Malaysia has the largest medical device industry in the ASEAN region, with total annual exports of nearly USD 7 billion. However, the sector is only scratching the surface of its full potential. As the government focuses on improving domestic healthcare and increasing manufacturing output, new opportunities are increasingly available. Asian Insiders Malaysia Partner Germain Thomas sheds some light on this bourgeoning market.
The Malaysian medical device industry has quietly become one of the country’s economic success stories. Yet, there may be even more to come. Market value surpassed USD 3.2 billion in 2023, and a compound annual growth rate of 7-9 percent between 2024 and 2028 has been predicted.
This impressive projection has been made possible in part by Malaysia’s New Industrial Master Plan 2030 (NIMP). The plan aims to strengthen domestic production of various industries, and medical devices are one area being targeted.
The plan seeks to promote the integration of value chains and build collaborations within the medical device industry. There is a belief that the NIMP will aid the country in cementing its status as the regional leader while putting it in a better place to compete with Ireland, Costa Rica, and other global medical device production hubs in the coming years.
Even before the introduction of the NIMP, the sector was already attracting significant investment. In the first nine months of 2023, the total investment in the medical device industry was MYR 807 million (USD 172 million). Over a quarter of this amount came from foreign firms.
Looking at the period between 2018-2022, the sector recorded MYR 24.5 billion (USD 5.2 billion) in approved investment.
The Malaysian medical device industry is thriving due to domestic and overseas demand. As mentioned earlier, the bulk of products made are currently exported. Take-up comes from a wide range of countries, such as China, Japan, and the United States.
Increasing domestic demand could soon provide manufacturers with additional opportunities. These are expected as the Malaysian government looks to upgrade the healthcare sector, boost medical tourism, and provide care for an aging population.
An expanded 2024 health budget was agreed upon in order to modernise public healthcare facilities. This is expected to lead to increased demand for medical devices as hospitals seek various upgrades.
Elsewhere, Malaysia is currently on pace to become an aging society sometime in the next 15-20 years. Care for this population segment requires unique instruments and products that may need to be produced at higher levels in the future in line with the increasing number of elderly patients.
Finally, medical tourism continues to be a point of emphasis in the country. While the segment was decimated during the pandemic, it has since seen a resurgence. Last year, revenue from the sector surpassed pre-pandemic totals. A decision to offer Chinese and Indian citizens visa-free entry helped spur recovery.
The Healthcare Travel Council announced a revenue target of MYR 2.4 billion (USD 512 million) for this year with the spillover economic impact of this to be nearly triple that sum. One of the most pronounced areas for the spillover would be medical devices and, in particular, more advanced equipment.
The country has long been the global leader in catheter production. Approximately 80 percent of the world’s supply is manufactured in Malaysia. Meanwhile, cardiology devices were the segment with the highest production value. Implantable devices, orthopaedic devices, and dialysers are among the other medical devices readily made domestically.
These will remain key drivers in the future, but concerted efforts are being made to move up the value chain. It is now possible to manufacture higher value-added and complex products in Malaysia. Growing this segment is crucial for the country to cement its status as a medical device hub.
Nearly 300 medical device businesses are currently operating in the country with major multinational firms like BBraun, Smith+Nephew, Dexcom among this total.
Malaysia also remains a global leader in medical gloves production, predominately latex and nitrile. Increased global competition changed the market outlook in the aftermath of the pandemic, although there is now more optimism due to the price of raw materials stabilising and energy prices potentially falling.
Beyond that, the United States increasing tariffs on Chinese-produced rubber gloves for medical and surgical use may help level the playing field for manufacturers in Malaysia. Roughly 35 percent of Malaysian rubber glove exports go to the US market, but the sector struggled to keep up with aggressive pricing from Chinese firms.
The strongest appeal for overseas companies considering a move into the Malaysian medical device industry is financial. Manufacturing of professional, medical, scientific, and measuring devices or parts can take advantage of tax incentives.
Companies are eligible for “Pioneer Status” or investment tax allowance under the Investment Act 1986. These can include a total or partial exemption from income tax for a period of five years. Upon the expiry of these, businesses can also apply for the Additional Reinvestment Allowance.
Malaysia’s Free Industrial Zones (FIZs) may also be of interest to companies in the medical device industry. These are specially designed export processing zones that streamline specific processes. Businesses operating in a FIZ can import raw materials, components, parts, machinery, and equipment directly required in the manufacturing process on a duty-free basis.
Importantly, the medical device industry is well developed and regulated. For instance, a European Union-style product classification scheme is in place. All products made in Malaysia must be registered with the Medical Device Authority (MDA), a body under the Ministry of Health. Meanwhile, the Medical Device Regulations 2019 sets compliance procedures and standards.
Malaysia’s protection of intellectual property (IP) is more robust than that in other parts of the region. It covers both local and foreign investors, and the country has signed several prominent international IP treaties.
The Malaysian medical device industry has room for growth, government incentives, and a friendly operating environment. Foreign firms to have entered the market speak highly of their experience. While every country in ASEAN has its sights set on being a manufacturing hub, none have the experience in the medical device sector that Malaysia offers.
However, setting up operations in the country does present companies with some challenges. Local relationships are key to understanding and navigating regulations, especially in a highly monitored industry like medical devices.
For a no-obligation discussion about how you can potentially enter the Malaysian medical device industry, please get in touch with Germain Thomas, Malaysia Partner: germain.thomas(at)asianinsiders.com or Jari Hietala, Managing Partner: jari.hietala(at)asianinsiders.com.