As we all know, the smartphone market has long bid farewell to the glory of rapid growth year after year and entered the stage of stock competition. As a result, the upstream days are no longer easy, and many device manufacturers are focusing on businesses other than smartphones. For example, O-Film (002456), an A-share optical giant that was once a member of the Apple industry chain, recently responded to investors on the investor interaction platform that the company has deployed medical endoscope products in addition to emerging optical and optoelectronic businesses such as smart home and VR/AR.
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medical endoscope market has long been almost monopolized by multinational brands. In recent years, with the continuous efforts of local manufacturers such as Kaili Medical (300633), Aohua Endoscopy (688212), and Haitai Xinguang (688677), the localization rate has increased. However, medical endoscopes are a type of equipment that requires high integrated manufacturing, and the core components are mostly supplied by overseas, and there are many obstacles to import and export. In this context, it is even more difficult to outsource for integrated assembly. This booming market may not be friendly to domestic brands as latecomers.

1. Clinical diagnosis and treatment applications are becoming more and more extensive

Medical endoscopes are used as imaging instruments , which can provide lighting, video and other functions during diagnosis and treatment. Endoscopes are used in both clinical diagnosis and treatment. The former mainly assists doctors in observing and diagnosing or taking lesions for biopsy, while in treatment, they can be used in conjunction with some surgeries or implanted therapeutic artificial products.
In terms of classification, medical endoscopes can be divided into electronic endoscopes and optical endoscopes according to different imaging principles, and can be divided into disposable endoscopes and reusable endoscopes according to the frequency of use. In industry analysis, they are more commonly divided into soft endoscopes and hard endoscopes according to the degree of hardness.
Because the application scenarios and categories of soft and hard endoscopes are quite different, they correspond to different markets and populations. For example, soft endoscopes mainly enter the human body in a non-invasive way, such as through natural cavities such as the digestive tract and respiratory tract. Gastroscopes and colonoscopes, which we often say, belong to this category; while hard endoscopes mainly enter the sterile cavity of the human body through surgical incisions, such as laparoscopes, thoracoscopes, etc. It is conceivable that hard endoscopes are used more in surgery.

2. Domestic share has increased

With the continuous advancement of electronic imaging technology, the functions of medical endoscopes have become more complete, and the scope of application is also expanding, so the market in this area is naturally expanding. Between 2016 and 2022, the global market size increased from US$11.3 billion to US$17.2 billion, with a CAGR of 7.25%. As an emerging market, China's natural growth rate is faster. From 2015 to 2020, the domestic medical endoscope market size increased from 13.1 billion yuan to 25.4 billion yuan, with a CAGR of 14.16%. At this point, we have established an impression. Although it is much faster than the global average level, in the large domestic medical device industry, the growth rate of medical endoscopes is actually not very impressive.
However, there is room for adjustment in the market structure. After all, this is a market where the localization rate was less than 10% before. The global medical endoscope market is firmly controlled by Japanese and German manufacturers. Japanese manufacturers such as Olympus, Fuji, and Pentax mainly focus on the soft endoscope field, while German Karl Storz holds a leading position in the hard endoscope field. my country's market share is basically divided among these brands.

However, in recent years, local manufacturers have also begun to lay out. For example, Kaili Medical, which originally focused on ultrasound products, entered the endoscope field in 2012 and has now grown into a leading domestic soft endoscope. In 2023, Kaili Medical's medical endoscope business achieved revenue of 850 million yuan, a year-on-year increase of 39%, and a gross profit margin of 74.4%, a year-on-year increase of 4.85pct, which shows that its HD series of soft endoscope products do occupy a certain industry niche. In addition, in 2023, Kaili Medical further launched a new generation of products HD-580 and the first domestically produced bronchoscopic ultrasound probe. Ultrasonic endoscopes are one of the most advanced lenses in the field of endoscopy, and Kaili Medical is also a professional counterpart in this field.
The trend of Aohua Endoscopy is similar in terms of performance alone. After launching the 4K ultra-high-definition endoscope system AQ-300 at the end of 2022, it achieved revenue of 678 million yuan in 2023, a year-on-year increase of more than 50%. 24H1 still maintained a growth of about 20%.
It can be seen that our local manufacturers are still in the incubation period, and their performance is highly correlated with the commercialization process of new products. Therefore, the R&D expense rates of both companies are quite high, around 20%, and the product investment is relatively large.
With the efforts of various Chinese companies, by 2023, nearly 750 domestically produced reusable endoscopes have obtained NMPA medical device registration certificates, maintaining a growth rate of 24% year after year, and the market share of imported brands has indeed declined. For example, in terms of soft endoscopes, according to medical procurement statistics, Japanese manufacturers still had more than 90% of the market share in 2018, while domestic manufacturers will be able to take up about 20% of the market share in 2023, which is indeed an improvement.

3. High requirements for integrated manufacturing

医用内窥镜的趋势应当说是确定性较强的，分来开看:硬镜应用场景主要在微创手术上，而国内微创手术数量增速是比较快的，2015年才只有580万台，而2021年已经跃升至1，860万台。业内预计未来仍保持将近20%的增速，毕竟从中美对比来看，国内微创手术渗透率只是大洋彼岸的不足一半。
而软镜业务所重点依赖的消化道疾病诊疗也有广阔空间。从世界卫生组织下属机构发布的2020年全球癌症负担数据来看，国内消化道癌症(结直肠癌、胃癌、食管癌)是显著高于全球平均水平的，2020年中国消化道癌症的新发患者高达136万人，占全部的30%，而全球平均水平只有19%。

Digestive tract cancer is a type of cancer that progresses relatively slowly and has a long window period for early cancer screening. Therefore, prevention and screening are of extraordinary importance for this type of cancer, which requires the use of soft endoscopes. What is the current situation in this area in China? It can be said that the penetration rate is relatively poor. The development rate of upper gastrointestinal endoscopy in China (1942/100,000 people) is only one-fifth of that in Japan, and the development rate of lower gastrointestinal endoscopy (942/100,000 people) is only about one-fourth of that in Japan. According to Minsheng Securities' calculations, if China can reach Japan's level in 2020 by 2030, the digestive endoscopy market alone will be 13.74 billion yuan, with a CAGR of 6.8% during the period.
However, market expansion does not mean that local brands can get the expected share.
Medical endoscopes are small and sophisticated equipment, and core components are difficult to assemble from outside. In other words, this industry cannot accommodate integrators and must be manufactured in an integrated manner. This undoubtedly greatly raises the threshold for domestic manufacturers. We cannot achieve "independent" production of externally sourced tubes like CT. Therefore, compared with other medical devices we have talked about, the road to breakthrough for medical endoscopes is extremely difficult.
The Japanese and German giants who have been deeply involved in the industry for many years have set up many obstacles in the export of core components. Take the CCD image sensor as an example. This component is the largest cost of the endoscope, and 98.5% of the market share is in the hands of seven Japanese manufacturers. It is difficult for endoscope manufacturers outside of Japan to get good CCD products. The quality of CCD is the key to medical endoscopes and directly determines the imaging quality. Therefore, at this stage, the quality of endoscope products of Chinese manufacturers is difficult to catch up with multinational brands.