Dilu Medical Files for IPO: Building a Vertically Integrated Color Contact Lens Supply Chain with 10 Product Registrations and 250 Million Annual Output

In the autumn of 2009, Jin Yilin, caught between the extremely slow delivery speeds of South Korean suppliers, delayed payments, and constant pressure from end-users demanding shipments, resolutely decided to build his own factory.

This factory, self-built in 2009, is named Jilin Rierkang, with its main business being the research, development, and production of color contact lenses. It is the first R&D and production base under DEARER (Shanghai Dier Medical Equipment Co., Ltd.). In the following decade,DEARER has successively established R&D and production bases in South Korea, Suzhou, and Xi'an, and will build the largest contact lens R&D and production base in China in Shanghai next year.

Jilin Rierkang Production Base (New Plant)

As a research and manufacturing enterprise of cosmetic contact lenses, DEARER has 10 product registration certificates, including 4 for daily disposable cosmetic lenses, 5 for long-term disposable cosmetic lenses, and 1 for long-term disposable light blue lenses.Capable of semi-mold and semi-cut as well as full mold pressing processes, with the production capacity for full molds; over 500 new designs can be launched monthly; annual production capacity reaches 250 million pieces, and automation of production is being actively promoted.

In addition to colored contact lens production, DEARER has also established a full-chain R&D system encompassing materials, formulations, inks, design, processes, and automated equipment, focusing on the entire colored contact lens industry chain.

Especially in the research and development of silicone hydrogel color lenses, DEARER has not only solved the synthesis problem of high-quality silicone hydrogel materials, achieving multiple goals such as high oxygen permeability, long-lasting hydration, and no eye irritation, but also addressed the printing and dyeing issues of silicone hydrogel color lenses. This allows DEARER to extend its design advantages in color lenses to silicone hydrogel color lenses.

What Are the Current Status and Future Prospects of the Color Contact Lens Industry? Why Did DEARER Enter the Color Contact Lens Industry Chain Through ODM Manufacturing at Its Inception? And Why Did It Invest in Material and Equipment R&D? How Did It Gradually Build Industry Barriers Over More Than a Decade of Development? With These Questions in Mind, VCBeat Interviewed Jin Yilin, Founder of DEARER, to Seek Answers.

On all major mainstream social platforms, there are countless video recommendations for cosmetic contact lenses.

Taking Xiaohongshu, Weibo, and Bilibili as examples, there are over 690,000 notes related to cosmetic contact lenses on Xiaohongshu, more than 100,000 posts in the Weibo Super Topic for cosmetic contact lens recommendations, and videos on Bilibili's cosmetic contact lens channel have reached 130 million views. (It is worth noting that there are also numerous cosmetic contact lens recommendation videos on Weibo and Bilibili that are not included in the Super Topics and channels.)

KOL Blogger Promotion as One of the Main Methods for Marketing and Promoting Beauty Products: The Themes of Their Content Creation Can Reflect Consumer Trends in the C-End Market. Cosmetic Contact Lenses Have Clearly Become One of the Hottest Categories in Beauty Consumption.

The data from relevant research reports more intuitively and authoritatively reflect the current booming state of the colored contact lens industry.

According to the "2019 Online Color Contact Lens Consumption Insight Report" released by AliHealth and the First Financial Data Center, with the rise of the appearance-driven economy, an increasing number of consumers are willing to pay for color contact lenses.

Specifically, in 2018, the consumption of contact lenses in China increased to 1.744 billion pieces, representing a 5.4-fold increase in demand compared to 2010. Moreover, in 2017, 70% of online contact lens buyers opted for colored contact lenses.

The "Tmall隐形眼镜行业人群洞察白皮书" (Tmall Contact Lens Industry Consumer Insights White Paper) pointed out that cosmetic contact lenses account for nearly 60% of the contact lens market, with the most intense brand competition and a growth rate of 19% year-on-year.

According to Tmall's 2021 first-half data on the contact lens industry, among the TOP25 brands, the market share concentration of the top five brands is less than 37%, and the concentration of the top ten is less than 48%. The market is highly fragmented, with significant changes in market share amid rapid development.

This also meansNew brands still have opportunities.

“"It is precisely because color contact lenses possess consumer attributes that they have a high growth rate and enormous market potential, which most traditional medical devices do not have," said Jin Yilin. However, this absolutely does not mean that the color contact lens industry has low entry barriers.

Like soft contact lenses, cosmetic contact lenses fall under the category of ophthalmic devices for corrective and protective use, which was included in the Class III medical device regulatory scope by the China Food and Drug Administration in 2012 due to its high-risk level and strict supervision. Therefore, cosmetic contact lenses also possess strong medical attributes and have relatively high industry barriers.

Not only that, according to Jin Yilin,For midstream companies in the colored contact lens industry, expertise in medical device-grade material science, high-precision processing, and fine chemical engineering is also required. This无形中raises the entry barrier for the colored contact lens industry.

Jin Yilin's undergraduate major was Polymer Materials and Engineering, and he once studied in Korea, where makeup culture is prevalent, and got in touch with the colored contact lens industry.

"At that time, color contact lenses in South Korea were industry-leading, but the market for color contact lenses in China was still a blank slate with enormous market potential. Therefore, based on professional knowledge, market judgment, and some coincidental opportunities, I decided to enter the color contact lens sector for entrepreneurship," said Jin Yilin.

Jin Yilin's "market judgment" refers not only to the optimistic outlook on the development of the colored contact lens industry but also to the assessment of the development status and industrial value of the colored contact lens supply chain.

From the perspective of the industrial chain structure, the upstream of China's color contact lens industry includes raw materials and packaging for color contact lenses, the midstream consists of different color contact lens manufacturers, and the downstream includes brands and sales channels such as e-commerce platforms and offline stores, with the end users being consumers at different levels.

And among them,The话语权 of colored contact lens manufacturers in the industrial chain will significantly increase. There are three main reasons:

First, according to Jin Yilin,Currently, in the colored contact lens market, apart from a few brands such as Johnson & Johnson Acuvue, Alcon, and Hiline, which have independent production capabilities, over 70% of colored contact lens brands, restricted by material research and development, production technology, etc., need to rely on OEM factory support.

Second, in recent years, due to the rapid iteration of end-user demands, higher requirements have been placed on the design, craftsmanship, quality, and production capacity of colored contact lenses. Against this market backdrop,Colored contact lens brands will focus more on the construction of channels and marketing capabilities, while design and production process upgrades will rely more on the midstream industry, namely colored contact lens manufacturers;

Third, from the production side,The threshold for contract manufacturers is high, and their number is limited, giving them a certain advantage in the industry value chain. Moreover, due to Taiwanese contract manufacturers' lower sensitivity to mainland China's popular fashion elements, limitations in pattern presentation, and the long time required to rebuild a Korean-style production line, the past ODM landscape dominated by Taiwanese contract manufacturers will be reversed. Contract manufacturers in China will welcome new development opportunities.

Based on this, the first attribute of DEARER is as a color contact lens ODM manufacturer.

How to Define the Strength of a Color Contact Lens ODM Factory?

Design and production capacity are naturally two major hurdles that cannot be bypassed.

As a consumer product closely related to "beauty," design elements such as pattern shapes and color combinations seem to be the foundation for determining the sales of a colored contact lens product. Therefore, for a colored contact lens ODM manufacturer, the improvement and refinement of design capabilities are crucial.

In this regard, DEARER has built up a diversified range of characteristics and advantages around two fundamental dimensions: the design team and capturing trendy elements.

DEARER has a design team of more than 20 people with 11 years of experience in color contact lens design, having cumulatively designed over 40,000 SKUs and forming a design library with tens of thousands of pattern designs. The order rate for regular designers exceeds 60%, while the order rate for top designers can reach up to 98%.

Moreover, DEARER's design team can accurately grasp market trends based on sales data analysis and targeted market research. For instance,DEARER owns multiple product design patents and has continuously introduced creative style designs, multi-color designs, pearlized designs, and rimless designs. Among these, DEARER's "Seven-Color + Pearlized" design has gained widespread market recognition.

DEARER Seven-Color Pearl Design

Not only that, but DEARER can also formulate a complete set of product planning solutions including product design, thematic routes, packaging layouts, etc., through the analysis of customer channels.

Specifically, DEARER's design selection process includes customer analysis — product design recommendation/private customization — customer intention selection — sample presentation — supporting services.

Taking the leading color contact brand Kela as an example, DEARER has established a long-term cooperation relationship with Kela for 8 years, with a cooperation scale of approximately 430 SKUs/year, and the cooperation amount exceeded 50 million in 2020.

At the start of the collaboration, DEARER's product design team will clarify the brand development plan for CLALA, establishing customer profiles based on CLALA’s brand characteristics. On this foundation, a dedicated designer will be assigned to adjust the periodic design style and direction according to CLALA’s selection needs at different stages, customizing exclusive patterns and styles. Design drafts will be provided at fixed times each month. During this phase, DEARER’s Design Director will personally participate, offering suggestions and assistance to help continuously create market-winning products. Subsequently, after CLALA selects the intended models, product sampling and trial wearing will take place. Once finalized, the order will be completed and production arranged.

It is worth noting that,DEARER's design team not only provides design services for colored contact lens products for brands but also offers配套设计方案及主题企划案, including packaging design, Tmall link color theme coordination, and more, based on different scenario needs of the brands.

With the empowerment of design capabilities, in addition to the aforementioned leading color contact lens brand Kelala, DEARER has also gained numerous partners. For instance, Shanghai Jialiang, the sales champion on Pinduoduo (its brands include: Aimei, Melefei, Kalefu, Gaoshineng, Aijing, Runtong, and MouSe), Meijumeijia, which has 320 offline specialty stores and over five million members, and the color contact lens brand Sweet Color, which has 500 offline stores in China.

Of course, the reason for attracting many partners is not only the excellent design capability, but also the comprehensive and strong production capacity is equally important.

Product pipeline, production process, and production capacity are key indicators for measuring the production capabilities of a colored contact lens ODM manufacturer.

“"Obtaining a registration certificate is a precondition for production."Jin Yilin stated that there are currently very few certified manufacturers in China's colored contact lens industry. Against this backdrop, DEARER has obtained 10 product registration certificates, including 5 for long-term use colored contact lenses and 4 for daily disposable colored contact lenses, "making it the manufacturer with the most daily disposable colored contact lens registration certificates in China."

In other words, in terms of the product lifecycle, DEARER's colored contact lens products cover the entire cycle from long-term yearly, half-yearly, and monthly disposables to short-term daily disposables. The four daily disposable colored contact lens registration certificates also lay the foundation for DEARER to tap into the potential market of short-term disposables.

Short-term throwaway products are the future consumption trend.

According to the "2019 Online Color Contact Lens Consumer Insight Report" released by Alibaba Health and the First Financial Data Center, from the perspective of different disposal periods, the consumption proportion of daily disposable color contact lenses online has been increasing year by year, while the consumption proportion of annual disposable color contact lenses has slowed down. The wearing cycle of color contact lenses is becoming shorter. In addition, in terms of the specifications of individual daily disposable products, consumers are more focused on small packages containing 10-20 pieces. The consumption proportion of small packages with less than 5 pieces, known as "trial-sized" daily disposables, shows a significant upward trend.

Therefore, DEARER, with four daily disposable color contact lens registration certificates, has gained a first-mover advantage in the daily disposable color contact lens market.

In addition,In terms of material usage, the materials used in DEARER's production are hydrogel and silicone hydrogel (DEARER has already developed the capability to produce silicone hydrogel color lenses, but they are still in the clinical trial stage, with the product expected to launch this year). These materials have high oxygen permeability and water content, ensuring comfortable wear. Among them, silicone hydrogel is set to become the mainstream material for colored contact lenses in the future.

However,Unfortunately, there are currently no domestically produced silicone hydrogel color contact lenses available in bulk on the market in China. However, according to Jin Yilin, DEARER is expected to obtain the registration certificate for daily disposable silicone hydrogel color contact lenses this year and achieve bulk market availability for these products.(Specific details will be elaborated in the next chapter).

If the product registration certificate is the prerequisite for colored contact lens production and also the threshold for colored contact lens ODM manufacturers, then the manufacturing process is the core competitiveness of ODM manufacturers.

According to Jin Yilin,DEARER possesses both full-molding and semi-molding/semi-cutting processes, capable of meeting the production needs for daily disposable and long-term disposable lenses. Additionally, with its inner surface film-coating technology, the pigment layer does not come into contact with the eyeball, enhancing safety. Moreover, DEARER has advanced optical design and processing capabilities, enabling more precise manufacturing of toric lenses, offering high flexibility in production techniques.

A large number of product registrations combined with core technology have laid the foundation for DEARER to establish "stable mass production design"—a key barrier for colored contact lens ODM manufacturers, according to Jin Yilin.

Currently, DEARER has built four production bases in total — Jilin Rierkang, Suzhou Rierkang, Xi'an Keshimei, and South Korea VOCOL (Fukou). Among them,Jilin Realcon can achieve an annual production capacity of 200 million pieces; Suzhou Realcon and Xi'an Kosmech's production capacities can reach 50 million and 60 million pieces per year respectively; Korea Focare currently has a smaller scale, with an annual production capacity of 12 million pieces, but after the automation production line upgrade, the capacity can be further increased.

Moreover, DEARER plans to build two production plants in Shanghai, with the first phase expected to commence operations in 2023 and the second phase in 2024. After production begins, the annual capacity of the two plants will reach 1 billion units.

It is worth noting that, whether it is the expanded production line of Jilin Realcon, or the production lines in Suzhou Realcon, Xi'an Kosme, and Shanghai plant, the main products produced are daily disposable products.

In addition, to further reduce production costs and improve production efficiency, DEARER is also promoting production automation, including automated lens detectors and automated demolding machines.

Automation Equipment in DEARER Medical Factory

"At present, the Jilin factory is gradually replacing manual labor and non-automated equipment with automated machinery. Currently, the factory's automation is segmented. In the future, the Shanghai factory will be entirely equipped with a more integrated tandem automated production line," revealed Jin Yilin.

DEARER's industrial role is far from being a simple ODM contractor.

"At the beginning of entrepreneurship, the domestic colored contact lens industry was still very profitable because of the high unit price of products, allowing manufacturers, distributors, and brands to make money. However, due to the highly homogenized processes and products of domestic factories, the production side quickly fell into a cutthroat competition." Jin Yilin stated, "We must find a breakthrough."

At that time, the breakthrough mentioned by Jin Yilin was still centered on design as the core of craftsmanship, following the new style route; subsequently, it gradually expanded to the research and development of craftsmanship and materials.

For example, in 2014, in response to the emerging trend of daily disposable lenses in Japan and Korea, DEARER initiated the research and development of daily disposable technology and materials, and obtained the first registration certificate for daily disposable cosmetic lenses in China in 2018. In 2018, in response to the material upgrades occurring across the entire contact lens industry, DEARER officially launched its silicone hydrogel contact lens R&D program, while simultaneously establishing a comprehensive, full-chain R&D system encompassing materials, formulations, inks, design, processes, and automated equipment.

As of now, DEARER has obtained two silicone hydrogel invention patents: "A Composition for Preparing Oxygen-Permeable Fluorosilicone Hydrogel Contact Lenses and An Oxygen-Permeable Fluorosilicone Hydrogel Contact Lens and Its Preparation Method" and "A Preparation Method of an Organosilicon Monomer Compound." Moreover, DEARER's first silicone hydrogel product has completed clinical trials.

When asked why he ventured into material research and development, Jin Yilin stated that raw materials are the foundation of the entire colored contact lens industry. Hydrogel material products currently on the market have been developed for over 30 years, and the emergence of new materials will inevitably lead to product upgrades. Seizing the opportunity in material upgrades is key to capturing future markets. "This is also the underlying logic behind why DEARER began developing new silicone hydrogel material products as early as 2018."

According to VCBeat,The oxygen permeability of DEARER's silicone hydrogel color lenses can reach 165mmHg, while the oxygen permeability of ordinary hydrogel color lenses is generally around 10-15mmHg, with a difference of more than ten times between the two.

In addition, in 2022, DEARER will launch a research and development project for fluorosiloxane materials as an attempt to explore a new path for silicone hydrogel material technology.

However,Material development is only a part of DEARER's research and development sector.

It is reported that DEARER's R&D team is divided into four parts: R&D design (more than 20 people), material R&D (more than 10 people), process R&D (more than 10 people), and automation equipment R&D team (more than 10 people), totaling more than 70 people.

In other words,In addition to material research and development, DEARER is also involved in process R&D and automation equipment development.

Among them, DEARER's process R&D mainly focuses on mold design, development, and production.

Since the full compression molding process requires the upper and lower molds to be nested for thermal reaction to form lenses, each lens produced consumes a pair of plastic molds. Companies in the industry generally purchase molds from upstream suppliers, but externally sourced molds commonly face issues of low yield rates and high costs.

According to Jin Yilin,At present, DEARER has the ability to directly design and produce molds, which can significantly increase the yield rate and reduce costs while flexibly adjusting mold inventory based on downstream lens orders, greatly improving the efficiency of the production line.

Moreover, DEARER places great emphasis on the research and development of automated equipment, which has been largely completed and is gradually being put into use.

"Since its establishment, DEARER has positioned itself as a high-end color contact lens supply chain. Therefore, it not only pays close attention to the production process but also highly values research and development as well as sales. Although our business model is mainly ODM, we believe that R&D is the internal driving force for development, and sales are the external driving force," Jin Yilin said during the interview.

This also means that,DEARER's business also involves the marketing segment downstream of the industry chain. However, Jin Yilin emphasized that all of DEARER's sales operations are related to its ODM business—either nested within the ODM business or aimed at better understanding color contact lens brand operations to better serve ODM clients.

For example, in order to better understand the operational logic of colored contact lens brands, DEARER launched its own brand targeting customers aged 18-35, with a price range of 148-369 yuan. The brand reaches end consumers directly through offline self-operated stores.

However, during the interview, Jin Yilin repeatedly emphasized, "By launching our own brand, we hope to understand the challenges faced by our ODM customers through our own operations, thereby improving the service quality of our ODM business."

Besides, when the annual and semi-annual disposable products are mainstream in the Chinese market, DEARER's ODM sales strategy is to capture the new style market through rapid updates, thereby helping customers achieve high unit pricing. However, when there is a clear trend towards daily disposables in the market, it quickly enters and captures the market with high-quality and novel-patterned daily disposable products.

Moreover, as the way customer groups perceive brands changes, the operational methods of cosmetic contact lens brands have also undergone transformations. An increasing number of brands are setting up shop on e-commerce platforms such as Tmall, Douyin, and Kuaishou. Against this backdrop, DEARER is continuously building its online marketing capabilities to empower ODM clients in swiftly understanding market demands.