Gennum Corp. of Canada, long one of the leading suppliers of digital signal processing (DSP) chips and other technologies to the hearing-aid and headset industries, is abandoning the hearing-aid market with the spinout of its hearing instrument design and manufacturing operations to a private equity group and the sale of its consumer Bluetooth headset business to a consumer electronics company based in Sweden. The Gores Group, LLC, a Southern California-based private equity fund, has purchased the hearing-aid chip business and is backing a management spinout that will be named Sound Design Technologies Ltd. And CellPoint Connect AB, manufacturer of the Flamingo Bluetooth, has acquired the Gennum nXZEN and nX6000 Bluetooth headsets that have won acclaim for their sophisticated DSP-based noise-cancellation technology. Gennum’s retreat from the hearing-aid business isn’t necessarily bad news for hearing-aid manufactrers depending on its DSP chips, because the equity firm is backing a group of managers already running Gennum’s Sound Design hearing-aid business and presumably will help them more sharply focus on hearing-industry customer needs in addition to providing investment capital to further develop their technology.
Gennum’s DSP chips are digital engines for hearing aids. For manufacturers more interested in integrating standard technologies to deliver hearing-aid solutions to customers rather than designing their digital products from the ground up, Gennum and other chip companies such as AMI Semiconductors provide robust DSP platforms. It’s an open question whether the hearing-aid industry will trend toward a more horizontal structure, with component and software suppliers providing system elements that integrators will put together and market, much as personal computer manufacturers such as Dell and HP depend on chiips from Intel and operating system software from Microsoft. About a year ago, U.S. leaders Starkey spun off its chip development operation to AMI. If the trend continues, companies such as AMI and especially the new Sound Design, which wiil be focused exclusively on the hearing-assistance industry, will provide new hearing-aid designers with the components they need to get into the market quickly and cost effectively. That is the kind of competition that tends to increase product availability and lower costs to consumers — something that’s long-overdue in the hearing-aid industry.
Meanwhile CellPoint will use Gennum’s excellent Bluetooth technology to improve its position in the fiercely competitive market for consumer Bluetooth headsets for mobile phones. It is a great example of advanced DSP technology originally developed for hearing aids working its way into consumer products, providing better sound clarity and amplification to a market where aging ears and a need for smaller, more portable products is creating a demand for better call quality. Not addressed in the Bluetooth announcement is the fate of Gennum’s Hearphone earpiece which amplifies environmental sound and original ZEN headset which was its first Bluetooth entry. However, financial filings by Gennum in the past year indicate a desire by the company to move beyond these businesses, so I won’t hold my breath to see much marketing oomph behind them from Gennum going forward.
The acquisition and establishment of the new Sound Design company won’t formally close until sometime in October, so we won’t hear until then about details on the company’s product and market plans.