Cochlear, the Australian company formed to commercialise the invention of the cochlear hearing implant four decades ago, will open its first factory outside of Australia in Chengdu, the capital of China’s Sichuan province, in late 2020. Cochlear’s mission is to build on its global leadership in innovation of hearing implants, as well as its market leadership in production and clinical services. It recognises that to retain global leadership over the long term, it needs to lead in China.
MAKE IN CHINA, LEAD GLOBALLY
Developed country markets for hearing implants and many other medical devices continue to provide significant growth opportunities and are Cochlear’s biggest driver of growth. Emerging markets are also an important driver of Cochlear’s growth, none more so than China. Cochlear CEO Dig Howitt explains:
“There’s a big market here. You’ve got a government saying they want China to be a manufacturer of medical devices. When you put those two things together you can see there are going to be successful cochlear manufacturers in China over the next 20 years. We want to be one of those.” When Cochlear decided to expand its manufacturing capacity, the decision to build a factory in China logically progressed. The market opportunity in China is vast, but trends
do not favour imports. “If you look at where medical devices are in China now and look back over the last 20 years, you can see that locally produced devices, made by local companies or multinationals with a local presence, dominate nearly all segments. Stents are a good example of this. Cochlear implants and pacemakers which are still largely imported are exceptions,” says Howitt. Cochlear expects to evade this trend by becoming a domestic manufacturer. Cochlear seeks to lead in all market segments in China, and recognises the need to adapt for price sensitivity. While there can be no compromise on quality, Cochlear looks closely at the needs of the local market and has already succeeded in shifting some consultations online. Howitt uses an aviation analogy: “Jetstar doesn’t aim for a lower safety record than Qantas. We aim for the same reliability of our implants whatever the segment they are sold in. Some of the service and features around that will be different.” Cochlear believes that establishing a manufacturing presence in China will help it better support the specific needs of its Chinese customers.
THINK IN DECADES
Cochlear’s commitment to manufacturing in China aligns with China’s long-term manufacturing strategy, Made in China 2025, which encourages global market leaders in advanced manufacturing to set up in China. Hearing is also an essential part of the health policy plank of China’s 2049 strategy to reach full developed country status. This means where it can Cochlear can align its expansion plans with the strategies of policymakers who also think in decades. Says Howitt:
“Our interests are aligned in that we want children to hear.” This is particularly important in a country where the government sets competition policy and is also the single largest buyer of hearing implants for children. Cochlear has also closely aligned with provincial policy goals by supporting Chengdu’s plan to become a major centre of innovation in medical devices. It has established a joint venture with the Sichuan Innovation and Entrepreneur Promotion Agency (SIEPA), a government authority that brings together private and public investment to attract high-tech businesses. SIEPA and Cochlear are working together to create the Chengdu Hearing Hub at the Tianfu Science City in Chengdu. Cochlear brings expertise gained from being a key member of the Australian Hearing Hub on Macquarie University’s Sydney campus.