Cochlear faces potential price competition in China

The nation's growing wealth is creating increased demand for hearing implant products.

Tom Richardson

Tom is a holder of the CFA Society of the UK administered Investment Management Certificate (IMC) and has more than a decade's professional experience in the investment management industry in Australia and the UK. Tom now works as a writer and editor for TMF Australia and has two easy to remember rules of investing he likes to follow. Avoid overpaying for growth stocks and avoid paying at all for stocks that are cheap for a reason. Tom prefers growth investing over value investing and says it's not rocket science, just avoid overpaying for the best returns.

Published August 2, 2013 1:06 pm AEST

Cochlear (ASX: COH) shares were down 4.8% on Thursday as investors considered potential threats to its Chinese market dominance. The Aussie world-beater has long been a beneficiary of the fast-growing Chinese healthcare market, however, the potential for increased competition saw a share price slide yesterday.

Media reports that Chinese company Nurotron Biotechnology will compete for lucrative government contracts on a low-cost basis are what spooked investors. Cochlear, though, bases its product price premium on industry-leading products in hearing loss healthcare.

It is not the first multi-national to face product competition from enterprising Chinese companies and it will continue to rely on its best-in-class reputation and technological edge to translate into increasing profits across global markets.

The company recently launched its latest hearing device, the Nucleus N6. It is said to be the start of an innovative new range of sound processing technologies, which it thinks will keep it ahead of the competition through 2014 and beyond.

Foolish takeaway

Home-grown competitors in foreign markets will always exist as a risk for Cochlear. Its competitive advantage lies with its technology, and maintaining this long-term should keep the future bright.

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Motley Fool contributor Tom Richardson owns shares Cochlear.

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