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● Part III: Socioeconomic Environments

INDUSTRIAL PERSPECTIVE

ANTHONY STEVENS

Medical Options, London, UK

THE WORLDWIDE MARKET

The worldwide market for diagnostic imaging equipmentand related services has been estimated as US $18.9billion, of which sales of equipment account for some US$12.4 billion, with the remainder being revenues fromservice maintenance agreements and other areas of sup-port (Medical Options 1999). Figure 1 shows the share ofrevenues from equipment sales between the various mo-dalities.

In the past 3 y, there has been considerable consol-idation among companies supplying medical equipmentand devices. These trends have also been seen in thediagnostic ultrasound (US) sector, where the number ofmajor suppliers with sales over US $50 million has fallenfrom 16 in 1997 to 11 in 1999. Moreover, 8 of these 11companies are also involved in other areas of imaging.However, this consolidation should be viewed positively;large multimodality players having dabbled in US formany years have finally decided to take the plunge.Figure 2 shows the estimated market shares of the majorUS equipment manufacturers in 1999. There is likely tobe further limited consolidation, both within US andamong the diagnostic imaging suppliers, so that, by2003, we expect only 5 or 6 key suppliers.

MARKET TRENDS

Worldwide, a number of trends are forcing compa-nies to merge. General trends include the creation ofpurchasing groups, in a number of countries but foremostin the USA, and the desire of these groups to deal withlarger suppliers able to offer a broad range of products. Asecond trend is the low growth in the medical equipmentmarket, where revenues from system sales are increasingat under 5% per annum. There are also issues specific toUS, most important of which are the technological de-

velopments reviewed elsewhere in this supplement andwhich are expensive to implement.

There is no consensus on the size of the world USmarket (Clinica 1998; Datamonitor 1998; Frost and Sul-livan 1999). It is variously estimated at between US $2.4billion and US $3.2 billion per annum. Estimates of unitnumbers vary even more widely. Although trade associ-ations in a number of countries collect sales data, theseneed to be treated with some scepticism. Almost 80% ofsales by value are made in the USA (32%), Europe(33%) and Japan (16%). Although this may give theimpression that resources are concentrated in the devel-oped world relative to other diagnostic areas, this is notthe case. Moreover, figures by volume show that devel-oping countries account for a higher proportion of equip-ment, but no accurate picture of volume sales is avail-able.

The installed base of systems is difficult to esti-mate. With only a relatively low proportion of equip-ment covered by servicing contracts and an extensivesecond-hand market, suppliers have a poor knowledgeof the status of equipment they have sold. One meth-odology is to estimate an installed base based oncurrent sales volume, knowledge of how this hasgrown over the past few years and an estimate of theaverage equipment life. If we assume that equipmentis decommissioned after 10 y, then this would suggestthat around 390,000 systems are currently operatedworldwide. This far outstrips other imaging modalities(Table 1).

In unit terms, the US market is growing strongly,but this is at the expense of lower prices and this trend islikely to continue. A number of developing countries areimportant markets for US, especially in terms of unitsales. China, in particular, has an extensive manufactur-ing capability for standard and mid-tier systems, andsales within China are estimated at 90001 units perannum. For many developing countries, US provides thefirst rung on the diagnostic ladder.

Address correspondence to: Dr. Anthony Stevens, Medical Op-tions, 315 New Kings Road, London SW6 4RF, UK.

Ultrasound in Med. & Biol., Vol. 26, Supplement 1, pp. S147–S149, 2000Copyright © 2000 World Federation for Ultrasound in Medicine & Biology

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MARKET SEGMENTATION

US systems range in price from less than US$10,000 to over US $300,000. For many users, pricingappears to be a continuum; however, manufacturers di-vide the market into a number of bands or tiers. Apopular segmentation scheme involves premium, high,medium and low tiers, which are primarily defined byprice. The premium tier is the domain of the power userwanting flexibility and upgradeability, and average sell-ing prices are in excess of US $150,000. The high tier(US $90,000 to US $150,000), also referred to as theupper mid-tier, are based around digital platforms anddeliver features previously available on premium tiersystems. These systems are attractive to purchasers whowant an advanced system, but who are unwilling orunable to take a premium tier product. The mid-tier (US$50,000 to US $90,000) is difficult to define. Factorssuch as ease-of-use, faster operation, software algo-rithms, image display, build quality, branding and flex-ibility separate a vast range of mid-tier systems. Mostpricing pressure is seen in the midspecification systemscurrently referred to as low end colour and where, inrecent years, specifications have improved and pricesfallen. Until recently, colour distinguished the mid-tier

from the low or standard tier. Standard tier systemscosting below US $50,000 are often application-specific;for example, bone density, surgery and intraluminal, orlack features such as Doppler, choice of probes or colourcapability. A recent development has been the launch of“hand-held” systems priced at below US $20,000.

Cardiac US has been referred to as a niche marketand this statement can be supported if we look solely atthe relatively small group of users; however, with cardiacUS system sales estimated to account for around 24% ofworldwide sales by value, it is a very important segment.Agilent Technologies (formerly Hewlett-Packard) hasbeen the dominant supplier and still holds over 50% ofthe worldwide market in terms of sales value. The re-alignment of a number of US companies with largergroups is injecting more competition. Companies such asGeneral Electric, Siemens and Philips are able to offer abroad portfolio of cardiac equipment including x-raycatheter laboratories, cardiac magnetic resonance imag-ing and cardiac monitoring, as well as US.

US is used by a wide range of personnel, and thoseusing the technique vary between countries. Germany isprobably the country in which US is used most widely,and it is estimated that sales to radiologists account forless than 15% of total systems. Greater hands-on use ofthe technique by the wider medical community is a trendin most countries. Developments that make the techniqueless operator-dependent, as well as falling prices, willdrive this trend. Worldwide, around 24% of US systemsare sold for use in cardiology, 55% for general imagingand 21% for obstetric examinations.

Markets vary widely between countries. In the de-veloping world, the market is for standard tier productswith an emphasis on obstetric and gynecological appli-cations. In the developed world, markets depend heavilyon who uses US. In Germany, for example, the wide-spread use of the technique has led to mid-tier systemsdominating sales. In the UK, where the market is largelyrestricted to hospital-based radiologists outside obstet-rics, high and premium tier systems dominate. In theUSA, where specification is important, again, the marketis predominantly divided between high- and premium-tier systems for general applications.

Fig. 1. The worldwide diagnostic imaging market.

Fig. 2.Manufacturers’ shares of the worldwide ultrasound market.

Table 1.Estimated installed numbers of diagnostic imaging equipment

Modality Installed systems

X-ray vascular 12,454CT 25,385MRI 12,170Ultrasound 390,387Nuclear medicine 13,667X-ray (general and RF) 93,000

S148 Ultrasound in Medicine and Biology Volume 26, Supplement 1, 2000

The success of various companies in various coun-tries and markets is a function of the equipment that theysell, so that high- and premium-tier manufacturers, suchas ATL and Acuson, account for almost 40% of US salesand, in Japan, traditionally a mid-tier market, Aloka andToshiba account for some 55% of sales. Europe, with itsheterogeneous market, can provide pickings for all man-ufacturers, with no clear dominance as seen in the USAand Japan.

To date, manufacturers have had product gaps andhave not been represented in certain tiers but, with theconsolidation of the industry, this is changing. The rea-sons why companies fail to have a broad product rangeextend from the cost involved in research and develop-ment, through to the need to involve different distribu-tion and the need to match products to the markets thatthe company serves.

Research and development is both costly and re-quires suitably trained personnel. The commitments nec-essary have acted as a barrier to entry to the premiumtier, which is defined as the leading edge. Establishedcompanies, such as Acuson and ATL prior to their pur-chase by Philips, spend around 20% of turnover onresearch. In larger multimodality suppliers, there aresome synergies in research and development betweendifferent imaging modalities. Eventually, new develop-ments become more affordable as research becomes dis-seminated and key components become available fromoriginal equipment manufacturers (OEMs). Examples in-clude transducer elements and, more recently, digitalbeam-forming components.

The cost of manufacturing many items of medicalequipment is falling. This is due in part to the hugeincrease in the price-performance ratio of computers, akey part of modern imaging techniques, and by manu-facturers embracing more efficient manufacturing tech-niques. Today, even with the number of new develop-ments coming, the most efficient manufacturers are ableto produce premium tier systems below US $50,000.

CONCLUSIONS

In the new millennium, US will extend its lead overother imaging modalities in the numbers of systemsinstalled and the numbers of patients examined. It willnot, however, overtake X-ray as the imaging modalitygenerating the largest sales revenues. Although sales ofsystems will grow, revenue will not match the unitgrowth, due to a continuing fall in the price of USsystems. Sales of x-ray systems will be under pressure,due to concerns regarding radiation exposure; however,the implementation of digital radiography (DR) will seea significant rise in the average selling price of x-rayequipment, compensating for the fall in equipment num-bers.

REFERENCES

Clinica. Ultrasound: the worldwide markets. London: PJB Publica-tions, 1998.

Diamonitor. The European ultrasound market. London: DiamonitorPublications, 1998.

Frost and Sullivan. World ultrasound equipment markets. New York:Frost and Sullivan, 1999.

Medical Options. 1999. www.Medical Options.co.uk.

Industrial perspective● A. STEVENS S149