Contract manufacturing Contract manufacturing
large stock of materials because it’s not always known when there will be demand. There are also multiple distribution points in the supply chain to contend with, so it is difficult to keep track of materials as they move through the supply chain. While last-minute demand is an issue, it is being compounded in recent years with delays in regulatory approval processes, geopolitical tensions and regional conflicts. For example, the Ukraine-Russia war has made metals such as titanium, platinum, cobalt- chrome and nickel scarcer whereas wars in the Middle East – such as the Israel-Hamas war and more recently the Iran-Israel-US war – regularly shut off key shipping routes that cause freight to re-route. This rerouting can add days or weeks to shipping times. Regional conflicts also cause other issues. With direct warfare, production facilities can be destroyed, and any nations involved in the war can easily be subjected to economic sanctions (which happened with Russia). Economic sanctions can cut off key suppliers for some OEMs and can also cause fluctuations in a country’s currency that can impact how much it costs to import goods. Trade tariffs, such as those being initiated by US President Donald Trump on a global scale, are causing many countries to introduce reciprocal tariffs. This is leading to a global trade war that benefits no one, and the delicate nature of medical device supply chains means they are directly in the firing line. These trade wars are affecting the distribution of components between the US and many other nations because it is raising the costs of many materials and components as the nations that produce a lot of the materials, such as China, are being hit hardest. For example, ongoing tensions between China, the US and Taiwan are raising concerns about semiconductor supply chain stability, while higher tariffs on imported metals (such as steel and aluminium) are increasing the price of orthopaedic devices.
A fragmented supply chain
Medical devices depend on a vast and interconnected network of global raw materials and components. However, these raw material supply chain issues have become more prevalent because a few nations hold all the cards.
“China controls over 90% of sintered neodymium magnet production, which goes into MRI machines, surgical lasers and hearing aids,” says Tinglong Dai, Bernard T Ferrari professor of business at Johns Hopkins University. “More than 70% of US-marketed medical devices are made outside the country, so when Beijing introduced new restrictions and licensing requirements on select rare earth exports in late 2024 and 2025, OEMs that had never mapped beyond their tier-one suppliers were suddenly in crisis mode.” Another issue within the supply chain is that there are different regulatory standards between regions,
www.medicaldevice-developments.com
where the US Food and Drug Administration (FDA) and EU’s Medical Device Regulation (MDR) have different requirements, which makes it difficult for companies to operate and distribute on a global level. “What makes medtech uniquely fragile is the regulatory layer. You cannot simply shift a production line to a new country,” says Dai. “That can trigger new FDA filings, ISO recertification and EU MDR revalidation, and companies simply do not know where their critical inputs come from. You cannot de-risk what you cannot see”.
All these factors impact the supply chain and the ability of OEMs to obtain critical raw materials and components for their devices. This includes manufacturing delays and increased costs for both raw materials procurement and manufacturing. However, some medical devices are more exposed to these issues than others. “Capital equipment like MRI systems and surgical robots sit at the highest-risk end,” says Dai. “They depend on rare earth magnets, liquid helium and advanced semiconductors, all sourced from a handful of geographically concentrated suppliers – TSMC alone controls over 50% of global semiconductor foundry capacity, all in Taiwan.” Dai also says that “AI-enabled devices are a fast- growing and underappreciated vulnerability and are doubly exposed because they need specialised chips and they depend on cloud infrastructure, which comes with its own geopolitical risks.” There are also some medical devices that are more susceptible because of their business structure. “Paediatric devices are quietly among the most fragile,” says Dai. This is because the patient population is small, sizing and dosing requirements vary enormously across age and weight, and regulators require separate clinical evidence from adult devices. This causes manufacturers to produce low volumes and there are very few competing suppliers that run on thin margins. “Manufacturers simply have little commercial incentive to invest in backup supply arrangements or redundant production capacity. When a single supplier hits a disruption, there is often no one else making that exact product,” explains Dai. “The FDA has documented this directly, flagging critical shortages of infant duodenoscopes and paediatric haemodialysis catheters with patient-outcome consequences. These are not obscure edge cases. They are life-sustaining devices with no adult substitute.”
All these issues with the global supply chain and globally connected industry are driving a shift. The shift is to go towards onshore and localised manufacturing. However, for many medical device companies, setting this up themselves comes with capital expenditures (capex) that are unfeasi ble for many medical device manufacturers. Because of this, many manufacturers are now partnering with CDMOs to help shift manufacturing onshore without a high capex.
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