In China, this increase in tariffs has been felt differently. Larger corporations have the benefit of shifting supply chains in order to circumnavigate the majority of taxes, as evidenced by Varex in their Q4 2019 earnings call. Although Varex experienced a "tariff-related revenue reduction" of about $20 million in radiographic digital detectors sales in FY2019, the company stated that “In response to the tariffs, we expanded our production footprint into China and Germany.” — thereby working around the import tariffs. Although China’s domestic FPD vendors continue to gain share across China, this is occurring at a much slower pace than previously and is much more influenced by commoditisation than the impact of tariffs on products made in the U.S.
Similarly, the radiography systems market has also been experiencing increased price pressure over the last few years. Since tariff introduction in both the U.S. and China, medical imaging vendors have been forced to choose whether to absorb costs or pass them onto customers. Larger companies are better positioned to react, as their manufacturing and supply chains typically span the globe and allow room for maneuverability. Siemens Healthineers and Philips have reported restructuring their medical imaging production after the instigation of tariffs. While these changes will incur one-off costs, they will position these vendors to compete more effectively in the longer term without the influence of tariffs. Moreover, vendors are striving to increase the relative value of their products by continually innovating and adding capabilities such as AI analysis and tomosynthesis to their portfolios. Another approach has been the introduction of "value" systems designed to cater to cost-conscious customers.
Overall, the introduction of tariffs appears to have reduced competitive pressure in the U.S. radiography market more significantly than in China. Should any tariff increases occur in the future, effects on either market should be minimal, as the competitiveness of the Chinese vendors in the U.S. has already been diminished and in China several of the non-domestic vendors have already shifted production to lessen the impact of tariffs and remain competitive.
About the author: Imogen Fitt is a market analyst for Signify Research, an independent supplier of market intelligence and consultancy to the global healthcare technology industry. Signify's major coverage areas are Healthcare IT, Medical Imaging and Digital Health. Our clients include technology vendors, healthcare providers and payers, management consultants and investors. Signify Research is headquartered in Cranfield, U.K.Back to HCB News
