Medtech sourcing and manufacturing in China has gained much attention over the past two decades, primarily due to low labor costs, low manufacturing costs and a large domestic market. However, costs have risen in China over the last few years. Thus, foreign device manufacturers looking to source or manufacture commodity medical devices are now looking for cheaper locations and are going to India and Vietnam. In this case study, I will discuss a client interested in the Indian medtech manufacturing market, who eventually decided to go to Vietnam.
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Our client was seeking a business partner in India that could source raw medical-grade PVC tubing materials and provide finished assembly for medical disposable packs. The tubing had specified measurements such as outside diameter, wall thickness and length, with color-coded identifiers. The delivered product needed to be manufactured to meet local regulatory and quality requirements, and have acceptable pricing for export to the Asian markets.
Suppliers in India
We initially contacted around 20 Indian medtech suppliers, then narrowed the list down to five companies. After visiting these five facilities, PBM concluded that the best prospect for a client was a Delhi-based, large medical device manufacturer that was known as one of India’s top medical device manufacturers. During our visit, we saw that the manufacturer had great infrastructure capabilities, with modern production facilities and processes, and a good quality control system. The manufacturer was also producing somewhat similar products for another foreign device company. However, the only disadvantage of this supplier was that it was a relatively big company and our initial volumes were low, so we were not sure how interested they really were.
General India Medtech Manufacturer Observations
During our five factory visits (the short-listed companies), PBM noticed several patterns when talking with the manufacturers. While these observations cannot be applied to all Indian manufacturers, they can certainly provide you with an idea of the medtech manufacturing landscape in India. The following are some general observations and comments from the Indian medtech suppliers.
- All the manufacturers we visited met basic requirements such as ISO 13485 certification, in-house cleanrooms, in-house EtO sterilization and in-house quality testing laboratories.
- In our particular client’s case, the manufacturing process required a custom mold to be made. A major concern expressed by the Indian manufacturers was that mold making would be a costly affair that would require a considerable investment. Some of the Indian factories asked our client whether they would pay for such expensive molds.
- Several manufacturers also expected to receive some sort of upfront financial support required to cover the project start-up costs. They indicated that this would ease their initial financial burden and provide confidence on maintaining long-term relationships once the client could show commitment to the manufacturer.
- No single company indicated that they were capable of producing all of the required components. The manufacturers were all expecting to procure or source components from other companies in order to fulfill the requirements. Of course, this made our client nervous since we did not know the quality of the Indian sub-contractors.
- Many of the Indian manufacturers found it difficult to provide us with ballpark quotes to manufacture the product. Some felt that they could provide more accurate quotes if they were provided with more samples and specifications for their R&D teams to evaluate. Initially we only showed them the samples at our meetings, but we did not leave any samples with the suppliers. Other suppliers felt that they needed a better understanding of the product volumes, ramp-up schedule, and investments/guarantees, and that the U.S. device company would offer them.
We tried to work with the selected Indian medtech manufacturer, but since this company was relatively large (500 employees), it was not clear they were interested in proceeding.
Ultimately, our client decided to look outside of India because they felt that there were too many issues associated with manufacturing their product in India. We next contacted medtech manufacturers in Vietnam. We found after meeting with five local Vietnamese companies that they could not make the product our client wanted to outsource. However, we did find two factories in Vietnam that were owned by Malay and Taiwanese medtech companies that had set up their own device factories in Vietnam. These Vietnamese factories exhibited more Western capabilities since they were set up by Asian companies that were already in the device market in their home countries. After further discussion with these two factories, we recommended them to our client. Our client conducted further due diligence and selected the Malay company’s factory in Vietnam. Today, our client is receiving excellent products from and building a trusting relationship with their supplier.
Medtech companies looking to source and manufacture in Asia should consider India and Vietnam as good low-cost production centers. More and more device commodity products are being made and sourced in these two markets. While manufacturing in India didn’t work out for our client’s specific component/device, India still remains one of the top countries for medical sourcing and manufacturing. It may take significant time and effort to find the right Asian manufacturer, but ultimately you will likely find an Asian manufacturer to reduce costs with decent quality and also be closer to the growing Asian medical markets.