Data show that the global API market grew from USD 119.6 billion in 2013 to USD 155.0 billion in 2017, with a growth rate higher than that of the pharmaceutical market over the same period. According to industry forecasts, the global API market will rise to USD 225.0 billion by 2021.
China is a major producer and exporter of APIs. More than 2,000 API varieties are produced worldwide, and China alone can manufacture over 1,500 types, offering a complete product portfolio.
Currently, six Chinese companies are among the world's leading API suppliers, includingNHU, Zhejiang Medicine, North China Pharmaceutical, Northeast Pharmaceutical, Huahai Pharmaceutical, and Hisun Pharmaceutical.
However, in recent years, as China has placed increasing emphasis on environmental protection, many Chinese pharmaceutical companies are undergoing industrial upgrading, which has posed certain challenges to India's API supply. It is reported that India has begun to compete with China for the API market.
According to India's PRINT website, India has approved in principle the establishment of API production hubs in Himachal Pradesh, Telangana, Andhra Pradesh and other states, aiming to compete with China's dominant position in this sector. Under the plan, India intends to provide subsidies covering 70% of the total cost or up to 1 billion rupees (about 98.01 million RMB) for each hub.
Indian media reported that China's API costs face upward risks, which may have further prompted India to launch policies encouraging local API production.
In recent years, China's strict environmental regulations have helped the API industry optimize its product mix, upgrade the industry, and transform toward high-end APIs. In addition, as developed markets such as the EU and the US mainly adopt the Drug Master File (DMF) system for API management, China can use this upgrading period to improve its regulatory framework, eliminate small pharmaceutical enterprises that fail to meet competitive standards, and achieve large-scale and concentrated development. China's API transformation has further stimulated India's competition in the market.
Analysts believe that driven by medical regulatory policies and industry trends, China's API industry is likely to enter a golden development period with huge growth potential that can last at least 5 to 10 years.
Following the implementation of the new volume-based procurement policy, the API pricing model has also changed. APIs used to be priced by the cost-plus method as suppliers for formulation manufacturers. With greater pricing power, API enterprises have shifted to a profit-sharing model, offering considerable profit elasticity.
Many funds are optimistic about the API sector, especially companies focusing on high-end specialty APIs. In their view, some domestic specialty API enterprises have gained international competitiveness with strong and steady demand growth. On the supply side, capacity has been reduced due to environmental requirements, certification barriers and process constraints, improving the competitive landscape and creating attractive investment opportunities.
Many API enterprises have achieved strong performance growth, which industry insiders attribute to rising API prices and improved profitability under environmental pressure.
Some Indian observers also noted that Chinese APIs used to enjoy unrivaled price competitiveness, often one-third cheaper than similar products. India imported nearly USD 7 billion worth of APIs from China in 2018. However, in recent years, as China has strengthened environmental protection and promoted industrial upgrading, many Chinese pharmaceutical companies have upgraded their operations, posing certain challenges to India's API market supply.
