Most investors recognize South Korean tech giant SAMSUNG ELECT LTD(F) (OTCMKTS:SSNLF) for its smartphones, tablets, televisions, and other home electronics. It often looms large in headlines for its global patent wars against its primary rival, Apple Inc. (NASDAQ:AAPL). However, Samsung is now aggressively moving into another major growth industry: health care technology.
These three major steps are part of Samsung’s outlined plan of becoming one of the world’s four largest medical equipment companies by 2020. Samsung projects $400 billion in annual revenue in 2020, with $10 billion (2.5%) of its top line coming from its new medical device segment.
Ambitious plans in a crowded market
A goal of $10 billion in annual health care revenue is a very lofty number for Samsung to hit.
By comparison, General Electric Company (NYSE:GE)‘s General Electric Company (NYSE:GE) Healthcare division — one of the largest medical equipment makers in the world — generated $18.3 billion in annual revenue in fiscal 2012. Growth has been nearly flat, however, with the segment only reporting a 1% year-on-year gain last year. General Electric Company (NYSE:GE) Healthcare manufactures imaging devices, clinical systems for administrators, surgical equipment, infant care products, IT services, and pharmaceutical products.
Samsung will have to contend with Koninklijke Philips NV (ADR) (NYSE:PHG), the parent company of Koninklijke Philips NV (ADR) (NYSE:PHG) Healthcare. The segment reported 6% comparable sales growth in fiscal 2012 and $13.2 billion in annual sales — accounting for 41% of Koninklijke Philips NV (ADR) (NYSE:PHG)’ top line. Koninklijke Philips NV (ADR) (NYSE:PHG) manufactures diagnostic imaging equipment, patient care and clinical informatics systems, and home health care products.
Samsung reported a mere $300 million in medical device sales in 2012, but it expects that number to surge to $500 million by the end of fiscal 2013. However, that growth trajectory will inevitably cool down as sales peak, and Samsung will need to do better than the 1% to 9% sales growth reported by its rivals if it intends to hit $10 billion in seven years.
Samsung’s game plan
To compete effectively against General Electric Company (NYSE:GE), Koninklijke Philips NV (ADR) (NYSE:PHG), and Siemens AG (ADR) (NYSE:SI), Samsung intends to increase its footprint in X-ray and ultrasound products. General Electric Company (NYSE:GE) is the market leader in medical imaging products in both developed and emerging markets, however. In India, General Electric Company (NYSE:GE) has gained significant market share with cheap and portable electrocardiogram machines that have also proven popular in rural areas of developed countries.