The CEO of Philips, Roy Jakobs, anticipates persistent weak demand in China’s healthcare sector throughout 2025. This projection stems from ongoing anti-corruption measures implemented by the Chinese government, which have significantly impacted revenue for Western healthcare companies. These measures involve rigorous audits and increased scrutiny of healthcare purchases.
Jakobs, speaking at the JPMorgan health conference in San Francisco, highlighted the potential for further market volatility in China due to evolving foreign trade policies under the new US presidential administration. He emphasized that the “anti-corruption efforts are still continuing on the ground,” with ongoing audits and heightened scrutiny surrounding procurement processes. This sustained scrutiny makes accurate forecasting challenging, leading Jakobs to anticipate a “challenging year for China.” He noted that Chinese authorities have been conducting extensive audits of past purchases within the healthcare sector.
Earlier this decade, China represented over 13% of Philips’ total revenue. The company provides a range of healthcare solutions in the Chinese market, encompassing diagnostic and monitoring equipment, as well as personal health products and appliances. However, due to the government’s anti-corruption campaign and the subsequent economic slowdown, Jakobs now estimates China’s contribution to be around 10% of the company’s revenue.
Despite these challenges, Jakobs expressed optimism about the long-term prospects of the Chinese market. He cited meetings with Chinese government officials in November, including regional leaders, who affirmed their commitment to foreign businesses and investment while emphasizing the importance of fair procurement practices. Philips expects to report over 18 billion euros in revenue for 2024 when it releases its full-year financial results.
China’s ongoing anti-bribery campaign within the healthcare industry has disrupted business operations and significantly impacted deals between hospitals and international healthcare companies. Philips is not alone in its concerns about the Chinese market. In October, several global companies, including Philips, issued warnings about the declining demand in China, attributed to weakened consumer confidence and the anti-corruption drive.
Merck & Co also reported a decline in sales of its HPV vaccine, Gardasil, in China during October. This decline is expected to persist throughout 2025 as the distributor reduces inventories in response to sluggish demand. Furthermore, AstraZeneca’s president of Chinese operations was arrested last year, highlighting the complexities and risks associated with operating in the Chinese healthcare market. The company has stated it lacks clarity regarding the reasons behind the detention. These instances underscore the broader challenges faced by multinational healthcare companies operating within China’s evolving regulatory landscape.
In conclusion, while challenges remain in the near term, Philips maintains a cautiously optimistic outlook on the long-term potential of the Chinese healthcare market. The company’s CEO believes that the current downturn, driven by anti-corruption measures and economic headwinds, will eventually give way to renewed growth. However, navigating the complexities of the Chinese market requires a strategic approach that prioritizes compliance and adapts to the evolving regulatory environment.
