Medical Device Contract Manufacturing Market

Market Overview

The global medical device contract manufacturing market size was valued at USD 88.94 billion in 2022. It is estimated to reach USD 212.30 billion by 2031, growing at a CAGR of 10.15% during the forecast period (2023–2031).

Contract manufacturing in the medical device market is an outsourcing method in which a company manufactures medical devices or parts of medical devices. Medical devices and equipment used in healthcare areas prominently affect the quality of patient care and account for many healthcare costs. As medical devices play a major role in diagnosing and treating various medical ailments, medical device manufacturers are approaching contract manufacturers to reduce cost, increase speed to market, scale production, and provide high-quality devices.

The medical device contract manufacturing market includes several contract manufacturing services to design, develop and manufacture various medical devices. Contract manufacturing is provided for various products under Class I, Class II, and Class III devices. Medical device OEMs allow proper medical equipment for contract manufacturing to meet health needs with safe and effective medical devices.

Market Dynamics

Global Medical Device Contract Manufacturing Market Drivers

Favorable Patient Demographics 

The prevalence of chronic diseases and related conditions is increasing across the world. The major factors contributing to the continuous increase of chronic diseases include the aging population and societal behavior changes. The U.S. Census Bureau estimates that the elderly population will roughly get doubled to 96 million by 2060, accounting for 22% of the total population. According to United Nations projections, the global elderly population will increase approximately to 1.8 billion by 2060 occupying 17.8% of the world population.

Moreover, the increasing rate of urbanization results in adopting a sedentary lifestyle. This is likely to increase the obesity rate and lifestyle disorders among individuals. The rate of hospitalization, coupled with an increase in minimally invasive surgeries, is also expected to increase in the upcoming years, thereby increasing the demand for medical devices. Therefore, with patient demographics and the prevalence of chronic diseases, CMOs are more likely to witness high production opportunities in the future. This will boost the overall market growth.

Vendors' Focus on Advancing Contract Manufacturing Capabilities

Vendors have been advancing their technological capabilities in the medical device sector. Vendors are majorly looking out for M&A activities, which can help them to diversify their services. For instance, in 2018, Jabil and J&J Medical Device companies entered a framework agreement to collaborate to expand their medical device manufacturing portfolio, diversification, and capabilities.

Innovations in advanced software within medical devices have also emerged in recent years. The introduction of smart medical device technologies, the increasing demand for efficient and capable manufacturing processes, the popularity of minimally invasive devices, and the implementation of new-age regulations are the major factors boosting the medical device contract manufacturing market.

Global Medical Device Contract Manufacturing Market Restraints

Maintain Technological Capabilities and Cost Balance

Medical device CMOs strive to balance product quality and innovation with cost and process efficiency. Despite the fact that CMOs have supported the medical device industry for decades, new obstacles have emerged due to changes in technology, globalization, standards and laws, as well as market and competitive pressures. In addition, OEMs focus on five key areas, i.e., manufacturing strategy, global supply chain, process excellence, global procurement, and advanced manufacturing engineering. OEMs rely on Contract Manufacturing Organizations (CMOs) to meet specific demands and obligations. However, this dependence places a heavy strain on CMOs, impeding the market's expansion.

Global Medical Device Contract Manufacturing Market Opportunities

Strategic Collaborations between OEMs and CMOs in Medical Device Industry

As strategic partnerships between OEMs and CMOs have grown, outsourcing of manufacturing processes has undergone significant modifications recently. The majority of medical device manufacturing companies outsource their processes, which impacts the expansion of the outsourcing industry. OEMs are placing a strong emphasis on marketing and R&D initiatives, transforming CMOs into important production partners.

Moreover, CMOs are developing from being basic providers to being significant marketplaces in collaboration with OEMs. As an illustration, in 2017 MedPlast purchased Vention Medical's Device Manufacturing Services division, which possesses sophisticated technology industry expertise in designing, developing, and manufacturing devices such as catheters, drug delivery devices, and advanced components. As one of the biggest OEMs in the world, MedPlast's array of capabilities was widened by this acquisition. Such mergers and acquisitions between OEMs and CMOs have paved the way for growth in the medical device industry.

Regional Analysis

Based on region, the global medical device contract manufacturing market is bifurcated into North America, Europe, Asia-Pacific, Latin America, and Middle East & Africa.

North America Dominates the Global Market

North America is the most significant global medical device contract manufacturing market shareholder and is estimated to exhibit a CAGR of 8.26% during the forecast period. High demand for medical device contract manufacturers can be attributed to several factors, including the following: the presence of large contract manufacturing companies with improved manufacturing capabilities; a growing population; a rising prevalence of chronic diseases; an increased reliance on medical devices; a need for more sophisticated healthcare items; an increase in both investment and research into medical device development; and higher overall healthcare expenditures. In terms of medical device contract manufacturing, North America holds the greatest market share due to the presence of major key vendors like Jabil and Sanmina. According to a study, six in ten adults live with at least one chronic condition, and four in ten have two or more. Therefore, the frequency of chronic diseases is high in the region.

Likewise, the prevalence of chronic diseases is mainly observed among individuals aged 65 years and above. As per the US Census Bureau, there will be 72.8 million more Americans over the age of 65 by 2030. Therefore, the demand for medical devices will eventually increase in the region with the rising elderly population.

Europe is estimated to exhibit a CAGR of 9.61% over the forecast period. Europe has contributed to moderate shares and registered a healthy growth rate for the medical device contract manufacturing market. Factors such as government support for research and development, increasing disposable income, and availability of technologically advanced products promote the medical device contract manufacturing market growth in Europe. In addition, the increasing trend of M&As among medical device companies in Europe contributes to market growth. Device manufacturers based in the US will likely become active partners for M&A deals in Europe. Companies such as Medtronic merged with Covidien and even acquired Dutch Firms Sapiens Steering Brain Stimulation. Europe comprises 95% small and midsize enterprises, which are also critical for the growth of the European medical device sector.

The Asia-Pacific medical device contract manufacturing market will likely expand during the forecast period because of several factors, like the rising elderly population with chronic diseases, increasing hospitalization rates, rising healthcare awareness, surging demand for medical devices, and technological advancements. Countries such as China, Japan, Australia, South Korea, and India are the prominent revenue contributors in the Asia-Pacific medical device contract manufacturing market. Furthermore, the availability of raw materials, increasing manufacturing facilities, and easy supply chain management are some factors promoting the region's market. The region will likely generate high growth opportunities for contract manufacturers with its rapid economic growth rate, cost-effective manufacturing services, and government-sponsored activities.

In Latin America, the increasing incidence of chronic illnesses among the elderly population, growing healthcare expenditures, increasing usage of medical devices, and rising demand for advanced technologies in the medical device industry are driving market growth. It was observed that the population in the region is also aging more rapidly than the rest of the world. For instance, around 71 million people in the region aged 60 in 2015 are expected to double by 2035. Likewise, Brazil has the highest population in Latin America, followed by Mexico and Argentina. The surging elderly population and the increasing prevalence of chronic diseases propel market growth in the region.

The majority of Middle Eastern and African countries have seen economic expansion over the past two decades, which has increased the medical device contract manufacturing market demand. This will lead to an increase in both public and private health spending, growing the overall healthcare sector. In addition, growing investment in the healthcare sector will bring innovations in medical technologies. This will provide an opportunity for the medical device industry to make advancements in the future. Medical device manufacturers will depend more on contract manufacturers, ultimately increasing their demand in the upcoming years.

Segmental Analysis

The global medical device contract manufacturing market is segmented by device, product, and service.

Based on the device, the global market is bifurcated into Class I, Class II, and Class III. 

The Class II segment dominates the global market and is projected to exhibit a CAGR of 10.47% over the forecast period. Class II devices include more complex medical devices than Class I devices. Class II medical devices pose a higher risk as they are more likely to have sustained contact with the patient's internal organs. Class II devices pose a moderate risk to patients and have been the cause of some of the medical device infections in hospitals. In addition, various monitoring devices are a part of Class II medical devices, which include X-ray machines, CT scanners, invitro diagnostics (IVDs), biomarkers, test kits, and many others. The increasing frequency of chronic diseases has increased the demand for medical devices.

Class I devices are the most common devices regulated by the FDA, constituting 47% of the approved devices in the market. Class I devices are the easiest and fastest marketed products as they present the lowest risk to the patient and are rarely essential to life-supporting care. Class I devices are not in direct contact with the patient's internal organs. These have minimal contact with patients and have a low impact on a patient's overall health. Such medical devices are subject to fewer regulatory requirements. Most surgical requirements, such as surgical gloves, bedpans, bandages, stethoscopes, and many more, come under Class I medical devices.

Based on the product, the global market is bifurcated into electronics manufacturing services (EMS), raw materials, and finished goods. 

The EMS segment accounts for the most significant market share and is anticipated to exhibit a CAGR of 10.63% over the forecast period. EMS providers offer advanced services, which include high-quality manufacturing, prototyping, testing, new product development, regulatory certifications, supplier management, documentation, maintenance, and repair services. Complex medical equipment such as MRI machines, digital X-ray machines, and many others require proven system-level capabilities and high-level assembly for their production. EMS providers hold expertise in numerous advanced technologies, moving electronics, and user interfaces that will help in developing such complex devices. The medical OEMs attract EMS providers with a larger global presence to increase their scale capability and confidence among potential investors.

Raw materials are basic components used to manufacture medical devices and equipment. Various manufacturers across industries depend on raw materials to facilitate their production processes. Effective product conceptualization and innovation depend on the availability of a consistent and sustainable supply of good raw materials at a predictable and anticipated cost. In addition, contract manufacturers usually have good working relationships with several raw material suppliers. Since they service more than one client, they can purchase more units in one shipment, which reduces the cost per unit. Engaging with trusted partners can avoid material challenges that can create delays and impact costs.

Based on services, the global market is segmented into product manufacturing and assembly services, quality management services, packaging and sterilization services, regulatory consulting services, and product design and development services. 

The product manufacturing and assembly services segment owns the highest medical device contract manufacturing market share and is estimated to exhibit a CAGR of 10.87% during the forecast period. Product manufacturing is one of the specialized services CMs offer for their clients, customers, and inventors of medical devices. Medical device CMs specialize in certain processes or tasks and offer expertise from their frequent manufacturing practice. The ability to partner with a contract manufacturing services company on a novel or existing device can free the OEM to concentrate on developing another product, avoid major capital outlays, and start marketing in regions or countries outside its area of familiarity. Further, assembly is an integral part of the device manufacturing process. DFMA is the major factor in making a difference between contract manufacturers and traditional medical device manufacturers. Outsourcing, specifically in assembly, continuously expands in the US manufacturing economy.

Independent organizations initiated the production of standards to facilitate the development and implementation of quality management services. The QMS design should be impacted by the organization's diverse objectives, requirements, and products and services offered. In addition, every component of a QMS contributes to achieving the overarching objectives of satisfying the needs of the organization and the customer. These may include quality objectives, manuals, data management, internal processes, quality analysis, improvement opportunities, and customer satisfaction. QMS has several advantages, such as lowering costs, reducing waste, preventing errors, improving and controlling processes, etc.

Recent Developments

• July 2023- Kidd & Company, a family office investment firm specializing in the lower middle market, sold NextPhase Medical Devices to Arterex, a medical device contract manufacturer in which the Investindustrial Growth fund has made an indirect investment. The terms of the deal were not disclosed.
• May 2023- Biomerics, a medical device contract manufacturer, reached definitive agreements to merge with Precision Concepts Medical, a portfolio company of ONCAP IV. The transaction involves acquiring Precision Concepts International's medical business and Precision Concepts Group.