Where Industry and Security Intersect
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At this time, the U.S. AT manufacturing industry appears to be healthy and it competes in international markets. About 23 percent of survey respondents’ 1999 sales of $2.87 billion were derived from foreign markets. U.S. companies, however, face strong competition from Asian and European manufacturers.
The four largest export markets for the United States are Western Europe, Canada/Mexico, Eastern Europe and the Asia/Pacific Rim region. The foreign market regions with the strongest growth in purchases of U.S. AT products from 1997 through 1999 were: Canada/Mexico, rising 44 percent; and Asia/Pacific Rim, up 20 percent.
While these figures are respectable, U.S. manufacturers cannot be certain of retaining this marketshare in the future. Sales of AT products to foreign customers by U.S. manufacturers, in fact, declined noticeably in 1999 in some markets. Customers in Western Europe cut back purchases slightly. South America and Central America posted steep reductions of 50 and 21 percent, respectively. Sales to Australia and the Middle East also declined.
Trying to expand, or at least retain, domestic and foreign customer bases may prove to be a challenge for U.S. AT manufacturers. The United States does not dominate all facets of the global AT industry by any means. For example, Germany’s Siemens AG is a market leader in hearing aids, and Sweden-based Permobil is a technological leader in high-performance, computer-controlled wheelchairs.
Western Europe is the largest export market for AT products manufactured in the United States, but at $282 million for 1999, U.S. firms’ presence in the Western European market is hardly exceptional. U.S. AT sales to Western Europe represent just 12.2 percent of the $2.32 billion in sales rung up by U.S. AT manufacturers in the domestic U.S. market.
According to Association for the Advancement of Assistive Technology in Europe17(AAATE), more than 20,000 AT products are sold in Europe and annual market sales are estimated at about 30 billion Euros (approximately $28.2 billion). This figure differs significantly from the estimates of the size of the U.S. AT industry in this report, which are based on survey data provided by companies. AAATE based its calculations on European industrial sector data that covers a much broader pool of manufacturing activities than the production of products for the disabled.18 Consequently, it appears that the reported level of AT product sales by European companies is greatly overstated.
Nevertheless, Europe is the "largest potential market for AT product in the industrialized world," according to some British analysts. They note that in 1995, there were an estimated 26 million potential consumers of AT products in Europe — a figure that is projected to increase 25 percent by 2020.
In marketing products in Europe, U.S. AT companies may encounter many of the same problems they experience in the United States. Across Europe there are national social systems with varying regulations for reimbursements to people with disabilities for purchases of AT products, according to AAATE.
Understanding the full dynamics of AT product manufacturing and trade around the world is difficult because there is limited data -- and what information is available often is fragmented. BIS’ survey data covers only the global activities of respondent companies operating in the United States.
To gauge the extent of U.S. AT company awareness of competitors, survey participants were asked to identify their five major worldwide competitors.20 Interestingly, only about nine percent of AT survey participants cited foreign-owned firms as competitors. Even so, responses to survey data indicate that U.S. AT companies are concerned about foreign competition.
At the same time, survey results suggest that many U.S. firms that manufacture and distribute AT products are not fully aware of their competition and what’s going on in the world AT market. When asked for an estimate of their company’s share of the world market, 80 of the 359 companies surveyed (about 22 percent) provided no answer; another 109 reported that their market share was zero. For the remaining 170 companies, responses ranged from less than one percent to 100 percent — the average global marketshare being 13.1 percent.
The wide spectrum of responses for these two questions may be attributable to the significant disparities in the sophistication and analytical capabilities of U.S. AT companies, which include a handful of very large enterprises and much greater numbers of very small operations. Some respondents acknowledge in written comments and conversations that they simply found it too difficult to estimate their share of the AT market or to stay abreast of the activities of foreign
competitors. It was also stated that the U.S. Government does not have sufficient data to properly assess the AT market.
AT firms also were asked if they thought foreign producers of assistive technology devices have any advantages over their firms--advantages not related to the quality or features of their products. In response, 60 percent of survey participants answered "No" to the question.
But, 105 companies (29 percent) stated that their foreign competitors have advantages unrelated to quality or product features (see table 12). Another 37 firms had no response.
AT companies then were asked whether foreign competitors are able to manufacture AT products less expensively. Twenty-one percent of survey participants gave no response. The companies that chose to respond were almost equally divided on the answer, although more AT firms thought that foreign manufacturers were more efficient.
There is a degree of contradiction in the responses to the questions posed in Tables 12and 13. Sixty percent of U.S. AT companies declared that their competitors have no edge that is unrelated to product quality and features. Yet when asked if foreign manufacturers are more efficient producers — an apparent advantage — only 38 percent of participating companies asserted that foreign companies cannot manufacture at lower costs than U.S. AT companies.
The difficulty that some companies have in assessing their competitive positions in the global marketplace is reflected in the number of non-responses in Tables 12and 13. While just 10 percent of participants did not respond to a question related to competitive advantage (Table 12), the number of non-responses jumped to 21 percent for the question about manufacturing cost competitiveness (Table 13).
With respect to whether foreign companies can manufacture less expensively, U.S. AT firms’ responses varied considerably by product category. Most of the respondents (70 to 74 percent) that manufacture communications devices and computer controls do notbelieve their foreign competitors can produce their products less expensively.21 In contrast, about 60 percent of respondents that manufacture aids to daily living, mobility products, and furniture and furnishings believe that foreign competitors manufacture products less expensively.
In written comments accompanying their "Yes" or "No" responses, companies expressed considerable concern about a range of economic and regulatory advantages held by foreign competitors. In some instances, survey participants noted that labor and material costs were so low in other regions of the world that foreign competitors can sell products below the material costs of U.S. firms.
| Product Category | # of Firms | "Yes" | % of Firms | "No" | % of Firms | No Response | % of Firms |
|---|---|---|---|---|---|---|---|
| Architectural Elements | 31 | 12 | 38.71% | 11 | 35.48% | 8 | 25.81% |
| Communication Devices | 61 | 14 | 22.95% | 35 | 58.33% | 12 | 18.33% |
| Telecommunications | 19 | 8 | 42.11% | 9 | 47.37% | 2 | 10.53% |
| Sensory Aids | 52 | 22 | 42.31% | 21 | 40.38% | 9 | 17.31% |
| Computers | 52 | 9 | 17.31% | 31 | 59.62% | 12 | 23.08% |
| Environmental Controls | 26 | 9 | 34.62% | 12 | 46.15% | 5 | 19.23% |
| Aids to Daily Living | 70 | 32 | 45.71% | 23 | 32.85% | 15 | 21.43% |
| Mobility | 119 | 54 | 45.38% | 41 | 34.45% | 24 | 20.17% |
| Orthotics, Prosthetics | 70 | 28 | 40.00% | 29 | 41.43% | 13 | 18.57% |
| Recreation, Leisure, Sports | 48 | 28 | 58.33% | 13 | 27.66% | 7 | 14.89% |
| Modified Furniture | 32 | 15 | 46.88% | 11 | 34.38% | 6 | 18.75% |
| Source: U.S. Department of Commerce/BIS AT Survey |
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More responsive product review and approval procedures for medical products in many foreign countries were cited as providing an edge for competitors in launching products in their home markets. In addition, some companies asserted that European nations were more supportive of their AT industry, enabling rapid introduction of many technological advancements in the industry while slowing imports by not providing adequate guidance regarding their market’s product certification requirements.
Not unlike companies in other segments of American industry, U.S. AT companies complain that
their inventions and product designs are effectively being stolen at times as a result of patent and copyright infringement. Companies have identified exact copies of U.S.-patented AT products that were produced in China without license–and then sold in the United States.
17 See http://www.fernuni-hagen.de/FTB/aaate.htm#resources
18 BIS conferred with Christian Bühler at AAATE concerning the basis for its estimate of AT business activity in Europe.
19 See The Role of Assistive Technology in Alternative Models of Care for Older People – Appendix 4, p. 336, Donna Cowan, Alan Turner-Smith, Centre of Rehabilitation Engineering, King’s College, London, England, www.archive.official-documents.co.uk
20 In all, 294 of the 359 survey respondents listed at least one competitor, for a total of 1,218 responses. Eight companies responded with regional responses (Asia, Europe, etc.) or said they knew of no competitors who filled the same market need.
21 Whether U.S. manufacturers today would still be so confident about their ability to manufacture AT-related communications devices and computer controls as cost effectively as foreign companies is unclear. Since the survey data were collected, a large portion of the U.S. electronics manufacturing supply base that AT companies might rely on has been moved to other countries or shut down.