4.8. There is limited scope to optimise or relocate manufacturing to generate additional cost reductions in the price of hearing aids.

Bulk manufacturing of hearing aids in centralised production factories is the standard manufacturing model employed by global suppliers. Production follows standard methods for small electronics manufacturing. Components such as microphones and transducers are sourced, while the hearing aid manufacturer is adding a plastic case and the proprietary software and assembles the final product. The production facilities, which are fairly automated,69 are set up across the globe — most commonly in Asia — to optimise sourcing of components, assembly and distribution of hearing aids in L.M.I.C.s and H.I.C.s.

Establishing a localised approach to production and assembly can in some cases lead to lower cost, high-quality assistive products for users. Potential advantages of localised production include potential avoidance of import taxes, reducing shipping costs, producing a product that is optimal for the local environment, and creating employment locally. However, in the case of hearing aids, it is unlikely that localised manufacturing would be able to lower costs in this way, because:

• LIMITED SCOPE TO REDUCE THE COST OF COMPONENTS. Microphones and transducers are the most expensive components for hearing aids and there is limited buying power for hearing aid manufacturers to negotiate prices. The global supply of microphones and transducers is controlled by two suppliers, Knowles and Sonion. These companies provide technologies for a range of different applications and hearing aid manufacturers are relatively smaller clients of these companies compared to other large technology companies.
• ASSEMBLY REQUIRES SKILLED LABOUR. While most of the hearing aid process is automated, the final production step of encasing the technology within a plastic frame is manual and requires significant training in electronics.
• HIGH UPFRONT COSTS. Since hearing aids are small and sensitive hearing technology, production requires relatively high up-front investments in specialised equipment and production facilities to assemble the miniature electronics at high quality.

Local assembly of hearing aids has taken place in some countries such as Brazil, India, Botswana, Vietnam and the Philippines to attempt to reduce the burden of import duties on hearing aids. In such a model, manufacturers might be incentivised, if volumes are sufficient, to supply semi-knocked-down kits to local businesses that then assemble hearing aids.70 Semi-knocked down kits usually require only soldering the transducer(s) onto the printed circuit board and closing the unit with small screws.

The assembly model has had limited success because cost reductions are small, manufacturers are wary of quality control of the final product, and manufacturers may have to disassemble existing stock of hearing aids to provide the broken-down kits.

Several suppliers of lower cost hearing aids—often based in Asia—have emerged and experts suggest that some companies are offering products of sufficient quality for global markets. While limited opportunities may exist to negotiate better prices of components, streamlining the production of a range of basic generation models may result in favourable manufacturing economics such as: fewer change-overs/down-time of manufacturing lines; more efficient planning; optimised logistics and a higher degree of standardisation in sourcing and production.