With over 1,600 companies, 51,000 full-time positions, a turnover of around 12.5 billion CHF contributing to 2.1 per cent of the Swiss GDP, and an export volume of nearly 11 billion CHF, the Swiss medical technology industry is still doing well. By international comparisons, Switzerland as a region is still a global "hot spot" for medical technology. Until now, Switzerland has had a great advantage in that the proximity of the entire medtech value chain has allowed the industry to support itself and work together to fuel the growth of the entire Swiss medtech industry. However, circumstances are rapidly changing.
Growth in the single digits - shrinking margins
The 2012 SMTI report reveals an increasing trend of slow growth compared to the last two studies. The average growth expectancy now rests at 5.9 per cent for 2012 and at 6.6 per cent for 2013, or almost half the growth rate seen in previous years. According to the authors of the study, growth will remain in the single-digit figures in the near future. The average growth in the medtech workforce over the last two years continues to be positive at 3 per cent, but still remains lower than expected. For many companies it appears that the golden days are over. "Five to ten years ago the margins amounted to, on average, over 10 per cent, today they come only within the single-digit per cent range," emphasise both authors of the study, Patrick Dümmler, Medtech Switzerland, and Beatus Hofrichter, IMS Consulting Group.
Small firms, especially from the supply industry, suffer the most from growing international pressure due to pricing and competition. The strength of the Swiss franc is named as another of the three greatest challenges for the sector Thus despite the lower limit on the exchange rate, industry export has had to absorb a currency appreciation of 23 % since the beginning of 2010 when compared to the Euro. According to the survey, 81 per cent of all SMTI firms are affected by this problem.
Exchange rate problems intensify foreign investments
To better safeguard against exchange rate fluctuations, 15 per cent of all companies are planning investments over the next three years in production facilities abroad where the economic environment is more favourable (natural hedging). Suppliers and manufacturers will also increasingly procure their outlay and investment goods outside of Switzerland. In addition, more and more Swiss medical technology firms are converting to foreign ownership. In Switzerland the tight budgets in the Swiss healthcare system, administrative expenditures and bureaucracy place increasing strain on the companies as a result of growing regulatory requirements. This all leads to the threat of impending migration of the supply chain. "There is an urgent need for negotiation to prevent the Swiss medical technology ecosystem from breaking apart," the authors warn.
Not only external factors, but also internal structural weaknesses accelerate the trend towards consolidation however. Companies are lacking in management skills and expert knowledge. In particular, marketing, compliance, regulatory affairs and QM specialists are strongly needed.
Forming national clusters and operating pools
In over 86 per cent of all responses, marketing development and market knowledge were considered an important topic, followed by increase in profitability. Currently the sector focuses on commercial and operative excellence. Despite more intense competition, medical technology companies concentrate too little on the strategic development of new business models and marketing channels.
In view of the developments mentioned, and according to the authors of the study, it is high time to act both for the sector and for the region as a whole. The medical technology industry must take on an active role in market consolidation. The authors of the study see potential a solutions in the formation of national clusters and product and/or service pools, within which the suppliers of healthcare services and products develop innovative solutions together to support the Swiss supply chain.
SMTI 2012 report for download:
http://www.medical-cluster.ch/smti