The China Trade

Saturday, November 30, 2002

CAPE CORAL, Fla. - No longer content with real estate on the margins of the Medtrade show floor - or the margins of the typical HME provider's vision - manufacturers from the Far East are migrating from the periphery to, they hope, a place closer to the heart of the HME provider's consideration.
At Medtrade this year, Merits Health Products rolled out a barrage of new product lines: a concentrator, a nebulizer, lifts, hospital beds, bathroom aids and ambulatory aids. Since launching direct-to-dealer efforts last year, Shoprider Healthcare has reportedly enjoyed a growth surge that's doubled, perhaps tripled business over the last year.

Other companies - Tuffcare, Dalton Medical and Summit Medical - have all made bolder moves to brand their own identity recently. After bringing 44 companies from China and Taiwan to Medtrade last year, the Formosa Cultural Corp. brought 61 companies to Medtrade this year and took up residence in 142 booths.

"Several years ago, there were very few Taiwanese and Chinese distributors that came here direct," said Winston Anderson, a co-owner of Cape Coral, Fla.-based Merits Health Products.

Anderson. "Now when you go to the show there are a tremendous amount of [Asian companies] that have got into the direct business."

But it's a two-way street. While OEM manufacturers invigorate their American subsidiaries, U.S. manufacturers are sourcing more and more product in China. Mainstream vendors who did very little in China until recently are now building more commodity product in a country where factory workers earn $40 per month.

Sourcing product in China has enabled Drive Medical Design & Manufacturing, formerly Medical Depot, to cut but not the bells and whistles, according to the company's director of marketing, Ed Link.

The strategy would appear to be paying off. At Medtrade this year, Drive's booth was six times bigger than it was last year when the company was known as Medical Depot.

Merits, long known as a manufacturer of scooters and power wheelchairs and perhaps moreso as a subsidiary of one of the more muscular OEMs in the business, more than doubled its floor space at Medtrade this year.

The company's concentrator recently got FDA approval and was set to start shipping last month. The hospital beds are slated to ship next month, unless the company's new 40,000 square-foot warehouse, now under construction, is not finished. The ambulatory aids were scheduled to arrive from China/Taiwan last month. The beds and scooter lifts are set to arrive next month.

Anderson and Larry Cheng share ownership in Merits USA. Cheng also owns Merits Taiwan and now Merits China. In the U.S., Merits warehouses product in Florida, San Diego, Dallas and Puerto Rico.

Are OEM subsidiaries and partners with new muscles scaring U.S.-based manufacturers? Some, perhaps. Not hardly, say others. "The beauty of the Asian thing is that luckily they will never understand sales and marketing," said one well-placed source.

Leisure-Lift, which prides itself as the only U.S.-based manufacturer of scooters and power wheelchairs, said this country is still a viable source.

"We can produce and market a product that, with the regular lines, we sell at the same price," said Jim Ernst, a 21-year Leisure-Lift veteran. "That means we're not making as much money, but we believe we're making enough for the long haul, and a high quality product that will last a long time. That is what we are all about."

To market a competitive oxygen concentrator, Merits eschewed the industry standard, manufactured by Thomas Industries, and engineered its own. Anderson believes it may be the only concentrator manufactured offshore.

Manufacturing in Asia is cheaper, but not as cheap it might seem. Taiwan's minimum wage is $8 per hour, according to Anderson. Since the caliber of the skilled laborer is likely to remain high under such standards, he predicts that Taiwan will remain dominant as a source point for scooters and power chairs.

"Nearly all the Taiwanese have gone to China with the low-line equipment like manual wheelchairs," he said. "But China does not have the capability or the technology" more sophisticated products. "And it takes a long time to develop that." HME