China’s PCR Market – A Localization Case Study

The demand for PCR equipment has surged in China in recent years, mainly including ordinary PCR (1^st generation PCR) and quantitative real-time PCR (2^nd generation PCR, also called qPCR).

In August 2018, African swine fever emerged in China and spread rapidly across the country, thus high demand for pig testing drove demand for PCR instruments. With the outbreak of COVID-19 in 2020, China has begun to establish a large amount of PCR laboratories, and the market demand for PCR instruments has experienced a new round of explosive growth.

In the whole year of 2020, the number of qPCR instruments purchased through bidding in China was about 5 times that of 2019, and the demand for qPCR kits grew faster.

Which industries were affected during this period?

• Hospitals – huge qPCR demand brought by nationwide COVID-19 testing needs
• Government labs - another wave of demand growth for qPCR after African swine fever
• 3^rd Clinical Labs - large qPCR demand from the overflowing COVID-19 testing needs
• Academia - demand for qPCR decreased as research project halts due to COVID-19
• Biotech Companies - increased demand for qPCR kits and COVID-19 testing services
• Pharma – vaccine development brings increased demand for qPCR
• Pig farms and feed mills - sharp rise in qPCR demand due to African swine fever in 2019

Obviously, the demand for PCR equipment has been excessively released in the past two years due to African swine fever, COVID-19, and government subsidies. The surging demand has also promoted the development of many Chinese local PCR equipment manufacturers and now poses a significant threat to international brands.

How do local brands stand out from the competition?

• Policy Protection for Local Manufacturers: Government's procurement protection policy for local suppliers has significantly increased the business of local manufacturers. Government labs and hospitals purchased a lot of domestic qPCR instruments during the pandemic.
• Lower Price: The price of imported brands is on average more than double that of domestic brands, which is one of the main reasons for hospitals and governments to purchase a lot of domestic qPCR instruments during the pandemic.
• Acceptable Quality: domestic products are currently able to provide satisfactory quality for those applications that do not require high performance (e.g. clinical needs), and those applications are also now driving domestic replacement to save costs
• US-China Trade War: In 2020, the China-US trade war hindered the supply of many US PCR equipment to the Chinese market, which provides opportunities for local brands.

Although China's PCR market environment has undergone drastic changes, China's high-growth biopharma and in vitro diagnostic fields will still create high potential opportunities for PCR instruments. Many top international brands such as Thermo Fisher, Roche, and Bio-Rad have established or are in the process of establishing localized production and R&D in China to deal with the increasingly severe local competition.

This challenges not only appear in the PCR market, but also in other industries where foreign companies are intensively involved. International brands need to fully understand the needs of potential customers and the dynamics of competitors and prepare for the upcoming stricter local procurement protection policies to ensure sustainable growth.

For more information, also read our industrial policy briefing on China's medical equipment market.