Current investment tips:
Hearing aids are multi-disciplinary integrated products, with technical advantages + channels to build barriers. Hearing aids are mainly used to make up for the defects caused by hearing loss and improve their conversation and communication ability with people. There are many sub categories. Different patients can choose suitable products according to their own needs. We believe that the core competitive barrier of hearing aids comes from the comprehensive advantages of hardware + software. The parameters of hardware and the advantages and disadvantages of algorithms greatly determine the performance of hearing aids and the satisfaction of patients. At present, the middle and high-end hearing aid brands all have the R & D capability of mainstream algorithms. The main differences come from the independent controllability of chips, the capability and progressiveness of algorithms, and the integration capability of downstream channels and industrial chains.
The localization rate of upstream components is beginning to show, and the downstream pattern changes or brings profit redistribution. The upstream components of hearing aids are mainly composed of chips, transducers, batteries and other components. Among them, batteries, shells and other components have a high degree of localization, while the chips are still basically imported by overseas manufacturers; At present, some chip manufacturers in China have completed the commercialization of medium and low-end hearing aid chips, but there is still a certain gap with overseas in the field of high-end products. The downstream of hearing aids is mainly the circulation and service links of hearing aids. At present, hearing fitting center is the main center; Hearing aids are a strong fitting and experience industry. Therefore, at present, hearing service institutions occupy the main value composition of the industrial chain. In the future, we believe that with the development of technology and channel reform, the value chain of hearing aids is expected to be reshaped, and the value of upstream and brand ends will gradually appear.
The hearing aid industry has great potential, and technology and policy drive the expansion of the industry. By 2020, the scale of the global hearing aid industry was US $6.5 billion, and the scale of China’s hearing aid industry was 6 billion yuan. Previously, the scale of the hearing aid industry was mainly affected by factors such as price, access and wearing aesthetics. We believe that the driving factors in the future mainly come from the growth of hearing loss population and the improvement of penetration rate: 1) the growth of hearing loss population: aging, the change of living habits of young people and the pollution of living environment may lead to the significant growth of hearing loss population; 2) Improvement of penetration rate: the penetration rate of hearing aids in China (5%) and even in the world (17%) is still at a low level. We believe that the industry growth is expected to be driven by factors such as technological iteration, OTC market opening and policy subsidies in the future.
The five hearing groups lead the development of the industry, and local enterprises have entered the bureau one after another. Nowadays, the five hearing groups are in a monopoly position in the global and Chinese markets. For a long time, overseas leaders have occupied most of the market share by virtue of the technical barriers and first mover advantages brought by their continuous innovation ability, as well as the complementary advantages and industrial chain integration effects brought by extension M & A. compared with them, Chinese local brand hearing aids still have an obvious intergenerational gap. However, China has the world’s largest potential market for hearing aids. From the 1980s to 1990s, five hearing groups successively entered the Chinese market, which promoted the development of China’s hearing aid industry. At present, in addition to overseas leading brands, China has preliminarily cultivated a number of local brands with independent innovation and R & D ability and certain brand popularity. In the future, we believe that they are expected to seek differentiated competitive strategies and gradually establish their own competitive advantages.
Investment analysis opinion: the trend inflection point of the industry appears, and the technological iteration + market expansion + channel reform brings breakthrough opportunities for local brands. To sum up, looking at the development of China’s hearing aid industry, we believe that some trend inflection points have begun to appear: 1) the emergence of hearing aid industry clusters, the cost reduction space brought by the localization of core devices in the future, and increasing the core competitiveness of local brands; 2) New market opportunities, local hearing aids can rely on their own advantages to locate moderate and mild patients and force the OTC market; 3) The technological revolution gives birth to channel expansion. The development of artificial intelligence and other technologies is expected to replace the traditional offline matching, and local brands are expected to flourish through e-commerce and other channels. In the future, with the continuous development of technology and policy, we believe that Chinese hearing aids are expected to gradually get out of the dilemma of small scale and weak research and development, and strive to occupy a place in the international market. It is recommended to pay attention to Jinhao medical treatment, Cofoe Medical Technology Co.Ltd(301087) , Jiangsu Zongyi Co.Ltd(600770) , Tianjian shares, etc.
Risk tip: the implementation of the policy and the development of OTC hearing aid market are less than expected, and the domestic replacement progress of core components such as upstream chips is less than expected
