About a half hour ride from the Hangzhou Railway Station is Jin Cheng Medical Textile Co., Ltd., a member company of Medtecs International Corp. Ltd. Yang Kexi, general manager of the company says it was 1994 when he decided to invest in the business with the aspiration of building a platform for further expansion into the mainland China market, and the wider global market thereafter.
Today, Jin Cheng has gained a strong foothold in mainland China with Hangzhou Jin Cheng Medical Textile as the core business platform in the local market. At the same time, Kexi has invested a lot of resources in researching and developing high-end, easy-to-use products for aging populations, which are expected to increase rapidly in the years to come as the population ages. Kexi hopes that with an optimized investment portfolio, his business will be sustainable and stronger in the changing market with demanding requirements.
Kexi talked about Medtecs’ story, which is one of growth beginning in Hangzhou then Taiwan, Cambodia, the Philippines and on to the U.S.
Call of a family business
Kexi explains that he decided to pursue the medical products business as demand in the disposable medical markets in Europe and the U.S. was growing rapidly. At the same time the rising local petrochemical enterprises in Taiwan provided strong support with sufficient raw material supply for the industry’s development in Taiwan. In that year, Medtecs established its first specialized medical textile plant in the export zone of the Philippines. Kexi returned to Taiwan and with his brother they began to develop the business together. Nearly 25 years has past, and today, the medical products market is booming, along with the Medtecs’ business.
Currently, Medtecs, which is the parent company of Jin Cheng Medical Textile, is one of the leading global medical products and service providers and is listed on the Singapore stock exchange. The company has grown to become the first diversified enterprise of its kind in Asia-Pacific, providing beddings and relevant products manufacturing, sales, cleaning, disinfection, logistics and e-commerce services for healthcare organizations, with 10 production bases allocated in mainland China, Taiwan, the Philippines and Cambodia and offices in Hong Kong and Singapore.
Competitive material applications and efficiency
The cooperation between Medtecs and medical institutions in Europe and the U.S. started in 1988. Medtecs offers all kinds of medical textile products that can be found hospital environments, such as attire for doctors and patients, ward bedding and blankets, etc. In the 1980s, the medical and health services market was growing at a fast pace, as was public protection consciousness for patients and doctors. This market need opened a great space for the development of disposable medical products. Companies in Taiwan seized these opportunities promptly as a result of earlier entering into international markets. In addition, Taiwan’s petrochemical industry was also on the rise at the time. The combination of local raw material supply capability and great outside end-market demands, acted as driving forces in the development of the disposable products industry in Taiwan.
Kexi believes that the competition of the disposable medical clothing industry is focused on the competition of efficiency and the application of raw materials. As customers’ demands increase, and raw materials and equipment are updated every year, nonwoven fabrics also have advanced their technology to SSM and SMMMS from early PP spunbond fabrics, with continuous barrier or protection performance improvement.
Since 2004, the U.S. started to promote the AAMI PB70 standard, which classified medical disposable products into four grades, with detailed requirements on the performance of filtration, water pressure resistance and other indicators, but the standard has not been able to be successfully implemented yet. Because the results of investigations suggested that even some large enterprises who occupied a large share of the U.S. market hadn’t reached the requirements stipulated in the demanding standard for products in Class 3. The fundamental reason is that it’s difficult for nonwoven fabrics to meet all performance indexes. For example, breathability and water resistance characteristics conflict with each other. As a long-term partner for large-scale enterprises in the disposable medical products market, Medtecs produces Class 1, Class 2 and Class 3 products at its plant in Cambodia. Its products also can meet some requirements for products in Class 4. Medtecs started its disposable medical products business as an OEM at the beginning of its investment in the country.
Being familiar with the international markets, world-class management and operation capabilities, Medtecs continuously upgrades raw materials applications, improves products quality, service and productivity based on customer requirements, so as to be in compliance with the regulations of different markets and seize greater market opportunities with competitive edge.
“Take the Jin Cheng plant as example, where we have recorded high export volume of 40 40-foot containers within one month,” says Kexi. “The production bases we set up in the Philippines and Cambodia years ago enable Medtecs to strengthen itself through the comprehensive advantages derived from diverse markets.”
Expanding presence for geopolitical advantage
With years of development, mainland China has obtained certain advantages in terms of product quality, labor efficiency, production technologies and management. However, it’s no longer a secret that many trade barriers have been created in European and American markets against exports from China, especially in the military medical organizations. As a result, orders from military hospitals Medtecs receives have to be transferred to Cambodia, after being produced in the mainland China plant for about half a year.
Disposable medical manufacturing is a labor-intensive business. In recent years, Kexi and his companies are facing some difficulties including labor shortages, labor cost increases, raw materials price surges and the appreciation of the RMB. On the other hand, higher tariff barriers also limit exports to Europe and the U.S. For instance, in some areas of mainland China, the average labor cost has been increasing at about 15% annually for the past three years. Furthermore, today, the younger generations have quite a different value system compared to their parents. They prefer change and are never satisfied with the status quo.
“As for the raw materials market, sometimes it’s like a puzzle,” says Kexi. “While raw material prices keep rising, product market demand is declining. Who can explain this with the market principles of supply and demand? In the end, this takes profit away from manufacturers.”
All this has led to the deterioration of the competitive domestic environment. Now, some export-oriented enterprises have begun to relocate to other countries in Southeast Asia including Vietnam and Cambodia, particularly Cambodia.
“Recently, some of my friends invited me to go on a field trip with them,” says Kexi. “There aren’t any foreign exchange controls in Cambodia and labor cost is low, about RMB400 per month. Besides, Cambodia maintains good relations with China, Russia and the U.S. Furthermore, Cambodia also benefits from the lower tariffs and less controlled European and American markets. Exports from Cambodia to Europe are duty-free. Although production efficiency there is relatively lower than in China, I believe that as time passes by this will improve through training.”
For Medtecs, investing in Cambodia was a coincidence. At the beginning of Cambodia’s implementation of its opening up policy, the Cambodian government hoped to restore, renovate and expand an old cotton textile plant that was built in the 1960s with the help of China. Medtecs took this opportunity and started its investment there and has been operating in the country ever since. In 2007, Medtecs started to produce disposable industrial products for DuPont when DuPont wanted to establish its nonwovens production base in Cambodia. So far, Medtecs has been operating in Cambodia for 13 years with a solid presence in the local market
Currently, Medtecs is shifting its investment and business focuses gradually to Cambodia, with a large production base and more than 4,000 employees already there today.
“We have noticed that some companies operating in China are changing their business strategies,” says Kexi. “For example, their production in China is mainly targeted at the local market. At the same time, they are seeking opportunities to build new production facilities in more competitive areas in the Southeast Asia region for product export to European and American markets. With the continuous appreciation of the RMB, profitability of export products will be further squeezed and more companies possibly have to relocate, including those businesses that are subject to stringent environmental protection policies.
“That doesn’t mean that we are going to give up the local market,” says Kexi. “In contrast, we’re staying on track with our development strategy and aim to strengthen our market presence here, to meet the domestic demands for medical products. On the other hand, we also will keep operating our medical textile production base in the Philippines.”
Care for the aging population
As China’s population grows older, the personal care products market for this demographic is booming today. The single-child family structure is a big concern for lot of parents, as they are worrying about their life at senior ages. Currently, Kexi is seeking opportunities to cooperate with some communities with a high percentage of senior people to provide them with trial products under the brand name “Dr. Yang”. The products include adult incontinence diapers, products specially designed to help the aged people to put on socks and shoes, and zippers and other easy-to-use plastic parts, are expected to be introduced to the market in 2014 in accordance of the company’s local market strategy, i.e., produce locally, market locally.
In addition, international exhibitions, customer visits and other efforts enable Medtecs to capture the latest market trends effecting international demand so it can develop and improve products accordingly. At the same time, with the joint efforts of universities and research institutions, the company is developing advanced and applicable products for senior people.
For example, as a family’s only child is living and working under intensified competition and pressure, how are seniors in solitude with conditions such as stiff legs going to be able to take care of themselves? Is it possible to produce brain-controlled wheelchairs? Medtecs is making progress in this field too. In addition, the company is looking at the possibility of developing electronic tableware. Kexi believes that one of the product development trends for the aging population is to be electronic. The cooperation with research institutions will create new opportunities for Jin Cheng and Medtecs together.
Advance on a firm footing with inherent value
With years of development, the disposable medical products market, both in the material and the products market segments, are becoming more diversified and driven by numerous enterprises in a variety of ways. For example, antimicrobial medical products are growing. One such product is described as the “four resistance cloth” that provides alcohol resistance, blood penetration resistance, static resistance and pressure resistance. In addition, products that provide protection from corrosion for those in direct contact with chemical products have become more popular in recent years too.
In general, the medical industry is relatively stable with no dramatic shifts up and down. Due to its management style of adhering to its inherent values and working on a firm footing, Medtecs is still lucky enough to be able to maintain steady growth even in the macro economic slowdown today.
For instance, in the process of development, many companies measure profitability as their only criteria, and always tend to expand upwards and downwards in the value chain, or to those industries which are irrelevant to their core business. Kexi says Medtecs also had thought about investing in nonwoven fabrics manufacturing, however, they realized that the expansion of production capacity in the market is happening too fast. As a result many manufacturers squeezed in one business sector results in cut-throat competition.
“There were only four SSMS production lines in 1994 when I first came to mainland China. However, this number has grown to hundreds of lines by now, increasing by more than 100 lines within just one year,” says Kexi. “Many companies want to expand into upstream industries and cover both the finished products and materials processing. Just take Xiantao, Hubei province as an example. Because of the low technical barrier for some products, all they need to do is to purchase some domestic made equipment with a small investment. With careful considerations, we decided to focus on what we are really specialized in, and try to expand and strengthen the business in the market. With dedication to the medical products market, Medtecs is ranked in the top four in the medical market in the U.S. The medical products market is already big enough for us to concentrate all our efforts there.”
Stepping into the future with full confidence
Through Hangzhou Jin Cheng Medical Textile Co., Medtecs will continue to consolidate its position in the domestic disposable medical products market. “We will maintain our local nonwoven production to fully utilize our production capacity for surgical gowns,” says Kexi. “We’re applying for the relevant administrative approvals currently.”
Kexi believes that the domestic market is full of potential. Previously, textile products were the main options for domestic healthcare organizations where costs are the major consideration. “For example, three years ago, you might find some doctors wearing surgical clothes stained with blood in some hospitals,” he says. “As exchanges and visits to foreign hospitals became more frequent, doctors’ awareness of cross-infection protection has also been improved. Considering that today many central air conditioning systems are equipped in large hospitals, which provides patients with much more comfort, this market is bound to move forward.
“Overall, Medtecs will strengthen its current domestic disposable medical products market based on Jin Cheng, and will expand to the aging market with its brand of Dr. Yang products,” say Kexi. “Cambodia’s competitive advantage will be further explored and utilized as well while the Philippines will continue to be the main supply base for our medical textiles. With this strategy, we’re fully confident of the future development of Medtecs.”
A closer look a Medtecs Group
Medtecs International Corporation Limited is an integrated healthcare products and services provider in the Asia-Pacific region and a leading manufacturer and distributor of medical consumables for the global healthcare industry. Beginning operations in the Philippines in 1989, Medtecs Group has since established a strong presence in the U.S., Europe and the Asia Pacific region. The group has offices and facilities spanning across Asia including Singapore, Hong Kong, Taiwan, the Philippines, Cambodia and China.
Medtecs is an original product manufacturer (OPM) of a wide range of medical consumables, hospitality and work wear apparels for large multinational healthcare distributors, pharmaceutical companies, hospital groups and other institutional customers in the U.S., Europe and Asia Pacific. Major product lines manufactured by the group include linens, hospital apparels, hospitality apparels, work wear apparels, bandages and face masks. The group’s OPM operations, which is part of its core business, are supported by 10 manufacturing facilities strategically located in low-cost center—four in the Philippines, four in China, and one each in Cambodia and Taiwan.
“We are a leading integrated OPM manufacturer and distributor of healthcare, hospitality and work wear products for the global healthcare and hospitality industry and a provider of third party hospital services in the Asia Pacific region,” says Yang Kexi, general manager of Jin Cheng Medical Textile, part of the Medtecs Group.
Leveraging on its strength as an OPM, the group also manufactures and distributes “MEDTECS” branded medical consumables to end customers in the Asia-Pacific region. The products made by Medtecs include: anti-static surgical attire; sterilized procedure tray (SPT) products; underpads and adult diapers; patient apparel; flame-retardant fabrics; surgical drapes; medical bandages; disposable surgical masks, boot covers and surgical gowns; and facemasks.
The group’s continuous efforts in product research and development has enabled it to roll out new products for its OPM customers on a regular basis as well as products for the home medical care and military uniform market. Among the group’s recent R&D initiatives include the development of digital camouflage military uniforms and P3 level face and cup mask and development of energy-saving conversion kits for its Philippines and Cambodia operations.