Philips targets four-fold rise in output of ventilators

Bloomberg

Royal Philips NV is ramping up production of ventilators to double output within the next eight weeks and is targeting a four-fold increase by the third quarter to meet demand from hospitals overwhelmed by patients suffering from severe forms of Covid-19.
The most-needed products are vital sign monitors, portable ventilators and medical equipment to treat a range of respiratory conditions, the Dutch company said in a statement.
It’s hiring more employees, adding lines and increasing shifts to ensure manufacturing continues around the clock.
The health-tech company sees demand outstripping capacity for these types of equipment, although it said the overall impact of the pandemic will be negative on results through the first half of the year. The shares fell as much as 6.3% in early trading in Amsterdam amid a global drop due to the increase in the number of victims.
With countries in desperate need of ventilators, it’s making choices: It favours places where hospitals are confronted with many coronavirus patients — so-called category 3 and 4 regions — over countries that are proactively building up stocks in case Covid-19 escalates, Chief Executive Officer Frans van Houten said in an interview.
It first delivered to China, then Italy, and now Switzerland, France, Spain and New York, while increasing production “to try to keep pace with the development of the outbreak,” he said.
Germany called for help from its car makers, like Volkswagen AG, which had shut down factories, asking them to shift production to ventilators and masks. Ferrari NV and Fiat Chrysler Automobiles NV are in talks with Italy’s biggest ventilator manufacturer to help boost its output.
Also Philips’s rival Medtronic Plc might have found common cause with a car maker. Elton Musk, head of Tesla Inc., who initially downplayed the risks posed by the virus.
Van Houten stressed it might be most productive to work with companies that already have experience with medical equipment and their supply chains. The issue of the machines’ components is crucial.
In some countries there is an issue of labour: Many factories are shut, with countries in lock-down, employees ordered to stay home and transport halted.
“All governments currently want to have their own factory, which is almost impossible,” he said. “Even if you have a production line, you are still a long way off; it is all about getting all those components on time. That is why we also call for governments to give room to all those suppliers to produce.”
The Dutch company, for example, had to step in to help a small supplier in the Philippines, which is in full lock-down, to obtain government approval to make a sensor Philips needs for its ventilator. It’s one of the hundreds of suppliers which all need to supply components for the firm’s medical equipment.
Philips manufactures globally with final assembly sites in North America, Europe and Asia and a network of certified materials and component suppliers. Its factories in China are running above 80% capacity again, it said.
Still, Amsterdam-based company sees a negative impact from virus in first half as outbreak cut demand for Philips’ consumer goods and hampered global supply chains. The company repeated it can’t quantify the magnitude and duration of impact.

“We will look at all proposals,” Van Houten said. “But we ourselves think that we can greatly expand our own production lines, and we are also working with so-called contract manufacturers, because they are specialised in doing production for others.”
“They can get those components more easily,” he said. “I think that’s more likely to succeed than firms that have never made a medical device.”