2013 / 5月
Chang Chiung-fang /photos courtesy of Jimmy Lin /tr. by Scott Williams
Roughly 98% of Taiwanese businesses are SMEs. Though essentially unknown, many are “hidden champions” that occupy spots at the top of their industries. Medical devices manufacturer New Deantronics is a case in point. It is the world’s largest maker of electrocautery instruments, accounting for 25% of the global market. Though a relatively small company, it is enormously influential in its field.
New Deantronics’ manufacturing headquarters sits squeezed between OEM giants Foxconn and Foxlink in Dingpu High-Tech Industrial Park in New Taipei City’s Tucheng District. A relative unknown compared to its larger neighbors, the company is actually the world’s largest manufacturer of electrocautery devices.Top dog
The idea of the “hidden champion” was proposed by German economist and author Hermann Simon some 15 years ago to refer to inconspicuous companies that are highly successful leaders within their own small fields.
Inspired by the concept, the Ministry of Economic Affairs launched a program in 2012 aimed at stimulating economic growth and revamping our industrial structure by promoting the development of medium-sized companies. The program has identified 74 Taiwanese “hidden champions,” New Deantronics among them, and aims to help them develop the kinds of manufacturing technologies that can solidify their international positions.
In the case of New Deantronics, the company is already widely acclaimed for its excellence within the field of electrocautery. Over the last few years, it has received the 11th annual Rising Star Award, the 16th annual R&D Innovation Award, the 18th annual National Award of Outstanding SMEs, and the 22nd annual National Quality Award (SME Award).Highly focused
The main reason New Deantronics has remained relatively “hidden” is that its product is fairly obscure. But even though few people outside of the medical field have heard of electrocautery pens, the devices are operating-theater essentials.
Generally speaking, surgeons use traditional scalpels, which cause less scarring, for their first incisions, then use electrocautery for almost all of the fine cuts thereafter. The technique’s advantage is that it reduces bleeding during surgery.
Electrocautery uses electrical current at high voltage and frequency but low power to cut or cauterize tissue. “Patients sometimes leave surgery with burn marks as a result of poorly placed dispersive electrodes,” explains Arthur Chi, general manager of New Deantronics.
Electrocautery pens come in a variety of shapes and sizes that differ based on how they will be used. Pen tips come in a variety of configurations, such as needle, ball or ring shapes. They can even vary within a given field of medicine. For example, orthopedic surgeons used different pens on hip, knee and shoulder joints.
At the most basic level, an electrocautery pen consists of a tip, a body, and a wire that connects it to the power supply. New Deantronics founder and president Jane Liu notes that those used in operating theaters must be waterproof, and that the button used to switch between their cutting and coagulating functions is crucial. “It has to have just the right amount of resistance, neither too little nor too much, or it will tire out the physician’s hand during surgery. In addition, the force required to depress it has to remain consistent even after many uses.”Supplier to the world
New Deantronics’ “invisibility” is also related to its decision to forgo the local market in favor of focusing directly on the world market.
“The Taiwan market is just too small” says Liu. In fact, Chang Gung and Show Chwan Memorial Hospitals are currently the only local hospitals buying New Deantronics’ disposable electrocautery pens. “The way the National Health Insurance system is structured encourages Taiwanese hospitals to buy electrocautery pens that can be reused 200 to 300 times. In contrast, the high cost of labor abroad makes it quite costly for hospitals in other nations to sterilize and reuse pens. They therefore tend to prefer disposables.”
The company exports primarily to the US and Europe via agreements with Royal Philips, Johnson & Johnson, and Covidien. It also sells directly to Australia, New Zealand, Japan, South Korea, Thailand, Brazil, and Mexico, and has extended its reach to the rest of the world through agents.
“The medical devices industry is highly regulated,” says Liu. She adds that while she’s felt her share of frustration with the stringency of regulations and the duration of certification processes, the aggravation factor makes her even more careful about adhering to them. To that end, the company has established a legal department specifically to handle the certification of its systems, and the testing and registration of its products.From outsider to industry leader
Surprisingly, Liu was an industry outsider prior to founding what has become one of the few Taiwanese medical device companies with global reach.
The company’s 59-year-old founder received her undergraduate degree in law from Fu Jen Catholic University before pursuing an MBA in the United States. Though she didn’t have a strong personal connection to the healthcare industry, she saw opportunities in the medical devices sector when she examined it from a market perspective.
After founding her company with just NT$6 million, she began manufacturing wiring for medical instruments. She then gradually moved into manufacturing components with the help and guidance of larger firms.
New Deantronics’ approach to business has been to focus on a single field and to seek constantly to improve.
Electrocautery pens are invasive devices that must be sterile. In its early days, New Deantronics had its customers handle the testing, packaging and sterilization of its products after delivery. Liu later decided to increase her company’s value-added by moving these functions in house.
The company built an ISO Class 7 compliant clean room in 2011 so that it could injection mold its plastics in a sterile environment. Workers entering the production area now must first thoroughly wash their hands, then don cleanroom clothing from head to foot (including a hat, gloves, and a mask) before going inside. The company has also built a microbiology laboratory specifically to monitor the bacteria in its production environment.
Now certified by the company’s large partners, New Deantronics’ products no longer need to be inspected and sterilized on delivery, and can go straight into inventory.
In spite of having already achieved great success—it is partnered with Covidien, the world’s top electrocautery brand with 76% of the global market—New Deantronics has no plans to rest on its laurels. In fact, the company introduced its own brand—E Surgical— just a few years ago and now distributes it in Australia, New Zealand, Japan, South Korea and France.Rooted in Taiwan
Since its 1987 founding, New Deantronics has slowly grown from an industry outsider into a world-class medical device maker, from a small startup with fewer than 10 workers into a medium-sized enterprise with more than 470 employees. The road was long and arduous, but Liu’s faith never wavered.
Her objective has always been to run a business here in Taiwan, where she understands the environment. “If pursuing my career had meant going to a place where I didn’t know the culture or laws, it wouldn’t have been worth it to me.” She therefore did her utmost to make things work in Taiwan.
New Deantronics’s production processes adhere to her “Made in Taiwan” principle. With the exception of a few plastics that can’t be sourced from Taiwanese suppliers, Liu acquires all her basic materials, the stainless steel, the copper, and the plastic, in Taiwan. Her 400-plus employees are all Taiwanese as well.
“If you’re running your business here, you should hire Taiwanese,” says Liu, who argues that labor-intensive businesses end up having to deal with rising labor costs no matter where they go. “You’re better off putting thought into how to move your business forward than you are chasing from place to place in search of cheap labor.”
Over the years, the company has automated the portions of its production that were labor-intensive, freeing its employees from repetitious tasks and enabling them to fulfill a greater variety of functions. It has also increased the value-added of its production line by, for example, manufacturing the many different lengths and shapes of electrocautery tip required by minimally invasive orthopedic surgeries. That, in turn, has required contributions from a greater number of employees.
New Deantronics has devoted considerable effort to automation, and has generated a number of patents around the world as a result. Its production machine can now produce an electrocautery pen every five seconds, and as many as 3.8 million pens per year. The company plans to add two more machines and increase their annual production to 10 million units by 2015.Building a medical devices network
While the company’s annual revenues of roughly NT$1 billion are hardly those of a large firm, it is very influential within its area of expertise.
“Working in healthcare is about helping others,” says Liu. “To sustain your business over the long term, you must have drive, learn continually, and be innovative.” Even though New Deantronics operates in a relatively non-competitive industry, it still needs R&D. Liu notes that cardiac electrocautery is ripe for a breakthrough.
The treatment of cardiovascular disease is an important area and will continue to be so in the future, but Liu notes that foreign firms control many key patents. New Deantronics is therefore seeking to develop its own technologies for reusable cardiological devices, such as defibrillators for the operating theater. “Having to dispose of something after a single use is very expensive, and hospitals are looking for reusable options,” explains Liu.
The company has also been exploring the development of power supplies/control panels for their electrocautery pens, and that research is already beginning to bear fruit.
Liu isn’t content with having created a company that is merely the “hidden champion” of the electrocautery pens industry. Before she retires, she hopes to bring other small medical device makers together under her company’s umbrella, creating a Taiwanese network of device manufacturers that can market its products to the world.
If she succeeds in her ambitions, Taiwan’s entire medical devices industry will reap the rewards.