Fitch Solutions: Medical devices industry to gain from trade war


  • Corporate News
  • Friday, 18 Oct 2019

“In the short term, Malaysian rubber glove manufacturers will likely benefit from the recent US tariffs imposed on Chinese medical gloves. In the longer term, additional tariffs on a broad range of medical devices imposed by both China and the US could help drive direct foreign investment into Malaysia, boosting its international competitiveness, ” Fitch Solutions said

KUALA LUMPUR: Fitch Solutions Macro Research expects Malaysia’s medical devices industry, including gloves, to benefit from the increasingly acrimonious trade war between the US and China.

In a statement yesterday, it said Malaysia can be used as an alternative manufacturing base for both the US and Chinese markets.

“In the short term, Malaysian rubber glove manufacturers will likely benefit from the recent US tariffs imposed on Chinese medical gloves.

“In the longer term, additional tariffs on a broad range of medical devices imposed by both China and the US could help drive direct foreign investment into Malaysia, boosting its international competitiveness, ” it said.

Recent moves by the US government to further ramp up tariffs on Chinese-made products will increase pressure for Chinese companies targeting the US market to relocate manufacturing operations.

It pointed out Malaysia’s unhindered access to the US market and other major world markets increases its attractiveness as an alternative manufacturing base.

It said initially, Malaysian rubber glove manufacturers stand to benefit from the recent US tariffs imposed on Chinese medical gloves.

The US government had imposed a 15% tariff on medical gloves made in China from Sept 1. Hence, US importers had been seeking alternative sources of supply from other manufacturers in Asia.

“As the world’s largest producer of rubber gloves, Malaysia stands to benefit from this shift in supply chain, ” it said.

The US imported medical gloves valued at US$2bil in 2018, of which around three-quarters came from Malays ia and 11% from China. Thailand and Indonesia are the other main suppliers.

Higher US demand for Malaysian gloves will boost industry profit margins which have been hit by a hike in raw material costs and surplus capacity due to over-expansion by the country’s four top glove producers, Hartalega Holdings, Kossan Rubber Industries, Supermax and Top Glove.

On the downside, the market environment for medical gloves in Europe is likely to become more competitive as Chinese producers shift their focus away from the US market.

“In the longer term, additional tariffs on a broad range of medical devices arising from the US-China trade war could help drive direct foreign investment (FDI) into Malaysia’s medical device industry, boosting its international competitiveness.

“We highlight that the Malaysian government is actively encouraging more investment from China particularly in hi-tech industries, ” it said.

During a meeting of the Malaysia-China Belt and Road Economic Cooperation Forum in August, Finance Minister Lim Guan Eng stated that Malaysia wass keen to learn from Chinese expertise in artificial intelligence, advanced materials, robotics and cloud computing.

This would allow Malaysia to build on current initiatives to boost hi-tech manufacturing such as the Indus try4WRD national policy on Indus try 4.0 launched in 2018 and the Industry Digitalisation Transformation Fund launched in 1Q, 2019.

“Investment in smart technology will stand Malaysia in good stead to expand manufacturing of hi-tech medical devices, ” it said.

Fitch Solutions note that to date US tariffs on Chinese-made medical devices have mainly targeted diagnostic imaging and electro-medical apparatus with most consumables remaining exempt.

Conversely, Chinese tariffs on US products have targeted a much broader range of devices and this could encourage more investment from the US which is already the top investor in Malaysia’s manufacturing sector.

US medical devices companies with manufacturing operations in Malaysia include Abbott, Becton Dickinson, Boston Scientific, Cardinal Health, Medtronic and Teleflex.


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