2019 Forecast: Strong medical market

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The global medical technology (medtech) market is estimated to reach $409.5 billion by 2023 with a compound annual growth rate (CAGR) of 4.5%, according to ResearchandMarkets’ forecast. If you are looking for more opportunity, Evaluate Medtech’s analysts suggest the global medical device market will grow at 5.6% CAGR to reach $595 billion by 2024. Medical device manufacturing remains a strong market, driven by technological developments, an aging population, and increases in chronic and lifestyle diseases – trends that expand healthcare spending.

The U.S., the world’s largest medical device market, represents about 40% of the global industry with exports surpassing $41 billion, according to numbers from SelectUSA, a U.S Department of Commerce program.

However, a strong medtech sector can also highlight challenges original equipment manufacturers (OEMs) and contract manufacturing organizations (CMOs) face. Reimbursement continues to shift to a value-based, positive-outcome model, so new medical technology must deliver improved outcomes at the same cost, or less, than what’s currently available in the market. Medtech must be produced better, safer, faster, and more economically to have the best chance for market acceptance, so early-stage collaboration requires a design for manufacturability (DFM) approach. Enabling proactive designing of products to optimize manufacturing: machining, fabrication, assembly, test, procurement, shipping, delivery, service, and repair, DFM addresses aspects that will deliver the best cost, quality, reliability, regulatory compliance, safety, time-to-market, and customer satisfaction.

CHANGING ROLES

OEMs are also consolidating suppliers, factories, and equipment, becoming leaner while CMOs grow.

Estimates from Visiongain show the CMO market will reach $316 billion by 2023, a 10.5% CAGR – as they deliver everything from design and added manufacturing capacity to final assembly, packaging, and shipping.

CMOs are investing more in smart manufacturing and advanced technologies – robotics, tooling, automation, hybrid machine tools, 3D printing, advanced analytics, Internet of Things (IoT) – to produce everything from microscopic medical implants to magnetic resonance imaging (MRI) machines.

In the Fall 2018 Medical Device Contract Manufacturing Update, from global advisory firm Duff & Phelps LLC, analysts note that, “Major medical device OEMs have combined complementary skills to gain greater market share. OEMs are choosing to outsource technical and production services to trusted partners to reduce their manufacturing footprint… As a result of OEMs buying other OEMs, CMOs have followed the broader industry trend and consolidated to expand capabilities.” (See CMO's Consolidation sidebar below.)

TECHNOLOGY, TOOLING

Through November, manufacturing technology orders hit $5 billion, up 22% for the same 11 months of 2017.

“Orders in the third quarter were amazing and no one expected that pace to continue into the last three months of 2018,” says Doug Woods, president, AMT – The Association for Manufacturing Technology.

Woods says AMT members are confident growth will continue with medical equipment demand from the graying population, the aerospace industry ramping up to reduce backlogs, and the auto sector driving investment deeper into the supply chain.

U.S. cutting-tool sector growth has been about 1.5% annually, according to McKinsey & Co., with more than 200 mergers and acquisitions of cutting-tool companies worth more than $4 billion in value since 2000. With a total available market of about $5 billion – the most value coming from milling (about 38%) and hole making (about 20%) – indexable tools are growing at a higher rate than solid tools, both carbide and non-carbide. Demand within the medical sector will remain stable; vendors looking for protection against economic turmoil will find a haven in surgical and orthopedic cutting tools, McKinsey research predicts.

Stable news with cutting tools correlates to the toolholder market forecast for growth at a steady rate, posting a 5.61% CAGR through 2022. Increasing automation is driving demand for advanced toolholders, according to analysts at Technavio. Investment examples include Sandvik AB’s Sandvik Coromant Centre that facilitates applications, machining, productivity, and research in manufacturing, and similar investments made by Ceratizit Group.

In the Deloitte Consulting’s 2019 Industrial Manufacturing Outlook, Vice Chairman Paul Wellener projects, based on the Oxford Economic Model, that final 2018 manufacturing GDP will likely grow 3% from 2017, “the highest annual growth levels recorded since 2010.”

Manufacturing GDP should increase by 3.7% in 2019, Wellener notes, explaining the latest Manufacturers’ Outlook Survey where optimism reached 93.9%, the highest yearly average ever recorded. Analysis by the Manufacturers Alliance for Productivity and Innovation (MAPI) indicates the U.S. manufacturing sector is likely to regain output levels lost during the Great Recession.

Wellener cautions that the manufacturing industry is dealing with one of the tightest labor markets in history, with high job-opening levels – more than 400,000 since January 2018 – and historic low unemployment rates.

Wellener’s conclusion – 2019 will seperate digital leaders from the followers.

“Digital technologies can be applied to product development and innovation through 3D prototyping and digital twins. Artificial intelligence (AI) and cognitive technologies can foster growth in the customer lifecycle and create exceptional experiences. And automation can deliver measurable outcomes,” Wellener says. “Nearly half of manufacturers (49%) are using a form of automation in their business, with plans to increase its use… Industrial companies have an opportunity to flip the switch on productivity with the right strategy and approach.”

About the author: Elizabeth Engler Modic is editor of TMD. She can be reached at emodic@gie.net or 216.393.0264.