Denmark targets iPhone generation to keep edge in hearing aids


* Denmark supplies half the world's hearing aids

* Huge potential in ageing population, emerging markets

* GN Store Nord device links direct from iPhone to ear

By Stine Jacobsen and Mia Shanley

COPENHAGEN, Nov 24 (Reuters) - Tiny Denmark, with fewer than6 million people, supplies half the world's hearing aids, andlocal makers aim to advance that commanding position as babyboomers and the iPhone generation age.

GN Store Nord, headquartered in Ballerup, nearCopenhagen, has a product it hopes will reach that demographic -famously averse to accepting the depredations of age - by takingthe stigma out of wearing an aid.

The world's fourth-largest maker has collaborated with AppleInc to develop a device packed with bluetooth-liketechnology that installed in the ear allows users to streamvoice and music from their iPhones without the need for anintermediary device.

Denmark's expertise in sound technology can be traced backto 1904, when William Demant Holding Group was foundedby Hans Demant, whose wife had a hearing disability. Nearly 110years later, William Demant is the world's second-largest makerof hearing aids, behind Switzerland's Sonova, and itsOticon Foundation continues to fund research and supportengineering students.

Strong public and private cooperation has driven developmentin audio products from microphones to amplifiers in Denmark,which is also home to luxury stereo maker Bang & Olufsen and sound measurement firm Brüel and Kjaer.

Denmark's technical university offers an engineeringacoustics masters programme that attracts students from aroundthe world and hosts a sound technology innovation network fundedby the Danish Agency for Science, Technology and Innovation.

There is huge potential in an industry worth $15 billion.

The World Health Organisation estimates there are 360million people - over 5 percent of the world's population - witha disabling loss of hearing, yet current hearing aid productionmeets less than 10 percent of global need.

Berenberg Bank estimates only one in four who suffer fromhearing loss in the United States use them. That might in partbe down to stigma, part to cost.

Premium products in the United States sell for about $3,000,including GN's Verso range, and GN has said it will probablylaunch LiNX at a 5 to 10 percent premium to that.

But there are hopes that the new technology can overcomesome of the stigma by making the devices more attractive,accelerating single-digit volume growth in a market that willbenefit from an ageing population and rising wealth in emergingmarkets.

United Nations figures project that one in five people in aworld population of between 8.3 and 10.9 billion will be over 60by 2050, up from just under one in 10 of the current 7 billion.

It was a technical challenge to get the 2.4 GHz technologyused in the LiNX into a tiny, discreet hearing aid that couldrun for several days without frequent and fiddly batterychanges.

It had a headstart on bluetooth technology for hearing aidsas one of the world's biggest wireless headset makers, butconventional bluetooth devices tend to be notoriously profligateusers of energy and require sizeable antennas. Overcoming thoselimitations gives LiNX users a cosmetic advantage by eliminatingthe need for a separate transmitter, typically worn round theneck.

Morgan Stanley calls the LiNX, which will be officiallylaunched in the first quarter next year, the "first attempt toturn a hearing aid into more of a lifestyle product".

Lars Viksmoen, CEO for GN's ReSound hearing aid business,described the 2010 launch of its first 2.4 GHz product - with athird device for streaming - as a "live or die" moment.

"Had that launch failed, we perhaps wouldn't have been heretoday," he said.

Luckily, the 2.4 GHz frequency was picked last year bytrend-setter Apple for its iPhones.

Apple went to all manufacturers and said it wanted to have adirect link from hearing aids to its phones using 2.4 GHz and,because GN was already on its second generation of suchproducts, an instant pairing was made.

Frequent visits followed between California and Copenhagento build up the protocol and improve power-efficiency.


The buzz surrounding the made-for-iPhone device and a majorcost-cutting programme have helped send GN's share price up 60percent this year, beating the 27 percent rise in Sonova and the6 percent rise in William Demant.

Some remain sceptical that the main user base - the over 65s- will feel the need for the connectivity offered.

"I think it will provide new avenues for innovation ... butI am less convinced it will structurally change the industry,"said Tom Jones, a Berenberg analyst.

Still, GN's bigger rivals are taking stock.

William Demant, which has a 23 percent market share, willnot go into details but says there is greater engagement withthe mobile phone industry.

"We will have great stuff with connectivity for all types ofmobile phones," Finn Mohring, Vice President of Research andDevelopment at William Demant, who previously worked at Nokiafor nearly two decades, told Reuters.

Asked if it might also collaborate with mobile makers, hesaid: "Probably. We will not be seen trailing in the dust onthis area."

William Demant, Sonova, Germany's Siemens andprivately owned Widex in Denmark all use lower frequency bandswhich some argue provide better sound quality. They also have2.4 GHz in third devices, but not in their hearing aids.

Starkey Technologies in the United States uses an 800-900MHz platform. It is working on a made-for-iPhone hearing aid butwill not provide details about what technology it will use.

But most agree GN is a step ahead, and ReSound's Viksmoensaid it would look to work with other mobile phone makers - thebigger Android market, for instance - after the iPhone device.

"It's a no brainer that we will not stop here," he said.

Morgan Stanley recently bumped up its organic sales growthforecast for GN's hearing aids business for 2014 to 8-9 percentfrom 5.8 percent, with possible further upside thanks to LiNX.

Currently the penetration rate among iPhone users in GN'starget group is only 5 to 10 percent.

"We'll see if connectivity can change that," Viksmoen said. ($1 = 5.5872 Danish crowns) (Editing by Will Waterman)

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