Medical and healthcare products are often perceived as a high-tech industry with many entry barriers including a stringent regulatory framework, high quality standards and the dominance of giant players with franchise rights, but they are not out of reach for Hong Kong companies. Given a growing trend towards outsourcing and offshore production of overseas manufacturers and brand holders, there are now opportunities for Hong Kong companies to enter into this industry as contract manufacturers.

Demographic changes also provide sources of optimism for the industry's future. Factors like an ageing population, rising health awareness, and more patients with chronic diseases are all helping to sustain the global demand for medical services and related equipment and supplies. The market of medical and healthcare products is estimated to be worth about US$200-300 billion a year globally while growing steadily at an annual rate of about 5%.

In Hong Kong, the medical and healthcare product industry is considered to be in an early stage of development. There are about 750 local manufacturers and traders, the majority being multinationals, dealers and agents of foreign brands. Only a few hundreds are manufacturing exporters with domestic or offshore production facilities.

Trade data also show that medical and healthcare products only account for 1% of Hong Kong's exports. In 2004, Hong Kong exported medical and healthcare products worth US$1,702.7 million, an increase of 30% from five years earlier. Based on the statistics of Hong Kong's domestic exports and re-exports of China origin, made-by-Hong Kong products were estimated at US$1,058.6 million, or 62% of the aggregate, with the dealership trade assuming the remaining share.

There are a few Hong Kong success stories already in the global medical and healthcare product market. For example, one company has attained worldwide leadership in electronic peak flow meters (for asthma management) and another in scales and weight sensors. There is also a leading contract manufacturer of disposable electro-surgical products. Meanwhile, telemedicine equipment has been developed by a local oxygen supply company.

While the medical and healthcare product industry is heavily driven by medical and technological advances, it is not necessarily high-tech. It is true that some products such as imaging systems are R&D intensive. However, there are commodity-type products that are not high-tech, e.g., surgical and medical supplies. Healthcare products such as blood pressure readers and massagers consist of mainly electronic applications in which Hong Kong companies have relevant design and production capabilities.

To be fair, the medical and healthcare product industry may not be a viable option for all Hong Kong companies, particularly those of smaller size. To begin with, a newcomer needs to go through tedious, time-consuming and costly procedures to be a qualified manufacturer. Full compliance may cost several million Hong Kong dollars and take about six months to one year or more. Given this initial cost, a newcomer should be ready to manage the risk that may be involved, in terms of cash flow, time commitment and resource management.

Hong Kong companies are advised to start out as contract manufacturers for foreign companies and learn industry practices from them. This market access approach is preferable because companies need backup in marketing and sales, after-sale services, insurance against product liability claims, and fulfilling regulatory requirements. With this kind of arrangement, Hong Kong companies can play a major role in technology integration and the protection of IPRs for contract vendors, their main concern in outsourcing decisions.

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