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Rush for Ventilators

With rising global demand, China’s ventilator industry had an unexpected opportunity to boost its position, but its long-term prospects in the global ventilator market remain in question

By NewsChina Updated Jul.1

As the novel coronavirus spread to almost every country in the world, it triggered huge demand for medical equipment. While equipment like masks, testing kits and personal protective gowns are essential, one product, the ventilator, is the difference between life and death for many with severe cases of Covid-19.  

A ventilator can help a patient of critical Covid-19 infection breathe when their lungs become so damaged that they cannot breathe on their own. It is the shortage of ventilators that forced healthcare workers in the worst-hit countries, such as Italy, to make hard decisions over which patients get to live and which do not.  

The equipment is so important that it became a focal point of the much-publicized brawl between US President Donald Trump and New York State Governor Andrew Cuomo in March, when Cuomo criticized the federal government for failing to supply enough ventilators to the state.  

Cuomo said that the city had about 5,000 to 6,000 ventilators but might need 30,000 to deal with the escalating pandemic. Nationally, the US Society of Critical Care Medicine estimated that 960,000 patients would need ventilator support due to Covid-19, about five times the 200,000 the country has now.  

According to GlobalData, an analytics company, about 10 percent of Covid-19 patients will need ventilators. As the number of infections reached 4 million in mid-May and is still growing, there is soaring demand for ventilators. US President Donald Trump has given automakers the green light to reconfigure their plants to make the machines. But as it takes months for companies like Ford and General Motors to shift their production to ventilators, China has emerged as a major provider of ventilators. 

The Latecomer 
Despite being dubbed the world’s factory, China was not a big player in the global ventilator market. Prior to the pandemic, China produced about one-fifth of the world’s total. In 2018, 8,400 ventilators were produced domestically out of the 14,700 that were sold in China.  

Given the high technological and regulatory barriers of the ventilator industry, the global market has been dominated by Western firms, such as Switzerland’s Hamilton Medical AG, Germany’s Dräger Group and Sweden’s Getinge Group.  

According to an analysis by CITIC Securities, the breathing and respiratory equipment market of China is dominated by Dräger, Getinge, and Medtronic, a company headquartered in Ireland. The firms had market shares of 36 percent, 19 percent and 16 percent in 2017. Mindray and Aeonmed, the top two Chinese brands each only had a market share of about 1.5 percent.  

According to China’s Ministry of Industry and Information Technology (MIIT), China has 21 ventilator producers, and only eight are certified to supply the European market. As Western firms have established technological dominance in the sector, Chinese companies tend to focus on the middle and low-end market.  

The global ventilator industry is ordinarily quite small. The value of the entire ventilator market in 2019 was only about US$1 billion. In normal times, hospitals may only have a few ventilators on hand as they are required only for critical cases. A major public hospital in China typically has about 10 ventilators.  

Soaring Demand
This was all changed by Covid-19. After the coronavirus struck Hubei Province in January, domestic demand for ventilators skyrocketed. Data released by the MIIT showed that China’s 21 ventilator producers provided 29,000 ventilators to Chinese users, including 18,000 ventilators to Hubei from January 1 to April 8, twice China’s annual demand for the machines.  

After the pandemic struck Europe and the US in March, crippling local production, Chinese producers started to supply the global market. The new dominance in the ventilator market came because after China managed to get the Covid-19 outbreak under control, it was among the few countries able to ramp up production.  

Lai Chunhong, chairman of Prunus Group, a medical equipment company based in Shenzhen, Guangdong Province, told NewsChina that the company used to produce about 100 ventilators a month, but has increased production capacity to about 700 a month. Lai said that they received orders from the US, amounting to tens of thousands, which she said far exceeds the company’s maximum production capacity. “We don’t have any room to receive more orders,” Lai said.  

“There’s literally no country in the world that doesn’t want to buy a ventilator from China right now,” said Li Kai, director of Aeonmed. Li told NewsChina Aeonmed now has full order books until September.  

Jing Jungang, general manager of the manufacturing department of Mindray, China’s biggest ventilator producer, told NewsChina that the company’s production has tripled to reach to 3,000 ventilators a month. Jing said that the number of employees increased from 2,000 to 3,800 in April. He said he expected the company would be able to produce 4,000 ventilators a month by June.  

According to data released by the State Council on April 5, China exported 16,000 ventilators between March 1 and April 4, worth 310 million yuan (US$44m). In other words, China exported more ventilators in slightly over a month than were sold in the whole year of 2018.  

This is likely a fraction of the still rising global demand as the pandemic looks set to stick around for months, if not years. According to an estimate from the Center for Health Security of Johns Hopkins University, the US will need about 62,000 full-featured mechanical ventilators, and an additional 98,000 ventilators with basic functions.  

Globally speaking, about 880,000 more ventilators are in demand globally because of the pandemic, according to a GlobalData estimate.  

Staff at a medical technology company work overtime to meet the surging demand for ventilators and oxygenerators, Shenyang, Liaoning Province, February 7, 2020

Limits to Expand 
For many in China, the sudden surge in demand presents an opportunity for Chinese producers to have more access to the global ventilator market in the long run. But analysts warned that given the weakness of China’s ventilator industry, China will have difficulties to meet the rising demand as the pandemic rages on.  

Despite the enhanced position of China’s ventilator makers, Chinese companies still rely on global firms for essential parts, such as chips, sensors, valves and turbines.  

According to Lai Chunhong of Prunus Group, the company relies on global firms for about 40 percent of some 1,500 components needed to produce its ventilators. Lai said it used to take eight to 12 weeks to receive components from its global suppliers. But as many countries have imposed lockdown measures and the number of commercial flights between China and other countries has dropped dramatically, it now takes 28 weeks. A particular sensor produced by an American company will become available again only in 2021, Lai added.  

To support ventilator producers, the MIIT gave them a list of all domestic companies that produce similar components and have released measures to facilitate cross-regional cooperation among companies.  

Wang Yungao, a technological director of Tongmao Electronics, a company that produces voice coil motors, said that sales to ventilator producers accounted for about 3-5 percent of its business prior to the pandemic, but it has jumped to 60-70 percent. 

While international suppliers of some components can be replaced by domestic ones, there are no alternatives for certain key components. “We don’t have alternative suppliers for sensors from Europe and chips from the US,” Lai said.  

According to Wang Ning, a medical industry analyst with CCID Consulting, an industrial consulting company, China still faces huge technological barriers in the ventilator sector. The recent surge in global demand may provide incentives for Chinese companies to increase investment in relevant fields, but it would take a long time to make meaningful progress.  

In the past weeks, many Western companies have rapidly responded to the shortage of ventilators. Flex, a California-based manufacturer known for making Apple computers, announced in early April that it will cooperate with Philips, a leading ventilator producer, to produce 25,000 to 30,000 ventilators a month in May and June. 

As governments around the globe push to produce ventilators locally, the unexpected and sudden boom of the Chinese ventilator industry may also be short-lived.