July 18 (Bloomberg) -- Samsung Electronics Co., whose empire ranges from memory chips to televisions, is in talks to buy makers of MRI scanners and X-ray machines to challenge General Electric Co. and Siemens AG in medical equipment.
Samsung is in “contact” with some companies, Senior Vice President Jo Jae Moon, who leads a team of medical-equipment developers, said in an interview in Seoul on July 15, without elaborating on the potential targets. The company has said it plans to spend 1.2 trillion won ($1.1 billion) in the medical-equipment business by 2020.
Any purchases would build on Chairman Lee Kun Hee’s plans to build the medical-equipment operations into one that generates 10 trillion won in annual sales. Lee is counting on demand for health-care gear to spur sales of scanners as the proportion of elderly residents in markets from the U.S. to Europe and Japan climb to records each year.
“Demand for expensive medical equipment will keep growing,” said Bae Ki Dal, an analyst at Shinhan Investment Corp. in Seoul. “The market is mostly dominated by foreign companies now. It will be interesting to see how Samsung will compete with them.”
Samsung fell 2.3 percent to 813,000 won at the 3:00 p.m. close of trading in Seoul, while the benchmark Kospi index lost 0.7 percent. Value Added Technologies Co., which supplies parts for X-ray machines, jumped 8.3 percent to 10,500 won, the biggest daily gain since Feb. 24. Medical-gear maker Vieworks Co. surged 15 percent to 16,250 won, the most since April, 2009.
No. 1 Target
The maker of Galaxy phones and tablet computers, with a plan to invest 23.3 trillion won in new businesses by 2020, made its biggest acquisitions in the health-care industry last year when it bought a controlling 43.5 percent stake in diagnostic ultrasound devices maker Medison Co., as well as 100 percent of Prosonic from Consus Asset Management Co. for 331.3 billion won. Samsung increased its stake in Medison to 65.8 percent in April.
“We have a lot of companies on our list, and we’ve been contacting most of them,” Jo said, adding that Samsung prefers to acquire small companies overseas with niche technology. “We’ll continue to meet them and negotiate. We have a target to be the No. 1 across ultrasound devices, X-rays and MRIs.”
Jo is also head of the Medison’s research center.
Samsung is making a push into an industry led by General Electric, which had $16.9 billion of revenue from health care last year, a growth of 5.6 percent, according to data compiled by Bloomberg. Siemens had 12.3 billion euros ($17.4 billion) in revenue from medical solutions, a 3.4 percent increase.
Royal Philips Electronics NV grew its medical systems business 10 percent to 8.6 billion euros, data show.
By comparison, 24.3 percent of Samsung’s revenue last year was from semiconductors and 26.6 percent from telecommunications equipment. The company’s total revenue is expected to grow 7.9 percent to 167 trillion won this year, according to the average of 36 analysts’ estimates compiled by Bloomberg.
Samsung is expanding into health care as its overall revenue grows at the slowest pace in five years and as populations worldwide get older. The number of people aged 65 and above will account for 8.3 percent of the world’s population by 2014, compared with 7.9 percent this year, according to U.S. Census Bureau data compiled by Bloomberg. Japan may be the oldest society, with the portion of elderly projected to account for 25 percent of the population in three years.
Besides takeovers, Samsung will also invest to boost hiring as well as research and development at its own medical-equipment business, where the number of staff grew from less than 10 people in 2009 to more than 200 now, Jo said.
Medison aims to increase sales by more than fivefold to $1.6 billion by 2020 from last year, he said. The company had a 5 percent share in the global market for diagnostic ultrasound devices last year and targets to increase that to 24 percent within a decade, Jo said.
The company may roll out its first products with the new Medison brand in the second half, Jo said.
Closely-held Medison, which currently has more than 1,000 employees globally with 12 overseas branches, may set up a research base in Seattle, Jo said. The company will also seek more patents, he said.
Medison was set up in 1985 and went bankrupt in 2002 because of excessive expansion. The company was taken over by Consus in 2006.
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