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General Electric Company (GE), Apple Inc. (AAPL), Koninklijke Philips NV (ADR) (PHG): Can This Tech Giant Cross Over From Smartphones Into Health Care?

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Most investors recognize South Korean tech giant SAMSUNG ELECT LTD(F) (OTCMKTS:SSNLF) for its smartphones, tablets, televisions, and other home electronics. It often looms large in headlines for its global patent wars against its primary rival, Apple Inc. (NASDAQ:AAPL). However, Samsung is now aggressively moving into another major growth industry: health care technology.

General Electric Company (NYSE:GE)Samsung’s big push into health care started with the acquisitions of ultrasound device maker Medison in 2010, health care equipment maker Nexus the following year, and medical imaging company NeuroLogica in January. In June, Samsung launched GEO, its own line of digital radiology and in-vitro diagnostic equipment.

These three major steps are part of Samsung’s outlined plan of becoming one of the world’s four largest medical equipment companies by 2020. Samsung projects $400 billion in annual revenue in 2020, with $10 billion (2.5%) of its top line coming from its new medical device segment.

Ambitious plans in a crowded market
A goal of $10 billion in annual health care revenue is a very lofty number for Samsung to hit.

By comparison, General Electric Company (NYSE:GE)‘s General Electric Company (NYSE:GE) Healthcare division — one of the largest medical equipment makers in the world — generated $18.3 billion in annual revenue in fiscal 2012. Growth has been nearly flat, however, with the segment only reporting a 1% year-on-year gain last year. General Electric Company (NYSE:GE) Healthcare manufactures imaging devices, clinical systems for administrators, surgical equipment, infant care products, IT services, and pharmaceutical products.

Samsung will have to contend with Koninklijke Philips NV (ADR) (NYSE:PHG), the parent company of Koninklijke Philips NV (ADR) (NYSE:PHG) Healthcare. The segment reported 6% comparable sales growth in fiscal 2012 and $13.2 billion in annual sales — accounting for 41% of Koninklijke Philips NV (ADR) (NYSE:PHG)’ top line. Koninklijke Philips NV (ADR) (NYSE:PHG) manufactures diagnostic imaging equipment, patient care and clinical informatics systems, and home health care products.

Siemens AG (ADR) (NYSE:SI) is another major competitor in medical equipment, which posted a 9% year-on-year increase in health care revenue to $17.9 billion in 2012. Siemens AG (ADR) (NYSE:SI)’ health care business — which produces medical imaging products, laboratory equipment, IT solutions, and hearing aids — accounts for 17% of its top line.

Samsung reported a mere $300 million in medical device sales in 2012, but it expects that number to surge to $500 million by the end of fiscal 2013. However, that growth trajectory will inevitably cool down as sales peak, and Samsung will need to do better than the 1% to 9% sales growth reported by its rivals if it intends to hit $10 billion in seven years.

Samsung’s game plan
To compete effectively against General Electric Company (NYSE:GE), Koninklijke Philips NV (ADR) (NYSE:PHG), and Siemens AG (ADR) (NYSE:SI), Samsung intends to increase its footprint in X-ray and ultrasound products. General Electric Company (NYSE:GE) is the market leader in medical imaging products in both developed and emerging markets, however. In India, General Electric Company (NYSE:GE) has gained significant market share with cheap and portable electrocardiogram machines that have also proven popular in rural areas of developed countries.

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