Major developing economies, most notably China, drove 2010’s economic recovery and are expected to dominate economic growth in coming years. In 2010, China surpassed Germany to become the world’s second-largest economy. This year, China’s economy is expected to grow 8.7%, according to the World Bank’s January forecast.

The World Bank forecasts developing countries’ real GDP to grow 6.2% in 2011, following 7.1% growth last year, due to increased industrial activity, exports and foreign investment. In contrast, high-income countries (consisting primarily of OECD countries) are estimated to grow 2.4% in 2011.

The rise of developing nations has been led by the so-called BRIC (Brazil, Russia, India, China) countries, where sizable domestic industries, new government investment, a rising middle class and foreign direct investments are advancing economic growth. BRIC economies have contributed 36% to the growth of global purchasing power parity GDP over the last decade, according to Goldman Sachs.

Growth in developing nations is benefiting analytical instruments and laboratory products sales. Domestic and foreign investment in new R&D and production facilities in such countries are fueling sales, as are increasing export and regulatory requirements, such as rules related to food safety exports and new domestic water quality regulations.

As a result, instrument and laboratory product companies have been shifting a growing share of their investments to developing nations in order to serve their fastest-growing markets and maximize growth opportunities. Investments in emerging nations include sales and marketing offices and demonstration and service centers designed to more effectively serve domestic end-users and the expanding foreign operations of multinational customers. The Wall Street Journal reported in February that an Ernst & Young survey found that 23% of companies plan to spend over 25% of their R&D budgets in emerging markets within five years.

Instrument and laboratory product companies have also expanded manufacturing and R&D operations in developing nations. Manufacturing in such countries provides cost savings and increased access to low-cost supply chains. As costs rise in China, manufacturing operations are moving to other countries such as Vietnam and Malaysia. Local R&D provides expertise for designing products for emerging markets and cost savings. A string of recent announcements by instrument and laboratory product companies illustrates this rapidly expanding presence in developing nations.

This month, Thermo Fisher Scientific announced plans for a new manufacturing facility based in China’s Suzhou Science and Technology Town. Set to open next year, the facility will manufacture life science instruments, equipment and reagents. Thermo’s Chinese revenue grew 14% in 2010, making the country the company’s third-largest geographic market. China accounted for 30% of the company’s $1.3 billion in Asian Pacific revenue last year. India accounted for 9%. The company’s total China-based workforce stands at 1,400. Already this year, Thermo has expanded its Shanghai manufacturing facility to meet demand for Thermo Scientific Nunc Cell Culture products.

Also expanding its infrastructure in China is Bruker. On its fourth-quarter conference call, the company stated it is expanding its Beijing facility by more than 50% and finalizing construction of a new Shanghai facility.

Shimadzu recently announced a new 30-person R&D division for analytical instruments at its Shanghai facility. The company stated that the division would address products for China’s “mid-range markets.” The company plans to devote greater R&D, sales and marketing, and product resources to this market. Sales of Shimadzu’s “core” analytical instrument products in China are estimated to be $140 million in fiscal 2011. The company plans to increase annual sales in the country to $300 million by fiscal year 2015 (ending March 31, 2016).

Life Technologies is also investing in China. Chairman and CEO Greg Lucier stated on the company’s most recent quarterly conference call, “We also started on building several warehouses across China in the coastal cities to further expand the footprint we already have. We had outgrown the infrastructure we had put in place a few years earlier.” He told Reuters in February that Life Technologies’ Chinese revenues currently total $200 million and that the company is aiming to grow them to $500–$750 million by 2016.

Life Technologies also disclosed on the conference call that the company’s sales in emerging markets were growing at a compounded annual rate of 30% and now account for approximately 10% of total revenues. In 2015, Life Technologies expects sales in emerging markets to total $1.6 billion, compared with $315 million in 2009. Among the other developing regions highlighted by the company were Latin America and the Middle East.

PerkinElmer disclosed on its February conference call that “emerging territories” represented more than 25% of revenues in the fourth quarter 2010 and grew in the mid-teens. The company said that sales in Brazil, Russia, India and China grew greater than 20% each. The company also discussed its expansion in China, disclosing it has invested in a new software center of excellence in Shanghai. Last August, the company announced a new Shanghai-based technical support and services team for drug discovery research. The company is also investing elsewhere in Asia. Chairman, President and CEO Robert Friel stated on the call, “We also established a center in Bangkok that will enable us to leverage our local expertise and capabilities and drive deeper penetration into the growing Southeast Asian market.”

Southeast Asian instrument and lab products sales are also growing quickly due to new regulations and foreign investment. Horiba Instruments announced in January that it had opened an office in Hanoi, Vietnam. The office will provide local sales support. Elsewhere in Southeast Asia, Thermo Fisher Scientific noted on its fourth-quarter conference call that it is growing its presence in Malaysia. Thermo owns Malaysia-based Biomedia Laboratories, which produces culture media (see IBO 11/15/09).

Penang, Malaysia, has long been a manufacturing base for Agilent. This location is now expanding. Agilent announced last year that it was moving NMR electronics manufacturing to the country (see IBO 1/15/11). The Malaysian press reported that Agilent plans to grow the facility to include a new production site for life science products. Agilent recently announced that R&D for PCR instrumentation will be located at the site.

The expansion is tied to Agilent’s sales growth in Asia. China is now Agilent Life Sciences’ second-largest market. Fifteen percent of the Life Sciences Group workforce is based in Asia-Pacific. Thirty-seven percent of the Chemical Analysis Group workforce is located in Asia Pacific, including 36% of its R&D staff.

In India, growth in pharmaceutical development and production, both domestic and foreign, has increased instrument demand. QIAGEN opened a direct subsidiary in New Delhi in January. The company expects the office to have more than 30 employees this year. According to the company, its Asian revenue totaled more than $135 million in 2010, and it has over 500 employees in the region, including 350 in China.

Merck Chemicals has also expanded its presence in India. In January, it opened a 1,700-sq-ft Application and Technology Center in Navi Mumbai. The Center will provide support for the Merck Chemicals, including Merck Millipore’s biopharmaceutical process and laboratory products units. The facility has eight laboratories, including dedicated labs for chromatography analysis and separation analysis. Marek Dziki, managing director of Merck Ltd., Merck’s publicly traded Indian company, told The Financial Express that the acquired Millipore business had 300 employees in India. The Center will also develop customized products for local and international markets.

Grace Davison’s Discovery Sciences business, which also supplies chromatography products, opened a Knowledge Center in Southern India this month. The Center will support customers of the company’s lab separation, bulk purification, excipients and pharmaceutical intermediates products. The Center will support Grace’s Indian and Asian Pacific businesses and develop products.