative and care costs, while in most other advanced countries health care prices are lower through government regulations. However, 2012 will mark a major shift for the U.S. healthcare market which will come as a result of the enormous pressures to cut costs, improve care, and prepare for the changes tied to the upcoming federal healthcare overhaul. Specifically, the recently passed federal legislation, which creates new health insurance marketplaces and requires most people to carry coverage, could lead to a spike in demand for health care once it takes effect in 2014. And even if the U.S. Supreme Court ultimately unwinds part of the law, the industry-wide changes that are now occurring will likely continue on as the increased pressures to reduce prices in health care coverage will persist.
In response, many major care providers are changing their roles, while many hospitals are increasing spending, building up extensive new doctor workforces, or increasing their mergers and acquisitions (M&A). For example, in October 2011, Cigna, a major global health services company, announced that it would pay $3.8 billion to buy HealthSpring, which effectively gives it a foothold in the booming senior-citizen and Medicare markets. Meanwhile, to prepare for any changes to the U.S. healthcare payment system, many medical insurance agencies are purchasing healthcare providers or producing new cooperative deals and payment models that can help share the risks of health coverage. It is reasoned that this general industry consolidation will eventually benefit patients by allowing a single, large organization to deliver a broader range of care in more locations.
Europe is another high-value regional market for the medical device industry, as three of the five top countries for medical device spending are in Western Europe and include Germany, France, and the UK. Two major factors are affecting this region in 2012. For one, in the short term, this market is being influenced by the European fiscal crisis, as this region is dominated by trade between EU members. In fact, imports account for more than three-quarters of the medical device market in the EU, most of which are produced by neighboring members. Reduced consumer demand will particularly affect Germany, the region’s largest economy, which relies heavily on European demand for its medical products. However, it is expected that as austerity measures take effect and the macroeconomic environment improves in the second half of 2012, the European device export market should likewise improve.
The other major factor affecting Europe’s market growth is potential changes in the regulatory environment or government measures which are expected to happen over the next year. This was spurred on after a safety scare over faulty silicone breast implants in late December 2011 from French firm Poly Implant Prothese (PIP), after which, the French government called for tighter regulations of the medical device industry in Europe. The scare also prompted several other governments, including England, Australia, and Columbia, to call for similar actions. At the same time, the EU’s health chief blamed the situation on Europe's weak regulations on medical devices, and in February 2012 called for an urgent review of the 70 to 80 regulatory agencies that are responsible for approving high-risk medical devices in Europe, most of which are manufactured by private companies. This situation could end up having a major impact on the Europe’s medical devices market in the future, as the European Commission is scheduled to review its Medical Devices Directives in the first half of 2012, and could end up creating deeper-than-anticipated reforms for the sector.
China, despite its huge population, is still relatively meager with regard to medical device spending per citizen; however, this is rapidly changing. In January 2012, the Chinese Ministry of Industry and Information Technology (MIIT) unveiled its latest Five-Year Plan, which illustrates key objectives related to government investment in the pharmaceutical and medical device sectors. Specifically, the MIIT has pledged to increase the gross industrial output of its drug and medical device industries by 20% annually, with a major emphasis on export and push for the development of more than 50 Chinese made medical devices to be designed this year. Domestically, China’s medical device market is expected to boom thanks to a growing middle class, an increased standard of living, and incentives and reforms coming from the public sector. In particular, there will be strong demand from Chinese hospitals, which will result from larger purchasing budgets and planned infrastructure upgrades. This is expected to not only benefit local manufacturers, but foreign manufacturers as well, as multinational companies currently dominate the Chinese market, led by players such as GE, Medtronic, Johnson & Johnson, Phillips, and Siemens Healthcare. Many smaller international players are expected to make a major push into this growing market in 2012, as compliance with the quality system requirements of foreign nations is also accepted in China. However, device classification in China is not as straightforward of a process and end up requiring greater investments in time and money. Also, while domestic suppliers have a smaller presence, they too are increasingly competitive thanks to the passing of favorable government tax benefits.
Table 2: Worldwide medical semiconductor revenue forecast by region.
Beyond the numerous product innovations and regional constraints, there are still many challenges in the medical market, and despite its high growth rates, the market has been affected by macro factors that have also influenced the consumer and computing markets. Namely, generally weak demand and slowing shipments have led to excesses in IC inventory supply and caused manufacturers to slash their capacity to salvage their margins. This factor is the main reason year-over-year (YoY) growth in the medical segment was weaker than usual, at only 2% YoY for global revenue and flat in terms of shipments. What’s more, despite innovation, the medical market continues to face unique governmental regulation and approval process factors that force product engineers to attempt to plan for potential trends years in advance. Finally, as wireless networking takes a bigger role in mobile medical equipment and monitoring devices, consumers are also becoming concerned with potential privacy issues. Although it is not currently a major problem, this is something that OEMs must keep in mind in the near term when designing consumer medical devices.
Matthew Scherer, a semiconductor market research analyst at research firm Databeans Inc., received his bachelor’s degree in English with an emphasis on Technical Writing from the University of Nevada, Reno. He has worked in the semiconductor analysis industry for four years, tracking the latest trends in all major IC categories and end-markets. However, he is primarily focused in consumer electronics, audio, industrial, and embedded markets. Scherer also publishes a monthly newsletter for Databeans Inc. Brice Esplin is marketing manager for Databeans Inc., a market research firm focused on the semiconductor and electronics industry, and a comprehensive source of information throughout semiconductor product categories and markets. For more information, e-mail brice@databeans.net.