GlobalizationofDentalLabbusinessReno05 06 2005 001

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					         The Globalization of The Dental Lab
         Business

         An Overview About Its
         development especially
         using the Chinese
         Laboratory Market

         Christian Brutzer
         President
         Heraeus Kulzer Inc.
         Armonk NY
Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
Outsourcing – Is it new?



         1.                 Outsourcing - is it new?




Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
Outsourcing – Is it new?

         1.1                Labs overseas working for devloped Countries

                            n        Outsourcing started more than 20 years ago

                            n        First wave was to countries such as Phillipines,
                                      Thailand, Singapore and Hongkong
                            n Thailand: At least 3 labs go back as much as 23
                            years. One lab founded by a dentist produced about
                            2800 PFM units/months in 1990 for export mainly to
                            Europe. Already then turn-around of work was 14
                            days.
                            Prices are in the NPM/PFM $ 30/unit, Empress2 unit
                            $50.


Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
Outsourcing – Is it new?

         1.1                Labs overseas working for devloped Countries

                            n        Phillipines: At least 4 labs go back 20 years,
                                     mostly export to USA and Germany
                            n        Singapore: Had a huge export lab market for a
                                     long time, now seems to have lost economic edge
                                     to China and partly to Indonesia.
                            n        Hongkong: At least 2 labs go back as much as 25
                                     years.
                            n        Korea/ Taiwan: Both countries have long
                                     established export labs mainly for US markets,
                                      but are gaining market share in the mid to high
                                     end.


Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
Outsourcing – Is it new?


         1.1   Labs overseas working for devloped
         Countries

                            n New market entrants:
                              Eastern European Countries, such as
                              Poland or Czech republic -> mainly
                              focusing on Western Europe

                                     China: After slower start in the last 15
                                     years, recently sees major growth ->
                                     exports are going global

Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
Outsourcing – Is it new?


         1.2                  Conclusion:

                            n Out-Sourcing is nothing new, it happend
                              for the last 20 years in our industry
                            n Out-Sourcing mainly is directed towards
                              developing countries with already
                              established logistics, but lower costs for
                              labor. Availability or costs of supplies
                              play no role in that decision as most
                              overseas labs use identical or similar
                              materials from major manufacturers.

Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
China – Market Data Overview



         2.                 China – An Emerging Dental Market




Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
China- Growing in importance


         2.1 Key Figures for China

                            n        1.3 billion people, 160 cities with more than 1 mio.
                                     people

                            n        GDP growth since 1997 always above 7%, 2003
                                     +9.1% despite SARS, 2004 + 9.5%

                            n        GDP (03) per capita ca. USD 1400, in East-Coast
                                     Cities about USD 4000      . USA ca. USD 26000
                                                            (shanghai)




                            n        Corporate Tax rate for FIE 30% (with tax holidays
                                     and rates as low as 15% available). VAT 17%. IIT
                                     from 5% to max. 45%(45% starting @ TRMB100)
Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
The Players in the Dental Market in China - An overview


         2.2                Market Share In The Chinese Dental Market
                                    Estimation of Total Chinese M arket Tunover 82.16 M io.USD
                                                        (WP w/o dental chairs, but incl. equipment)


                                                                                                              HKCN
                                                    22%                                      22%              Dentsply
                                                                                                              Ivoclar
                                                                                                              Shufo
                                                                                                              Bego
                                                                                                              SDMF
                                      0%
                                                                                                              3M/ESPE
                                     1%                                                                       GC
                                    3%                                                                        Dentaurum
                                                                                                              Nissin
                                     1%                                                                 10%
                                                                                                              Weiland
                                     1% 3%
                                                                                                              Voco
                                                                                                              DGM
                                              6%                                                              Argen
                                                                                                   6%         Korea
                                               1%
                                                                                                              Italy
                                                   1%                                                         Domestic
                                                          4%
                                                                 8%           2%        8%


Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
Product Segmentation in China - An overview


         2.3                Lab / Surgery Sales Distribution in the Chinese
                            Dental Materials Market
                            (WP w/o dental chairs & equipment)


         21.36 Mio. USD




                                                   40%
                                                                 Lab Products
                                                                 Dentist Products
                                                          60%




                                                                 32.04 Mio. USD


Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
Product Segmentation in the Chinese Lab Market - An overview


         2.4                Product Share in Laboratory Sales in China

                                               Light Curing Mat.
                                                      0%         Galvano Mat.
                                  Abrasive Blasting                  1%
                                                                 Other Consumable
                                Waxes 2%                                1%          Teeth
                                   3%                                                24%
                     Denture Base
                          5%
                   Investment
                       6%
                     Gypse
                      6%



               Non-Precious Alloys
                                                                                            Porcelain
                      14%
                                                                                              24%

                                                   Precious Alloy
                                                        14%

Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
Dental Labs in China - An overview


         3.                 Labs & Technicians in China




Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
Dentistry and Dental Labs in China - An overview


         3.1                Dental Technicians in Mainland China

                             Total of Dental Technicians: 45000 (USA ca. 37000)

                             Dental Technicians VS Dentists in China: 1:14 (USA 1:4)

                             Non-Educated Technicians: 30000 (Dental Workers in Labs)

                             Educated Technicians:
                              12000
                             Master Technicians:
                              3000
                             Dentists with Lab.
                              2000

Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
Dentistry and Dental Labs in China - An overview


         3.2                Size of Dental Laboratories

                                    Total Amount of Dental Laboratories: 3375
                                    Development Per Year: 50 ~ 70

                                                          25


                                                    250

                                                               800


                                                                             1~4 Employees

                                                                             5~20 Employees

                                                                             21~100 Employees

                                                                             Over 100 Employees

                                                   2300




Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
Dental Labs in China - An overview


         3.3                Dental Laboratories - Sales Distribution
                                Total Turnover of All Chinese Laboratories: 236.8 Mio. USD

                                                         8%




                                                                               Export Market
                                                                               Domestic Market



                                                   92%                         Sales to Dentists
Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
Dentistry and Dental Labs in China - An overview


         3.4                Regional Distribution of Chinese Laboratories



                                                   others
                                        Shandong
                             Center China 3%         4%
                                 4%
                        Shanghai
                           5%
                Jiangsu
                   5%                                                Guangdong
                                                                        43%
             Fujian
              6%




    Beijing & Hebei
          7%


               East Northern China
                       9%
                                                        Zhejiang
                                                          14%

Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
Dentistry and Dental Labs in China - An overview


         3.5                Monthly Salary Structure of Technicians and
                            Workers in Labs and Hospitals

                                    New Technicians in Training: $ 170 ~ 100
                                    Technicians with 2 Years Experience in Labs: $ 470 ~ 270
                                    Technicians with 4 Years Experience in Labs: $ 690 ~ 330
                                    Technicians Can Work in C & B Jobs: $ 1140 ~ 560
                                    Technicians Can Work in Denture: $ 1100 ~ 330
                                    Severe shortage of skilled Technicians
                                     continous



                             Top Salary of Dental Technicians: $ 2272
                             Dental Tech. Director: $ 2500 ~ 1000
                             Laboratory Managers: $ 2500 ~ 1200


Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
Dental Labs in China - An overview



         4                  Dental Economics in China




Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
The Value Chain in China - An overview


         4.1                Typical Costs For Dental Unit
                            Labs  Dentists USD

                                    One Non-Precious C & B with Porcelain:
                                     $ 6 ~ 23
                                    One Precious C & B with Porcelain: (Costs no incl. PM)
                                     $ 7 ~ 30
                                    One Non-Precious C & B:
                                     $ 2.5 ~4.5
                                    One Full Denture
                                     (depends on costs of artificial teeth)
                                     $ 7 ~ 75 ~126




Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
The Value Chain in China - An overview


         4.2                Typical Costs For Dental Unit
                            Dentists  Patients USD

                                    One Non-Precious C & B with Porcelain:
                                     $ 29 ~ 63
                                    One Precious C & B with Porcelain:
                                     $ 110 ~ 139
                                    One Non-Precious C & B:
                                     $ 12 ~ 25
                                     One Full Denture:
                                     (depends on costs of artificial teeth)
                                     $ 13 ~ 250




Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
The Value Chain in China - An overview


         4.3                Dental Business in Labs And Hospitals

                             From Laboratories to Chinese Dentists in China
                              $ 236.8 Mio.
                             From Dentists to Patients in China:
                              $ 1,368 Mio.




Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
China – Market Data Overview



         5.  China – An Emerging Player in
         „Outsourcing“




Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
         Outsourcing to China - An overview


                       5.1                         Lab Export Business of China

                                                    Total Domestic Turnover of All Chinese Laboratories:
                                                     $ 236.8 Mio.
                                                    Total Export Turnover of Chinese Dental Labs:
                                                     $ 18.94 Mio.
                                                    Monthly Sales Turnover for Export: $ 1.58 Mio. (previous
                                                     year $ 0.82 Mio.)
                                                    Export Share of total Chinese Dental Lab Production
                                                     8% up from 5% previous year
Total Turnover of All Chinese Laboratories: 236.8 Mio. USD

                       8%
                                                    Development Per-Year: 40~50% Increasing

                                               Export Market
                                               Domestic Market



           92%




         Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
Outsourcing to China - An overview


         5.2                Main Destination of Chinese Lab Products
                            for Overseas Dentists

                                                        5%
                                                   3%

                                            8%


                                                                    America
                                                                    Japan
                                                                    Canada
                               16%                                  Hongkong
                                                              53%
                                                                    Germany
                                                                    France
                                                                    others
                                        5%


                                                        10%
Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
Outsourcing to China - Conclusion



         5.3.                     Conclusion:

                            n China will increase its importance as a
                              source for dental devices
                            n China will take away business not only
                              from US based laboratories, but also from
                              already existing overseas labs in the
                              export business.
                            n As out-sourcing is not new, China will not
                              re-write that business proposal



Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
Outsourcing – Is it new?


                     Conclusion:

                            n China will not be able to boost its skilled
                              technician workforce fast enough to have
                              major impact on local US business as the
                              domestic market in China increases its
                              demand significantly
                            n Other developing countries continue to
                              compete with China
                            n Past experience in Europe shows that
                              out-sourcing cannot replace domestic,
                               higher end laboratory work

Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3
Dental Labs in China - An overview




         We are in the business of making people smile …….




                                                   Thank You!




Christian Brutzer, Heraeus Kulzer Inc., 2012/7/3

				
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