Introduction:
In February 2025, China’s Ministry of Commerce placed Illumina on the “Unreliable Entity List” and subsequently prohibited its gene sequencers from entering China, as a major countermeasure against the United States’ unfair trade policies. Previously, domestic gene sequencing companies represented by MGI (华大智造) had already begun to challenge Illumina’s monopoly and achieved notable results in the equipment market. With supportive policy, the process of domestic substitution for equipment will accelerate further and gradually extend to reagents and consumables.
1. Chinese Government’s Restrictions on Illumina
Policy Background and Specific Measures
On February 4, 2025, China’s Ministry of Commerce included Illumina in the “Unreliable Entity List,” and on March 4, 2025, further prohibited the export of its gene sequencers to China. This action was based on the “Provisions on the Unreliable Entity List,” citing Illumina for “violating market transaction principles, interrupting normal cooperation with Chinese enterprises, and taking discriminatory measures.”
• Scope of Restrictions: The ban mainly targets high-throughput gene sequencer exports but does not explicitly restrict reagents, consumables, or maintenance services.
• Policy Intent: By restricting equipment imports, it aims to compel domestic substitution while retaining a buffer period for existing equipment (dependent on reagents and consumables) to avoid a technological disconnect.
Illumina’s Market Position and Response Strategy
• As the global monopolist in sequencer markets (holding 80% global share), Illumina has long dominated the Chinese market, with its revenue in Greater China reaching USD 308 million in 2024.
• In response to the ban, Illumina pre-stocked at least one year’s worth of reagent inventory and hopes to maintain consumable supply to Chinese clients through localized production in Shanghai.
2. Policy Impact on High-Throughput Sequencing Equipment Market
Market Restructuring: Acceleration of Domestic Substitution
• Rapid Increase in Market Share for Domestic Sequencers
After Illumina was listed as an unreliable entity, its market position in China was directly impacted. According to data from China Insights Consultancy, Illumina’s market share fell from 82% three years ago to 35% in 2024, while domestic companies such as MGI rose to 47.3%. Analysis from Zhongcheng Medical Devices based on public bidding data showed that MGI accounted for 44.71% of procurement value in the first half of 2024. The key drivers behind this substitution include cost advantages (only one-third the cost of imports), technological breakthroughs (e.g., DNBSEQ technology, nanopore sequencing), and policy support (such as “Buy Domestic” policies).
• Stock Market Competition and New Market Development
Following the restrictions on Illumina, its existing customers may turn to domestic equipment. For instance, MGI’s MGISEQ-2000 has already entered the UK market, demonstrating enhanced international competitiveness of domestic devices. In addition, China’s gene testing equipment market reached RMB 115 billion (approx. USD 15.9 billion) in 2024, and increasing domestic substitution will further unlock market potential.
Adjustment of Supply Chain and Technical Ecosystem
• Short-Term Supply Chain Disruptions
- Dependency on High-End Equipment: Some high-end sequencers in China still rely on Illumina’s technology, and the listing may lead to short-term supply disruptions (e.g., for core reagents and chips).
- Substitution Paths: According to the “Provisions on the Unreliable Entity List,” Chinese firms may apply for special permits to continue transactions, but the approval process may delay cooperation timelines. Additionally, Illumina’s local production base in Shanghai may face operational restrictions, impacting its localization plans.
• Acceleration of Long-Term Technological Autonomy
- Domestic Breakthroughs: MGI achieved sequencer self-reliance through the acquisition of CG, and Qitan Technology launched the nanopore sequencer QNome-3841, filling a domestic gap.
- Industry Chain Synergy: Domestic firms are pushing for local sourcing of raw materials (e.g., optical and fluidic components) to reduce import dependence. For example, MGI has locally substituted some high-value raw materials.
Policy and Industry Environment as Catalysts
• Policy Support for Self-Reliance
- China uses the “Unreliable Entity List” to counter external blockades, while enacting the “Industrial Promotion Law” to explicitly support high-tech industries such as gene sequencing.
- Local governments favor domestic equipment in procurement, with companies like MGI and Berry Genomics becoming dominant in bidding.
• Shift in International Cooperation Models
- Limitations on Foreign Collaborations: Illumina’s partnerships with local firms like Novogene and Berry Genomics may be impacted by the listing.
- Increased Requirements for Data Security and Compliance: Illumina’s BaseSpace cloud platform must comply with Chinese data privacy regulations, and such cooperation may now face stricter scrutiny.
Dual-Edged Effect of Industry Competition and Innovation
• Forcing Domestic Innovation
- Under pressure from the entity list, Chinese firms are increasing R&D investment. For instance, MGI reduced sequencing costs to below USD 500, and Qitan Technology overcame nanopore sequencing bottlenecks.
- Integration of AI with sequencing is accelerating, improving data analysis efficiency and creating new application scenarios in precision medicine and agricultural breeding.
• Changes in Global Competitive Landscape
- Domestic substitution in China may weaken Illumina’s global monopoly. In 2023, MGI accounted for 18.7% of global new installations, challenging Illumina’s 80% market share.
- Trend of “de-Americanization” in supply chains: China is lowering risks through local production and diversified sourcing (e.g., Europe, Southeast Asia).
Potential Risks and Challenges
• Risk of Technological Gaps
Some high-end sequencing technologies (e.g., ultra-high-throughput, single-molecule sequencing) still depend on imports. Domestic devices need further breakthroughs in accuracy and throughput.
• International Market Barriers
Chinese companies may face tighter tech restrictions when expanding abroad. For instance, MGI faced patent lawsuits in the U.S. and Europe, requiring stronger IP strategies.
• Short-Term Industry Pain
Institutions reliant on Illumina (e.g., tertiary hospitals, research centers) may experience issues with maintenance and consumables, requiring transitions via inventory or equipment replacement.
3. Policy Impact on Sequencing Reagents and Consumables Market
Short-Term: Supply Volatility and Dual-Track Response
• Dependence on Reagents and Consumables:
Over 50% of high-throughput reagent kits in China’s clinical field are based on Illumina platforms. Short-term supply may continue, but stability is questionable.
• Emergency Measures:
- Medical institutions mitigate shortages by stockpiling.
- Domestic manufacturers are developing compatibility kits to attract users toward local consumables.
Long-Term: Formation of a Domestic Reagent Ecosystem
• Technology Parity and Cost Advantages:
- MGI’s DNBSEQ-T7 paired reagents have a throughput of 6 Tb/run and cost 40% less than Illumina’s.
- Sansure Biotech and Berry Genomics achieved >90% localization of NIPT (non-invasive prenatal testing) reagents, with prices dropping from RMB 2,000 to RMB 800 (approx. USD 110).
• Industry Chain Synergy:
- Equipment-reagent bundling model: MGI’s reagent revenue grew 38% YoY in 2023, accounting for 58% of total gene sequencing revenue.
- Raw material localization breakthroughs: Genemind Bio achieved domestic substitution of critical materials like DNA polymerase.
Market Segmentation and Challenges
• Clinical Diagnostics:
Companion diagnostics in oncology (e.g., AmoyDx BRCA1/2 kits) and reproductive health are seeing the fastest domestic replacement.
• Research Market:
Due to historical data continuity, Illumina reagents remain in use, but new projects tend to prefer domestic ones. MGI offers “data comparison toolkits” to verify consistency.
• High-End Reagent Barriers:
Fields like single-cell sequencing (e.g., 10X Genomics Chromium kits) and methylation detection still rely on imports.
Risks and International Bottlenecks
• Fragmented Supply Chain:
60% of domestic reagent companies have annual revenue under RMB 100 million (approx. USD 13.8 million), with weak bargaining power for raw materials and exposure to capacity fluctuation risks.
• Lack of International Certification:
Only 21% of domestic reagents have CE/ISO13485 certification, limiting overseas expansion (MGI’s overseas reagent revenue share <15%).
Conclusion
China’s sanction on Illumina marks a full-chain restructuring of the gene sequencing industry, from equipment to reagents:
• Equipment: Technological advantage and policy dividends enable MGI and others to lead the market.
• Reagents: Still reliant on imports in the short term, but a closed-loop domestic ecosystem is expected by 2026, with domestic market share potentially exceeding 65%.
• Key Battlegrounds:
- Full localization of upstream enzyme materials (e.g., sequencing polymerase, transposase);
- Integrated solutions that break through international ecosystems (e.g., MGI’s “instrument-reagent-data” closed loop);
- Overcoming overseas patent and certification barriers.
This event not only reshapes the domestic market landscape but also accelerates China’s leap from “follower” to “leader” in the global gene sequencing value chain, laying a foundation for self-reliance in strategic sectors like precision medicine and the bioeconomy.
[Disclaimer]: The above content reflects analysis of publicly available information, expert insights, and BCC research. It does not constitute investment advice. BCC is not responsible for any losses resulting from reliance on the views expressed herein. Investors should exercise caution.