A thriving segment with secular and structural growth outlook. We see structural and  secular growth ahead for China’s clear aligner industry, with the current penetration at 11%  vs 32% in the US. Our TAM analysis shows that there is still 2x headroom in penetration  after a ten-year (2021-30E) volume CAGR of 25%. However, our channel checks show  that the competition landscape changes may be turning against the Top 2 (Angelalign and  Invisalign), which could offer potential opportunities for smaller players and new entrants,  such as ClearCorrect (owned by Straumann, set to launch in China in 1Q22).

Intensifying competition driving market share reshuffle and price decline. We  estimate the Top 2 brands to have lost 10pp market share in 2021 (Figure 1). Smaller  players appear to have gobbled market share with competitive pricing strategies and  differentiated channels, on top of improving big data and reputation. We expect the industry  ASP to continue to drop 3% p.a., driven by competition, in our industry model. Apart from a  potential price war, we think the fast expansion of China’s localised DTC model (direct to  customer) and pricing control risk on traditional braces may also trigger meaningful  disruption in the pricing trend (see section on “Braced for potential disruptors”).