Expect opportunity, risk in China's supply chain

James Carbone -- Purchasing, 5/20/2004

For many electronics purchasers, China has become a huge sourcing opportunity as well as a significant challenge. It is an opportunity because the amount of electronic components including passives, connectors, semiconductors and printed circuit boards being made in China continues to grow. For instance, the worldwide electronic connector market grew 11.2% in 2003. However, China led all regions of the world with a 30.6% growth rate, according to connector industry researcher Bishop & Associates.

Many U.S., Japanese and European suppliers have opened factories in China to take advantage of low-cost labor and to support the growing electronics equipment manufacturing industry in Asia. Some component companies have entered into joint ventures with Chinese companies to produce parts.

The growth of component manufacturing in China is the reason that component prices have continued to fall even though unit shipments are rising.

However, while many low-cost components can be sourced in China, there are issues that often can be a thorn in the side to buyers. Product quality from indigenous suppliers is often an issue. Price is often the main concern and component quality takes a back seat.

Counterfeit components continue to be a problem. In some cases components being sold in China are just shells, or sometimes a part may not have the performance requirements that they are supposed to have. In other cases, a part carries the name of a leading manufacturer, but it is in fact a knockoff.

Another challenge is a lack of understanding of how business in the West is done. Western companies often require a supplier to provide a lot of information about its operations before deciding to do business with the vendor. In China, indigenous suppliers are often leery of providing detailed information about their operations.

The issues involved in sourcing in China can be daunting for any size OEM or EMS provider. However, large OEMs are often better able to deal with the issues because they have more resources. Often they have international procurement offices (IPO) to evaluate and manage suppliers.

But purchasers at smaller companies often lack the resources to do the supplier evaluation needed to avoid getting stuck with defective or counterfeit parts. However, there are strategies that any size company can employ to reduce risk when sourcing in China...

Top Emerging Network Equipment Companies

VentureWire awarded 10 start-up technology companies that are best positioned for long-term success in the data communications industry. 

• Actelis Networks, Fremont, Calif., which provides technology to boost the speed, range, and reliability of copper local loop facilities
• BitBand Technologies, Netanya, Israel, which develops and marketsAppliances for streaming video and audio over IP networks
• Callipso, Santa Ana, Calif., which provides VoIP services to telecommunications carriers and prepaid card providers
• DataPower Technology, Cambridge, Mass., which provides network infrastructure to improve XML performance and security
• Force10 Networks, Milpitas, Calif., which develops Gigabit and 10 Gigabit Ethernet switching and routing equipment for business
• Ikanos Communications, Fremont, Calif., which develops silicon products for broadband communications over copper wiring
• Nimcat Networks, Ottawa, Ontario, which provides embedded call processing software
• P-Cube, Sunnyvale, Calif., which provides products that enable network access providers to bill based on services and applications used on their networks
• Pedestal Networks, Fremont, Calif., which develops infrastructure to enable DSL over any local loop
• my favorite Vonage, Edison, NJ, which provides voice-over-IP services

The Top 30 Global Medical Device Companies

 

Gains Top Declines

 

The success of the medical device industry is never more apparent than when you examine the numbers being produced by manufacturers in this market. Year by year, today’s top companies show that dedication to the bottom line can help amass steady growth, with most of the top 30 companies posting healthy double-digit gains over the prior fiscal year. 

Of course, with all the competition and consolidation occurring in daily business, some companies showed signs of weakness with flat or, even worse, declining sales and profits—however, they are in the minority. 

While US companies tend to dominate the top 30, the proliferation of international giants shows that the industry is generating more and more profits from global outreach efforts, particularly in China, Japan and Europe. The dollar’s fluctuating worth will surely continue to impact sales over time, though. 

As the following in-depth company examinations show, new product innovation usually plays the most prominent role in determining success and sustainability year after year.

At least one of the companies on this list will disappear in 2006. Guidant will probably go down in history as one of the top newsmakers of 2005 due to Boston Scientific’s aggressive acquisition of the cardiovascular product maker—not to mention Guidant’s mounting legal troubles stemming from a slew of product recalls and reports of improper handling of related problems with its ICDs and pacemakers. 

Parent company Kodak has also been weighing the merits of selling its longtime healthcare division and, by this time next year, that segment could be operating under another owner. Meanwhile, Tyco is transforming itself by breaking into three separate segments.

However, like the industry overall, this report includes a variety of success stories, most notably St. Jude. The industry’s shining star in 2005 improved sales by more than 27%—an enviable accomplishment for any company in any industry. And Hospira, in its first full year as an independent company (it was formerly a division of Abbott), held its own in a crowded marketplace.

With all the myriad acquisitions occurring in the medical device sector, and the ever-new crop of small start-up companies, it’s interesting to note that this year’s list (in terms of ranking by sales) didn’t differ much from last year. The lone entrant to the elite list is Varian Medical. In the current climate, however, it’s anybody’s guess as to who will be on this list next year.    

One caveat about this list: Bausch & Lomb certainly fits into the fold of the top 30 medical device companies, but, unfortunately, the company did not have any firm 2005 numbers to report as of press time. 
     

The MPO Staff

 

TOP MEDICAL DEVICE MANUFACTURERS

 

1.	Johnson and Johnson	$17.7B
2.	GE Healthcare	$12.1B
3.	Medtronic	$10.1B
4.	Baxter International	$9.8B
4.	Cardinal Health	$9.8B
6.	Tyco Healthcare	$9.5B
7.	Siemens Medical Solutions	$9.2B
8.	Philips Medical Systems	$7.5B
9.	Boston Scientific	$6.3B
10.	Stryker	$4.9B
11.	B. Braun	$3.9B
12.	Guidant Corp.	$3.6B
13.	3M Healthcare	$3.5B
14.	Zimmer Holdings	$3.3B
15.	Becton, Dickinson & Co.	$3B
16.	St. Jude Medical	$2.9B
17.	Kodak Health Group	$2.7B
18.	Hospira	$2.6B
19.	Fresenius	$2.5B
20.	Smith & Nephew	$2.4B
21.	Synthes	$2.1B
22.	Alcon	$2B
23.	Biomet	$1.9B
24.	C. R. Bard	$1.8B
24.	Terumo	$1.8B
26.	Dentsply International	$1.7B
27.	Invacare	$1.5B
28.	Gambro	$1.4B
29.	Dräger Medical	$1.3B
30.	Varian Medical	$1.2B