GE looks to growing Asian markets for fresh business opportunities

Yen's rising value makes Japan more attractive

As the U.S. market for imaging equipment sales becomes more batteredand bruised, Asia is emerging as a growing source of demand fornew imaging equipment, according to the general manager of theglobal MR business for GE Medical Systems.

Few industry executives know the Asian market better than NobuhikoIto. As vice president and general manager of GE Asia, Ito wasresponsible in 1993 and 1994 for marketing efforts covering GE'sentire imaging product line around the Pacific Rim and India.He was selected to manage GE's global MR operations in November1994, replacing Paul Mirabella, who was named general managerof Americas sales (SCAN 12/14/94).

Ito notes that one need look no further than GE's forecastof MR sales to see how swiftly Asia is rising in prominence. In1991, 57% of all new MR systems were sold to customers in theU.S. and Canada. Asia and Europe constituted 29% and 14% of themarket, respectively.

GE officials expect a new world order to be in place by 1997.They forecast that two years from now Asian customers will buy48% of all new MR scanners. The Americas will account for 44%of new sales, and European nations will purchase 19%.

"The relative size of the American market is getting smallercompared to other markets, so I have to grow markets outside theU.S.," Ito said.

The healthiest growth in Asia will originate in Japan, he said.Its market may be roughly flat in terms of unit sales growth,but higher yen values mean that each sale of an American-builtimaging platform in Japan garners substantially more revenue thana year ago.

"From a dollar perspective, Japan is the biggest growthmarket," he said.

Currency fluctuations are encouraging GE and its Japanese joint-venturepartner YMS to consider shifting some manufacturing from Japanto lower cost markets, Ito said. He stressed that YMS is an extremelyimportant part of GE's strategy, but its value does not necessarilylie in manufacturing. It contributes engineering, sales and servicesupport in addition to building MRI, CT, and ultrasound productsthat have made GE a major power in Japan, he said. Ito does notexpect GE to completely eliminate its Japanese manufacturing base.

South Korea ranks as the second most important source of Asiansales growth, according to Ito. Health-care infrastructure developmentis a government priority. As in Japan, South Korean corporationsare spending millions of dollars on showcase hospitals carryingtheir names. Samsung, an integrated finance and electronics company,generated huge imaging equipment orders in 1994 with the constructionof its medical complex in Seoul. Gold Star, a global electronicsconcern, also built a large hospital last year.

"Korea has really been bursting with spending on medicaldiagnostic equipment," Ito said.

China is returning to a growth trend, according to Ito. Hospitalofficials are showing renewed interest in acquiring CT equipment.The demand for high-field MRI scanners is increasing as well.

China is a major GE success story, Ito said. He claims an overall40% market share in the country, which will acquire more than220 CT systems, nearly 30 MR systems and about 30 vascular x-raysystems this year, according to x-ray film vendor Agfa-Gevaert.

Ito ascribes GE's market position in China to the efforts ofits 50-person dedicated sales force and its provincial distributionstructure. Its position is also attributable to GE Hangwei MedicalSystems, a joint venture formed in 1991 between GE; Beijing ChangfengIndustrial, a unit of the Ministry of Aeronautics and Space Industry;and China National Medical Equipment and Supplies Import and Export,a branch of the Ministry of Public Health. GE owns 65% of theventure (SCAN 5/22/91).

GE Hangwei is crucial to GE's activity in China, accordingto Ito. Its manufacturing facility in Beijing assembles CT andultrasound systems from components shipped from Japan. Operationsbegan in 1994.

GE's direct sales force markets big-ticket items, such as helicalCT and high-field MR systems, to major government-owned hospitals.The company staffs sales offices in Beijing, Shanghai and HongKong. It relies on a distribution network comprising local dealersand agents to sell low-end x-ray and ultrasound equipment in therest of the country.

Ito has seen market growth since mid-1994 originating fromsoutheast Asian countries. He singled out Thailand as an example.Its government teaching hospitals are beginning to buy high-tierMRI, CT and x-ray products.

"This trend will definitely cascade down to the next levelof hospitals and farther down to the local tier," he said.

The GE executive is also optimistic about prospects in Indonesia.With a population of 200 million, Indonesia is more than threetimes as large as Thailand.

"Equipment demand in Indonesia is modest now, but in threeto five years, we expect the country to be one of Asia's biggestmarkets," Ito said.