Chosun Instrument Inc.

Established in 1975 during a time when South Korea had a GDP of just approximately $200, Chosun Instrument has played a pivotal role in the nation's economic growth for nearly five decades. Beyond importing medical devices, they have actively contributed to hospital construction and the installation of medical gas systems, leaving a lasting impact on the healthcare infrastructure of Korea.

How does the Korean medical industry contribute to addressing the challenges posed by an aging population, and what strategies can be implemented to enhance individuals' productivity over an extended period?
After the Korean War in 1953, Korea experienced rapid economic development, attracting significant attention from other countries. The country has made substantial improvements to its national healthcare system, which is now regarded as one of the best in the world.

The Korean healthcare system operates on the principle of younger individuals paying insurance premiums to support the care of the elderly. However, the aging population, coupled with a low birth rate, poses a serious challenge to the Korean government.

To address this issue, the government is committed to balancing the income and expenditure of the healthcare system. Efforts are underway to reduce insurance premiums and expenses, and the Ministry of Health is leading various research initiatives to find solutions.

From the perspective of the medical industry, the aging population is seen as an opportunity for market expansion. Digital medical devices and services are being developed to cater to the needs of an aging society. These include devices and applications based on digital IT services, such as oxygen generators, ventilators, and a device known as C-PAP.

Of particular interest are the Korean baby boomers, born between 1958 and the 1960s, who are now 65 years or older. This generation is characterized by higher education and income levels, and they are actively shaping a new culture as seniors. They are not merely confined to their homes but show interest in various other aspects of life. Efforts are being made to integrate this emerging culture with healthcare services.

Furthermore, I find it fascinating to witness the evolving healthcare landscape as the population ages. I often refer to it as "healthcare 3.0." Healthcare 1.0 primarily focused on treating the sick, including early pandemics. Healthcare 2.0 introduced the development of hospital systems and emphasized disease prevention. In contrast, healthcare 3.0 encompasses a broader desire for a healthier lifestyle, going beyond mere longevity.

In our company, we have a home care division that supplies medical oxygen generators and respirators to households. The revenue of this division has experienced significant growth over the years, likely influenced by factors such as the COVID-19 pandemic and the aging population.

Overall, the Korean healthcare system and medical industry are actively adapting to the challenges posed by an aging population, with a focus on innovative technologies, cultural integration, and promoting a holistic approach to healthcare.

Have you and your partners collected any data regarding the long-term impacts of COVID-19, specifically "long COVID," on respiratory issues, considering that you mentioned exponential growth in this sector?

While we currently lack specific data on the long-term impacts of COVID-19, particularly on respiratory issues such as "long COVID," we do have knowledge that patients with Chronic Obstructive Pulmonary Disease (COPD) are often prescribed oxygen infusion as part of their treatment. However, the extent of recovery and the precise impact of oxygen infusion on their recovery process remain to be fully understood.

In the rapidly growing South Korean healthcare market, as a producer, exporter, importer of foreign brands, and distributor, how do you analyze the ongoing trend concerning the utilization of domestic versus international manufacturers? Furthermore, considering the debate surrounding the distribution of benefits from market growth, particularly regarding the dependency on foreign health technology, what insights can you provide on the dynamics within the South Korean healthcare system?

The rapid growth of the Korean medical industry in recent years can be attributed to the increased production capacity of domestic manufacturing companies. This expansion in manufacturing has allowed Korean medical equipment and devices to gain a larger market share. In the field of medical equipment, the credibility of the manufacturer and the country of origin play a crucial role, as doctors place great importance on trusting the quality of products from specific countries. Consequently, Korean products have gained significant traction in the market, particularly in diagnostic devices, leading to increased exports in recent years.

Recognizing the criticality of the medical devices and equipment sector, the Korean government has actively supported its growth. This support is expected to benefit Korean manufacturing companies, positioning them as key beneficiaries of the expanding market. Notably, Korea has also achieved success in exporting items in the defense and arms industry, where the credibility of the country is paramount. With the medical industry following a similar trajectory, it is poised to become the next target industry for export success, akin to the achievements in the defense sector.

Currently, Korea ranks 8th in the world market share for arms and defense, and it has been highlighted that Korean medical devices rank within the top 10. With the momentum gained in the medical industry, it is indeed feasible for Korea to advance further and secure a place among the top 8 countries in the global market share for medical devices.

In light of the Ministry of Health's first comprehensive plan, which emphasizes greater integration and cooperation among the public sector, private sector, and innovative startups, how would you assess the significance of collaboration between these sectors? Additionally, in the current landscape, how would you evaluate the level of innovation within the Korean medical device industry and its potential for global competitiveness?

While Korea is considered a developed country, it is acknowledged that relative to advanced nations like the United States, United Kingdom, and Japan, there is room for further development. Hence, the allocation of government budgets becomes crucial for us. Recognizing the significance of the healthcare industry, the current Yoon administration has identified it as one of the key sectors to prioritize.

Under the administration's 12 core strategies or industries, the bio healthcare industry holds a prominent position, with specific plans being formulated accordingly. In line with this strategy, the Ministry of Health announced a comprehensive plan for the development and support of the medical device industry in April. To ensure its successful implementation, a dedicated task force has been established, along with action plans. The roadmap also includes a benchmarking reference, exemplified by the Boston cluster, which further underscores the planned approach.

In summary, Korea has set forth concrete plans and initiatives, supported by the government, to foster the growth and advancement of the medical device industry, aligning it with broader national development goals.

Given that South Korean companies face competition from countries like Japan, France, the EU, and China, which benefit from large domestic markets allowing for rapid scaling before going global, it poses a challenge for South Korean companies with a smaller domestic demographic. In order to sustain strong growth momentum, South Korean companies often need to embark on global expansion swiftly, which can be a demanding endeavor, particularly for SMEs.

In your perspective, how significant is it for SMEs to pursue international expansion to maintain a healthy growth trajectory? Additionally, could you please share your own experiences of internationalization, including your expansion into Vietnam and the increased exports of respiratory and oxygen tanks in your company's portfolio?

Before discussing our company's internationalization journey, I'd like to highlight the opportunities that the Korean medical device industry has in leveraging digital and IT services. As exemplified by NC Soft's popular game "Lineage," which transcends borders and is enjoyed globally, Korean-style healthcare services have the potential to enter overseas markets without being limited by geographical boundaries. The digital world presents a new market as a whole.

In terms of our own company, we initially expanded into countries like Vietnam, which have friendly trade relations with Korea, enabling us to export and tap into such markets. Hospitals require a wide range of equipment to cater to various departments and treat diverse diseases, including cancer, common illnesses, and more. Global companies may struggle to specialize in all these complex and diverse areas. Thus, outstanding performance in a particular field within the medical device sector provides an opportunity to become a global brand.

Our company, Chosun, began as a medical gas engineering company and eventually evolved into a comprehensive supply chain owner, encompassing the entire process from gas manufacturing to installation in hospitals. Through our expertise in medical gas, we expanded our business sectors. Initially focusing on supplying medical gas to emergency rooms (ER) and intensive care units (ICUs), we then ventured into supplying medical devices. Building upon our gas expertise, we also started manufacturing oxygen generators for home use.

Despite the challenges posed by the relatively small domestic market, we embraced diversification while maintaining our competitive edge in medical gas. This approach has proven successful, and our visionary president has led us to a stage where we are breaking down borders and exporting our devices. The global demand for oxygen generators, such as sourcing by international organizations, presents significant opportunities for trustworthy vendors like us.

Additionally, we are exploring opportunities in Official Development Assistance (ODA) projects. South Korea, once a recipient of ODA support, has now become a major supplier. In November, Chosun Instrument became a supplier to the Commonwealth of Massachusetts in the United States, participating in global procurement. Although not ODA specifically, this exemplifies how South Korean companies are engaging in global procurement processes, reflecting the transformation from being an ODA recipient to a reputable partner in such initiatives.

In summary, the digital realm provides avenues for expanding beyond borders, and diversification coupled with specialization in specific areas enables Korean companies to establish a global presence. Our own experience in internationalization and participation in global procurement initiatives showcase the opportunities for South Korean businesses to thrive in the global medical device market.

Considering your expertise in the entire vertical integration of medical gas, from upstream gas production to downstream installation in hospitals, I would like to delve into your internationalization strategy. With regards to global procurement, in which aspect of your vertical integration has your international expansion primarily focused? Has it primarily been in the area of medical devices such as respirators, which experienced significant demand growth during the COVID-19 pandemic? Additionally, are you also exploring collaborations with foreign hospitals, and what are your future plans for internationalization?

Until now, our main focus for export has been on respiratory products. However, starting from the second half of this year or early next year, we are planning to introduce X-ray equipment manufactured in Vietnam and S. Korea and focus on exporting them.

In 2018, Chosun Instrument acquired Vikomed, the first and largest X-Ray manufacturer in Vietnam with a 10,000 m^2 facility in vicinity of Hanoi. In July 2023, we also acquired M4S, a South Korean X-Ray & C-Arm manufacturer that has its own proprietary technology for devoping a wide range of DR products from hardware like X-Rays and C-Arm to software like PACS and Viewer.

These products are being developed with Korean technology, but the manufacturing will take place in our Vietnamese facilities. This approach allows us to offer high-quality equipment at a lower cost, enhancing our competitiveness in the global market.

The level of detail and precision involved in producing these X-ray machines is truly remarkable. We handle every aspect, manufacturing all the parts in-house at our Vietnamese factories. It's a unique capability that I have not witnessed at other international exhibitions. Once the pending international certification process is completed, we are hoping we will expand our export volume and possibly collaborate with overseas hospitals for studying remote imaging diagnostics.

When do you think those are going to hit markets?

We are currently in the process of obtaining international certification for our X-ray equipment, and we anticipate completing next year. X-ray machines are highly versatile and in demand across various sectors, including ODA projects and global procurement initiatives. To aid our export efforts, we have been leveraging the support of KOTRA (Korea Trade-Investment Promotion Agency), a government-funded organization dedicated to assisting Korean companies with their exports. In collaboration with KOTRA, we are working towards establishing a regional office within their agency. This partnership will provide us with valuable market information and additional support as we plan to export our X-ray equipment.

In the landscape of imaging solutions, South Korea has competitive offerings, particularly in areas like mammography and reagents. Although it may not be an overly crowded market, there are companies specializing in X-ray and inspection equipment. I would like to ask two questions in this regard. Firstly, what motivated your decision to expand into this specific market? Secondly, when comparing CHOSUN to imaging solution companies, what distinct advantages does CHOSUN possess in terms of its offerings and capabilities?

The imaging solution sector represents a significant portion, approximately 25 to 30 percent, of the overall medical device market. To establish a strong presence in this competitive industry, we recognized the need to grow in size and penetrate this market. While X-ray machines may be considered a red ocean, our approach is to integrate advanced software with the equipment. M4S develops its own image viewer software, called BLADE, as well as its own PACS software called Wiz PACS. With these software capabilities, we are always looking for AI partners with whom we can collaborate to create a truly powerful and life-saving tool to run AI diagnostics and find early-stage anomalies more quickly and easily.

This integration allows for the automation and augmentation of diagnostic processes, reducing the dependence on a large number of doctors.

By leveraging AI technology in X-ray machines, we aim to create a business model that enables healthcare providers in developing countries, where the availability of doctors may be limited, to effectively utilize this imaging technology. Our vision is to empower healthcare professionals by providing intelligent solutions that enhance the diagnostic capabilities of X-ray machines. This endeavor requires close collaboration between device companies and IT companies, working together to develop and implement innovative solutions.

Could you provide a summary of your company's journey from its inception to the present, highlighting both your evolution and your role in driving growth within the Korean medical device industry? Additionally, I am interested in understanding the market share you hold within major hospitals, as you mentioned earlier.

Our company was established in 1975 as a medical device importer in a time when Korea was still considered one of the poorest countries with a GDP of approximately $200. Despite the challenges, we recognized the importance of public health and the need for medical equipment maintenance services. In the 1970s, under the leadership of former President Park Jung Hee, there was a strong emphasis on economic growth and building a sense of community. This led to significant economic progress, and the Korean government also started planning the construction of large hospitals in the 1980s, which required extensive medical equipment.

Being an importer, we played a crucial role in providing medical gas systems during hospital construction. We installed the medical gas system for Seoul Asan Hospital, the largest hospital in Korea, established in 1987, and continue to maintain it. In the late 1990s, the importance of a medical emergency system was recognized, and in collaboration with Dr. Lim Yo Han from the Korean Severance Hospital, CHOSUN Instruments contributed to the development of the emergency medical equipment system.

Over the years, we have imported various equipment and also ventured into manufacturing our own. With a business history of 48 years, we have witnessed and actively contributed to the growth of the medical system and equipment in Korea, from a GDP of $200 to over $30,000. This extensive experience and understanding of the evolving healthcare landscape provide us with a competitive edge as we expand into the global market.

In Vietnam, we seized an opportunity in 2018, anticipating its potential growth. Our competitive advantage stems from our unique position of having witnessed the evolution of the medical system and understanding the requirements at each stage of economic development. Acquiring M4S in July 2023 was our latest expansion to invest in proprietary Digital Radiograph technology and boost synergy with our facility in Vietnam.

Domestically, we have imported South Korea's first major hospital and ambulance, and our medical gas engineering and emergency medicine divisions continue to excel. Additionally, as an exclusive partner in South Korea, we collaborate with leading global manufacturers.

In terms of market share, references play a significant role in the medical equipment sector. We have established strong partnerships with prestigious hospitals such as Seoul National University Hospital and Seoul Asan Hospital, which have chosen our products. With such reputable references, we have no challenges in growing our market share within the country.

Great to know, now let's delve further into pulmonary diseases, specifically COPD, which encompasses chronic bronchitis and progresses through four stages without surgical intervention. Unlike cancer, where tumors can be removed or treated with chemotherapy, COPD progresses from stage one to four, ultimately resulting in mortality. In phase four, individuals often require supplemental oxygen to ensure proper oxygenation, and respirators may also become necessary. COPD poses particular challenges in ICU settings due to the potential complications of lung infection, which can contribute to higher mortality rates for patients suffering from this condition.

Could you provide insights into your company's expertise in the field of respiratory diseases, specifically focusing on COPD, which is the third leading cause of death globally? Additionally, could you discuss the products you have developed that are specifically dedicated to addressing the challenges associated with COPD, particularly in terms of oxygenation and the use of respirators, especially in critical care settings?

We have not developed any specific devices for the treatment of COPD. However, we have worked with partners to introduce the best-in-class aerosol drug delivery, which we have proudly been representing to major hospitals’ ICU and NICU. Currently, drug therapy is the primary and most viable treatment option for COPD. While stem cell therapy may be considered as an alternative treatment, its recognition as a reliable medical intervention is still under scrutiny within the medical community. It is important to note that oxygen supply is crucial for human survival, and our primary role is to provide reliable and uninterrupted oxygen supply. No substitute has been found that can effectively replace the essential function of oxygen in the human body.

Regarding the proprietary technology and manufacturing capabilities in the respirator area, you offer various products such as the CSI 3000 multiple respirators. Could you elaborate on the competitive advantages of these products and their current end applications? Are they primarily intended for emergency response scenarios, or do they also cater to individuals with respiratory diseases, providing them with affordable options for home use in case of emergencies? Additionally, could you share your market penetration strategy for the respiratory category?

I will start by providing insight into our involvement with respirators and the background of DANIL, a gas equipment company that specializes in medical gases. As the CEO of both Chosun Instrument and DANIL, I am the second-generation representative of the founding family. DANIL Syschem, established in 1983, focuses specifically on supplying medical gases to hospitals, serving approximately 45 to 50 percent of all hospitals in Korea.

While there are numerous industrial gas suppliers in Korea, DANIL Syschem stands as the only specialized medical gas supplier. When I joined the company in 1994, I initially dealt with medical oxygen ventilators to expand our medical gas business. During this period, we took inspiration from European companies like Linde in Germany and Air Liquide in France, whose healthcare divisions accounted for 20 percent of their total sales. Recognizing the potential for growth in the healthcare sector, based on medical gases, I decided to acquire Chosun Instrument in 2000, as it aligned with our focus on respiratory equipment.

The products that I personally represent and that reflect our company's mission revolve around medical oxygen. Whether it is supplying gas or providing oxygen generators, our emphasis remains on the essential role of oxygen. Throughout the past three years, especially during the COVID-19 pandemic, the importance of oxygen has been widely recognized. We are proud of the contribution we made by helping many individuals with our products during this challenging period.

Our mission extends beyond supplying oxygen to hospitals. We participate from the design stage of hospital construction, ensuring the installation of medical gas systems. Once the hospitals are operational, we continue to provide various medical equipment, including operating tables, ventilators, and more. Our commitment lies in supplying oxygen wherever patients require it, be it within hospital settings or at accident scenes and emergencies. We are also currently exploring expansion into the field of X-ray equipment, further diversifying our product portfolio.

Looking ahead to the next five to ten years, what is your long-term vision for the evolution of your company, both in domestic and international markets? Could you outline the benchmarks you aim to achieve during this timeframe?

Our long-term vision encompasses achieving success in international markets. Considering the limitations of Korea's small population and domestic market, we recognize the abundance of opportunities overseas. In particular, we see Vietnam as an ideal location from which to serve neighboring countries like Laos and Thailand. By establishing our base in Vietnam, we aim to expand our presence and penetrate these markets effectively.

Reflecting on your tenure as the president, could you share what accomplishment you are most proud of? Additionally, are there any actions or decisions you wish you could have approached differently?

As a traditional medical device company, it is very difficult to survive in this ever-evolving, increasingly competitive field. However, the fact that we are still leading the medical device market in S. Korea after almost 5 decades of being in the business is quite exhilarating.

I am very proud of the fact that Chosun Instrument served every stage of Korean economy in the nation’s journey of exponential growth and that we have constructed some of the now worldly hospitals that have been saving people’s lives.

This in itself is such a feat, but acquiring M4S in July 2023 is a milestone moment for us to gain momentum in now exporting our technology and products to our global partners.

Reflecting on things I could have done differently, numerous instances come to mind. Notably, I believe we could have invested more efforts into leveraging digital technology. However, I view this not as a failure but as an opportunity for growth. We still have time, and we're prepared to adapt and evolve our operations to embrace the digital world in the future.

Source: Worldfolio <https://www.theworldfolio.com/interviews/chosun-instrument-fueling-lifesaving-care-with-medical-oxygen/5905/>