Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

3 Stocks to Dominate China's Mobile Health Market?

By Leo Sun - Mar 22, 2014 at 8:30AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

China’s mobile health and health care IT market is forecast to rapidly grow by 2017, but many American companies are sitting on the sidelines because of the confusing, opaque nature of the market. Yet IBM, Microsoft, and Lenovo could still be solid investments in this mysterious market. Here’s why.

The mobile health (mHealth) market in China, which is worth 1.8 billion RMB ($291 million) today, is expected to grow nearly 600% to 12.5 billion RMB ($2 billion) by 2017, according to a recent report from the Brookings Institution. Meanwhile, China's health care IT investments are expected to grow from 17.1 billion RMB ($2.8 billion) in 2012 to 33.7 billion RMB ($5.5 billion) by 2017, according to market research firm IDC.

That would make China, home to 1.3 billion people, the second largest mHealth market in the world after the United States. Mobile Internet users in China rose 19% year over year to 500 million at the end of 2013, fueling demand for better cloud-based health care products, such as EMRs (electronic medical records), EHRs (electronic health records), and health care apps.

Guangzhou Military District Wuhan Main Hospital. Source: Wikimedia Commons.

Yet the irony is that most leading health care IT companies in the U.S. -- such as Epic, Cerner, and McKesson -- have barely taken baby steps into this rapidly growing market.

Patients using both Chinese traditional medicine and Western medicine, incompatible workflows with U.S.-centric EMRs, language barriers, and cloud-based security issues are all frequently cited as reasons for U.S. companies to avoid expanding into China. In a 2012 interview at Modern Healthcare, KLAS Enterprises executive vice president Jared Peterson simply called the Chinese health care IT market "a big mystery."

IBM and Microsoft claim an early lead in China
Yet even though the major U.S. players still haven't figured out their strategies to expand into China, companies like IBM ( IBM 0.57% ) and Microsoft ( MSFT 0.69% ) have made admirable progress. Both companies have expanded into China's health care IT market in response to a $124 billion, three-year health care reform plan from China's Ministry of Health.

In 2010, IBM installed new technology in a group of hospitals in the Guangzhou province to standardize EMRs, using the collected data to statistically analyze traditional Chinese medicine treatments alongside Western ones. IBM also applied locally developed language algorithms to bridge the gap between the two types of medicine. IBM's efforts may have successfully crossed the administrative, language, and Chinese medicine barriers EMR/EHR providers have complained about.

Meanwhile, Microsoft equipped Chinese hospitals with smart technology by integrating EMRs, patient and bed management, laboratory data, and other information into a single cloud-based system. Microsoft tied all of this together with its own EHR system, HealthVault.

Apple iOS is not an ideal health care platform in China
The American mHealth market favors Apple ( AAPL -0.13% ), since iPhones and iPads across the same generation share identical hardware and software configurations, which are easier to develop apps and peripheral devices for. Apple is also a dominant player in the U.S., commanding a 43% market share in smartphones and 34% market share in tablets.

In China, however, the market situation is completely different. Apple only controls 17% of the smartphone market and 28% of the tablet market in China, according to recent figures from market trackers Kantar and IDC. The majority of both markets in China belongs to Google ( GOOGL 0.33% ) Android devices, putting Apple in a weak position among hospitals and consumers.

With IBM and Microsoft building smarter hospitals from the ground up across China, there will be less demand for native iPad EMR/EHR apps in hospitals, which were created as a response to outdated technologies in the U.S. Meanwhile, consumer-focused app developers are more likely to create health-related apps for Android to reach a wider audience.

Lenovo and Microsoft could be better bets
Lenovo ( LNVGY 1.70% ), the world's largest PC maker, could be a better bet than Apple in China's growing mHealth and health care IT markets.

As Lenovo has the largest global market share, its presence in Chinese hospitals may be growing as its rivals are losing ground.

To understand why Lenovo may become a dominant name in mHealth and health care IT, we should consider these factors:

  • Many of Lenovo's recent laptops are hybrid devices with removable tablets.

  • Most of these devices run Windows 8/8.1, which will gain market share in hospitals thanks to Microsoft's early expansion into Chinese health care IT with HealthVault.

  • Windows 8/8.1 devices are popular in hospitals, since the same EMR/EHR program can be run in both a desktop and bedside (mobile) setting, especially if the device is a hybrid with a detachable tablet.

  • Lenovo also controls 11.8% of China's fragmented smartphone market with its Android devices, putting it in third place behind Samsung and Apple. That share is poised to rise after its acquisition of Motorola earlier this year.

Lenovo already offers "featured products for health care" on its website, highlighting HD displays for "reviewing charts and X-rays", an Intel security suite to keep a "practice's data and records secure," and the four modes of the Thinkpad Twist, which can alternate between laptop, stand, tent, and tablet modes -- ideal for doctors on the move.

Lenovo's ThinkPad Twist could appeal to doctors on the move. Source: Company website.

The Foolish takeaway
Investors shouldn't think about the Chinese mHealth and health care IT markets in the same way as the American ones. Whereas the Chinese market is a young and fertile one that can be built from the ground up, American ones are still struggling with decades of old technology and necessary upgrades.

Although many health care companies have shied away from the Chinese market, companies like IBM, Microsoft, and Lenovo could be solid bets on building smarter hospitals in the world's most populous country.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

International Business Machines Corporation Stock Quote
International Business Machines Corporation
IBM
$117.77 (0.57%) $0.67
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$332.88 (0.69%) $2.29
Lenovo Group Stock Quote
Lenovo Group
LNVGY
$20.64 (1.70%) $0.34
Apple Inc. Stock Quote
Apple Inc.
AAPL
$165.08 (-0.13%) $0.22
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$2,847.39 (0.33%) $9.44

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
656%
 
S&P 500 Returns
144%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/01/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.