Hearing Aids. Electronically-speaking, they're far from sexy when compared to the slick-designed Bluetooth headphones and headsets in the consumer space.
But, what they lack in fashion appeal, they make up for on growth potential. A promise of worldwide growth, untapped market potential and innovative research will keep manufacturers of this unassuming, under-the-radar device happy on the revenue and profit side.
By nearly all counts, there is a bigger need for hearing aids worldwide than is currently being met by hearing aid makers.
Hear-it.org estimates that the total number of people suffering from hearing loss of more than 25 decibels (slight hearing loss is typically in the 20 – 25 dB range) will exceed 700 million worldwide by 2015. That could increase to 900 million people by 2025.
More than 5 percent of the world's population – about 360 million people – has a disabling hearing loss (328 million adults and 32 million children), according to the World Health Organization.
And, the majority of people with hearing loss are younger than age 65, notes the Better Hearing Institute.
On the supply side, WHO says current production of hearing aids meets less than 10 percent of the global need.
That means good times are ahead for hearing aid makers. Revenue is expected to swing upwards at a compounded annual rate of 8.8 percent between 2012 and 2017, according to IHS.
"Although it's a mature industry, we're expecting to see a lot of growth," said Roeen Roashan, a medical devices and digital health analyst at IHS. "There's an ageing population and we'll see more people with hearing loss. There is also a low penetration rate for hearing aids."
Tuning Into the Market
One obvious growth driver ties to the increasing number of elderly people in key markets. Although a large majority of people with hearing loss are under 65 years old, the average age of hearing aid users are about 72, IHS found. That translates to opportunities globally but namely in the U.S., Europe and parts of Asia.
Reversely, Roashan also expects that the leading hearing aid makers —only a handful of companies dominate most of the world market—to shift some of the design and marketing direction to target a younger consumer.
"Young people are not going to wear hearing aids the way they are today," Roashan added.
Another thing that could keep companies' bottom lines healthy is the pricing structure of hearing aids. While end-user prices vary globally, generally these little devices cost a lot more than most other consumer electronics gear, even more than an iPad, as this Audicus blog points out. Consumer Reports recently tested hearing aids, and the prices ranged from $1,800 to $6,800 per pair.
Of course, these are medical devices that must meet different fail-safe standards than consumer devices, and together with the costs of research and development, low volume production runs for specialized products, and a mark-up as it moves through the supply chain, prices run higher for these products.
"At the end of the day, a hearing aid is an extremely simple device. A hearing aid's only job is to amplify audio. Amplification of audio is an extremely cheap function," said Andrew Rassweiler, senior director for Cost Benchmarking Services at IHS. "However, we know that anything related to medical devices—whether it is life critical or otherwise—is many, many more times expensive to the OEM that makes the product."
But Stefan Launer, vice president of science and technology at Swiss hearing aid maker Sonova, defends the entire industry's pricing practices. The bill of materials of a hearing aid, he argues, is not indicative of the cost to provide the device to the patient. Ultimately, according to Launer, the cost of the hearing aid needs to support the years of research and development required to produce the final product.
But, unlike consumer electronics OEMs that operate on slim margins, hearing aid providers have a much wider space to play in when it comes to final retail price. Rassweiler estimates that hardware costs for a typical behind-the-ear hearing aid are about $100.
Sonova has dozens of scientists working to improve hearing aid technology. "If you look at the pharmaceutical industry, the bill of materials of a drug is very low," Launer said. "But the cost to produce that drug, evaluate it, and do the necessary regulatory compliance is the costly part. With medical devices, it's the same case. Hearing instrument provision is a process requiring involving a counseling and personalization process by a health care taker. The device needs to be fitted to individual needs by an expert hearing health care practitioner. This process adds significant costs."
To reach a larger population and increase market share, companies may want to reconsider this structure and make it more affordable to a broader user base.
"It's well-known that the premium on these devices are extremely high compared to the bill of materials. You could say that's because it goes through a lot of channels, and there are higher prices for the services that come with hearing aids. There are also healthcare systems that partially or fully reimburse for hearing aids, so there may not be any incentive to lower prices," Roashan said. "But look at the number of people with hearing loss in the developing world—two-thirds of people with hearing loss are from developing countries—and these people don't have hearing aids because they are too pricey. The industry needs to take this more seriously if they want to see more widespread growth."
Changing Frequency
There are some other competitive factors in play as well.
"There are two major problems in the industry today. In terms of the device, it hasn't changed significantly
in probably three or four decades. It's still there behind your ear. It's still obtrusive," Roashan added. "Also, it's not adaptable to the environment. It doesn't adjust on its own. You have to adjust it yourself."
The form factors may not see a major makeover any time soon, but having the device be self-adjusting is where many of the market leaders are heading.
Along those lines, a hot technology right now is a mobile phone app that adjusts hearing settings. With the app, users can use their phone to change settings more discreetly than by fiddling with their ears, Roashan said. Miracle-Ear has a video that shows what this connectivity looks like with its mini MEBluConnect accessory.
Then, there's the potential impact of wearable technology. Of course, Google Glass comes to mind, and though Google has not come out and said hearing loss could be a possible use study, IHS believes it may not be too far off.
As reported by Electronics360, Glass, or some device like it, might be used for hearing augmentation and could be an inexpensive alternative to having a hearing device surgically implanted. Conceptually, too, these new-and-upcoming devices might be able to use speech-to-text technology so that the written words would display on an eyepiece.
Perhaps one of the more interesting competitive leaps could come in the form of an intracochlear drug delivery implant that could eventually eliminate the need for a hearing aid altogether. Solid-state physicist Jeffrey Borenstein is working on the design and development effort at the Charles Stark Draper Laboratory in Cambridge, Mass.
The device brings together microelectromechanical systems (MEMS) with microfluidics, which enables precise fluid control on very small scales. Though the device could have broad applications, the target research focus has been on sensorineural hearing loss, a prevalent kind of hearing loss that may soon be treatable with drugs. The idea behind the implant is to stimulate regeneration of tiny hair cells on the organ of Corti, a structure within the ear's cochlea; when these hairs are damaged or lost they do not function normally as receptors of sound, said Borenstein, who has written extensively on this area of research, including this IEEE Spectrum article.
"It's very difficult to deliver drugs to this site, for a number of reasons. One is that there is a barrier between the blood and the cochlea, which is there to protect the ear from the toxic effects of a lot of compounds," he told Electronics360. "But when it comes to trying to get into the inner ear, it's a very delicate and small space, and physically it's relatively inaccessible. The ear has developed as a sensitive organ that is protected from the environment, making it hard to get drugs in there."
While it will still be a long road, the team has been focusing on hardware miniaturization and integration.
"If you integrate the components fully, you're going to make the device much smaller and more reliable," Borenstein said. "Our focus has been on building integrated chips that contain the fluid elements like pumps, valves and sensors. Basically, it's all the things you're doing in integrating microelectronics that we're doing for microfluidics."
The device is still in the pre-clinical lab stage, with benchtesting and animal implants studies are being conducted. Borenstein thinks there may be applications ready to test in humans in the next two to three years, but that they may not be in the hearing regeneration area because of the difficulty in demonstrating efficacy. "That will take longer. There's complicated molecular biology involved. There are other diseases in the inner ear that are more straightforward to understand and treat, so it's likely those will be the first applications," he added.
