Building on Strengths: South Africa’s Strategy for Medtech in the Age of AI
GE Healthcare, the industry's sixth-largest medtech company, is acquiring Intelligent Ultrasound Group's clinical AI software business for approximately $51 million (R932 million). This deal follows the company's purchase of AI imaging firm Caption Health. Since its spin-off from GE, GE Healthcare has been aggressively investing in its digital strategy. Earlier, the company acquired France-based IMACTIS, which specializes in CT-guided interventional procedures for minimally invasive surgeries.
The past few years have seen a wave of spinoffs. Medtronic, Johnson & Johnson, GE, and many other major medtech companies have been concentrating on spinning off their divisions. Now, these newly independent companies are strengthening their portfolios by acquiring others. GE Healthcare is particularly well-positioned, as it has a substantial war chest estimated to be in the billions.
Medtech companies, like those in various other industries, are heavily investing in digital strategies, with a strong focus on Artificial Intelligence(A.I). Many of these companies have been experiencing only modest growth, and they view A.I. not just as a means to boost growth but as a transformative force for their businesses. While A.I. is currently one of the most sought-after areas for healthcare investment, its impact on the bottom line is still a few years away. As a result, smaller companies are increasingly open to selling or partnering their A.I. projects.
These changes have inevitably led to job losses within the industry. For instance, ICU Medical, a manufacturer of infusion pumps, has announced the reduction of 83 positions at its Minnesota facility. Reports indicate that since the beginning of 2023, approximately 14,000 employees in the sector have lost their jobs due to restructurings in the U.S. alone. This represents a significant challenge in shaping the medtech industry of the future. As companies shift towards A.I.-focused businesses, they may need skills that are not traditionally found within the medtech sector, rendering many conventional roles obsolete.
Statistics South Africa's (StatsSA) Quarterly Employment Survey indicates that employment grew positively from 2015 until the end of 2019. However, since the onset of the COVID-19 pandemic, there has been a consistent decline, with employment in the sector dropping to 9,624 individuals by mid-2023.
How do we remain relevant in this changing landscape?
Various medtech reports offer insight into the South African medtech manufacturing sector. Companies that produce predominantly "low-risk" consumables account for approximately 53% of the sector. Those specializing in orthopaedics and prosthetics represent around 27%, while hospital furniture manufacturers make up 14%. Electro-diagnostics producers comprise 9%, sterilizer manufacturers account for 8%, and dental equipment producers contribute 5% of the sector. South Africa’s strength lies mainly in low and medium-risk categories. We do not yet have the capacity to invest in cutting-edge A.I. projects.
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To stay competitive, South Africa should focus on leveraging its existing strengths. We need to foster a "low-tech" approach that doesn't require billions in investment or cutting-edge skills. This strategy could also boost employment. By adopting Gunpei Yokoi's philosophy of Kareta Gijutsu no Suihei Shikō—"Lateral Thinking with Seasoned Technology"—South Africa can create valuable products using established and well-understood technologies, rather than trying to compete with the world's largest economies in the A.I race.
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