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International medical device maker Smith & Nephew (NYSE: SNN) is expanding its China manufacturing facilities for the usual two reasons: the cost savings and the growing importance of the China medical market.

Smith & Nephew, based in the UK, but with several manufacturing plants in the US, operates in three areas of the medical device market: orthopedics, wound care and endoscopy tools. The orthopedics division makes hip, knee, and shoulder replacements, plus nailing systems used to repair broken bones.

In October 2007, Smith & Nephew announced that it would eventually close its high-tech wound care dressing facility, located in Largo, FL, and move production to a new plant in Suzhou. That plant is scheduled for completion in 2009. The change meant a loss of 150 manufacturing jobs in Largo.

Now, in a somewhat more complicated structural realignment, Smith & Nephew announced that it will begin production of parts for artificial joints in a new manufacturing operation located in Beijing. The new building will replace another one that Smith & Nephew inherited when it bought the Swiss joint manufacturing company Plus Orthopedics Holding AG for $889 million in 2007.

Traditionally, Smith & Nephew manufactured its joint replacement products in Memphis. The company said it did not intend to close its Memphis plant. Instead, because its US and Swiss facilities are operating near their limits, the new 100,000 square foot China operation will provide added capacity. It will manufacture surgical instruments and parts for artificial joints, which will be shipped to US plants for final assembly. With factories in Memphis and Switzerland at capacity, the company is building in China.

Smith & Nephew officials said that the company remains wary of China counterfeiters, so it will not build its latest, most high-tech devices in China.

As part of its China initiative, Smith & Nephew said it will begin focusing more on the China market, engineering joint replacement products for Asian people. When the company purchased Plus last year, it acquired a number of products that were approved for use in Japan.

Disclosure: none.

Source: Smith & Nephew Shifts Focus to China Operations