Why Reshoring Matters for Medtech

Author: 
Brian Buntz

A lot of U.S.-based manufacturers are bringing production operations back home after offshoring them in the 1990s and 2000s to save cash. After years of looking to low-cost destinations like China, many firms are finding the cost benefits of offshoring are evaporating. Businessweek proclaimed earlier this year that it is now just as cheap to make products in the United States as it is in China. In 2001, an average worker in the Yangtze River Delta made less than $1 per hour. Now, a worker in the same area makes almost $5. The Boston Consulting Group surveyed U.S. manufacturing execs recently and reported that 16% have already returned production back to the United States from China. 20% said they would consider reshoring in the near future. 

Specialty Silicone Products
Specialty Silicone Fabricators (Tustin, CA) offers contract packaging and assembly services as well as silicone-based products.

This trend is apparent in the medtech industry as well. “We are seeing a lot of medical device companies moving production back onshore,” says Chris Mazelin, marketing manager at Specialty Silicone Fabricators (Tustin, CA), which offers contract packaging and assembly services as well as silicone-based products.

Some manufacturers are looking to other low-cost manufacturing destinations like India, the Philippines, Costa Rica, and Africa. There are downsides to doing business in those regions as well. “Africa may have a lot of potential but there are a lot of eco-political issues there,” Mazelin says. “The Philippines and Costa Rica are working to expand their economic might but there is not a lot of infrastructure there yet.”

Speaking of infrastructure, a number of medical device companies that have offshored production have run into delays as shipments can get stuck in transit from far-flung destinations. Facing unprecedented time pressures, medtech companies are in a race to get their products to the market. Device firms are looking to contract manufacturers to help them shrink their production timelines. This requires a collaborative approach between the OEM and the contract manufacturer. “Absolutely there has been more collaboration between contract manufacturers and medtech OEMs recently,” Mazelin says.

Another factor fueling the reshoring trend is the growing complexity and miniaturization of medical devices, in which electronics are playing an ever more important role. While China may be home to Foxconn, one of the biggest companies specializing in contract assembly of electronics, the United States is a leader when it comes to making sophisticated medical device engineering and production.

In medtech, the United States can remain competitive by leveraging its ability to innovate, creating lean and efficient manufacturing processes that can be used to make next-gen medical devices.

The United States is a leader when it comes to making combination products as well. “We are seeing an interest from companies looking to take a bioabsorbable polymer or silicone material fabricated into a given shape that elutes a drug over a long period of time,” Mazelin says. This gives you a single component that has a specific concentration of a drug that can be placed at the point of use in the body and diffuse a drug over a period of time.

Refresh your medical device industry knowledge at BIOMEDevice San Jose, December 304, 2014.

Brian Buntz is the editor-in-chief of MPMN and Qmed. Follow him on Twitter at @brian_buntz.

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