Recently, an announcement by the Ministry of Commerce has aroused strong attention from the financial and biotechnology industries, and the US gene sequencing giant Illumina has been included in the list of unreliable entities. This event is a leading gene sequencing equipment company in China, MGI (stock code: 688114. SH) has brought unprecedented market opportunities and is expected to further expand its footprint in domestic and foreign markets. As of the close of trading on February 6, MGI closed up 4.27%, and rose nearly 20% in the two trading days after the holiday.

Illumina has long dominated the global gene sequencing market. From 2019 to 2021, its global market share was as high as 74%, 78% and 71%, respectively. In China, however, Illumina's dominance is waning. From 2020 to 2022, its market share in China fell from 59% to 37% year by year, and by 2023, the market share of new domestic installed capacity will decline to 26.5%. In stark contrast, MGI will sell 695 new sequencers in China, accounting for 47.3% of the new installed market share in the upstream of the domestic gene sequencing industry, ranking first in the domestic sequencing equipment market share for two consecutive years.

Founded

in 2016, MGI, a direct competitor of Illumina, has grown into a leading gene sequencer company in China in just a few years. As of June 30, 2024, its business covers more than 100 countries and regions on six continents, serving more than 3,000 users. In terms of technical strength, MGI and Illumina are the only companies in the world that can independently develop and mass-produce clinical-grade gene sequencers with different throughput from Gb to Tb, and MGI is the only institution in the world that has mastered the three gene sequencing technologies and products of "excitation light", "self-luminescence" and "non-luminescence", with strong technical reserves.

Illumina's inclusion in the list of unreliable entities this time has brought an opportunity for domestic substitution companies to be trillion-dollar tracks. From the perspective of the domestic market, Illumina's early monopoly market faced a complete collapse, and MGI, as a local leader, has become the best choice in the industry and is expected to further expand its domestic market share. In the past, some domestic customers chose Illumina products due to their technical dependence, but now with Illumina's inclusion in the list, customers will re-evaluate when purchasing, MGI, with its stable product performance and localized service advantages, will attract more domestic customers, consolidate its 47.3% market share of newly installed capacity in China and achieve further growth.

From the perspective of the international market, the inclusion of Illumina in the list will also change the competitive landscape of the global gene sequencing market. MGI has been actively deploying overseas markets, and the impact of Illumina has created favorable conditions for MGI to explore the international market. In some markets, such as Europe and Asia, customers who originally preferred Illumina may turn their attention to MGI, which is expected to take this opportunity to increase its visibility and market share in the international market and accelerate its global business expansion.

In addition, MGI and Illumina have previously gone to court over patent disputes. Since 2019, Illumina has initiated patent and trademark infringement lawsuits against MGI in 20 countries and regions, which has seriously affected the overseas sales of MGI's products involved in the lawsuit. However, in May 2022, MGI won a U.S. patent infringement lawsuit and received $334 million in damages, demonstrating its technological strength. With Illumina's inclusion on the list of unreliable entities, MGI's confidence in technology research and development will be greatly boosted, and it is expected to increase R&D investment, accelerate the pace of technological innovation, launch more competitive products, and occupy a more favorable position in the global competition for gene sequencing technology.

In December 2024, the Ministry of Finance issued the Notice on Matters Concerning Domestic Product Standards and Implementation Policies in the Field of Government Procurement (Draft for Comments), which made waves in the field of government procurement, clarifying and refining the definition and price advantages of domestic products. The adjustment of this policy, for the domestic manufacturing industry, especially the technology-intensive medical equipment industry, means that domestic goods will have a greater price advantage in the competition.

Roland Berger pointed out in the report "Status and Trends of Medical Device Industry" that although the localization process of China's high-end medical devices is accelerating, 80%-90% of high-end medical devices still rely on imports. The issuance and implementation of the "Notice" of the Ministry of Finance and the "Announcement" of the Ministry of Commerce are expected to change this status quo and promote the progress of domestic equipment in technology and cost control, which means unexpected market opportunities for MGI.