Over the past year or so, hundreds of e-cigarette companies have emerged in the industry. In Shenzhen alone, they have contributed 90% of the global e-cigarette market.
Editor’s note: This article is from Daily Economic News, Reporter: Ouyang Kai, editor: Chen Junjie, authorized to reprint.
At the moment, the e-cigarette industry is hot. Before the top of the IDG, source code, real grid and other top VCs, followed by the same road uncle founder Cai Yuedong, hammer technology Luo Yonghao and other big coffee to enter.
Many investment institutions and the Internet have been eyeing this cake. Just on September 29, another e-cigarette brand, NUT Nut, announced that it had completed the tens of millions of angel rounds of financing led by Chuangxiang Investment.
The Daily Economic News reporter found that over the past year or so, hundreds of e-cigarette companies have emerged in the industry. In Shenzhen alone, they have contributed 90% of the global e-cigarette market, so many brands. Influx, the foundry is obviously in short supply – many brands have even had to rack their brains to “please” the foundry in order to “race” for limited capacity.
Strong foundry
Compared with the way mobile phone manufacturers choose to build their own factories, e-cigarettes are more of a choice of foundries.
It is true that building a supply chain requires money, requires talent, and requires a strong ability to integrate the entire industry chain. Whether a new brand can grasp both production and research and at the same time grasp the brand and channels is a huge test.
In the words of Chen Min, CEO of e-cigarette brand, if you choose to build a factory, there is obviously no competitiveness in terms of efficiency and cost. In this way, why can’t you stand on the shoulders of others to develop?
Because the threshold of e-cigarettes is not high, it has not been difficult to make LEDs in Shenzhen and Dongguan before, and the factories that produce mobile phone parts have changed to e-cigarettes. But for a time, so many brands influx, the situation of more meat and less meat makes the foundry more and more powerful.
It is reported that at this stage, e-cigarette foundries will even pick brands and pick customers. Many foundries are non-co-brands that do not cooperate, and even put forward many requirements to the brand during the account period, such as some generations. The factory is only willing to start work after receiving the deposit or even the full amount, and the brand can only pick up the goods after paying the balance.
“First of all, they (the foundry) trust your brand and company, the product you want to choose, or the product plan you make yourself, he thinks it is reliable, and for him, it is not just to say It can be achieved, preferably a brand that can improve his ability. So when the factory chooses, you will find out why these factories only choose these brands. Because these brands have growth potential, they are willing to support you. You work together.” Chen Min explained.
This kind of strong position has also made many foundries earn a lot of money. Therefore, many mobile phone supply chain companies want to “cross-border” to e-cigarettes. Changying Precision said in the 2019 semi-annual report that the company has obtained the qualification of the well-known e-cigarette brand JUUL e-cigarettes. It means that Changying Precision has successfully entered the electronic cigarette industry and become a member of the field of electronic cigarette foundry.
From capital-driven to technology-driven
Chen Min believes that under the current situation, it is not entirely dependent on the foundry, and the brand still has to establish its own supply chain and R&D team. “Whether it is the design of the product, the structural scheme, and the material selection of the atomizer, we must focus on us, and we will lead it.”
This practice, which runs counter to reality, has also cost Chen Min a lot of money. Just to understand the supply chain situation, he spent 8 months, even in the middle, there have been cases of replacement of the foundry, the foundry boss directly complained to them to help them to do too difficult, because the entire line of technology, Equipment must be redeveloped.
“Who doesn’t want to have their own supply chain? This is no longer subject to people in terms of capacity, and the product’s update iteration cycle can be shortened, but now the foundry is so strong, the timing is not appropriate, there is no financial strength and Talent reserves are the most important. If they are not, they can only be temporarily led by their (factory).” Some practitioners lamented the reporter.
Of course, the e-cigarette foundry has a simple method of doing it. For example, picking a mold from a number of factory product libraries, changing the color, or changing the surface, can be achieved, which is the fastest way for OEMs to do electronic cigarettes.
But with the development of the industry, especially the e-cigarette national standard and e-cigarette legislation are getting closer and closer, the industry will eventually be supervised, which means that the cost of compliance will increase, and the influence of the foundry on the brand reputation will also be Gradually exposed, such as uncontrollable quality, limited production capacity, long iterations of product iterations, serious oil spills, etc., these key links, if the brand does not have much control, over time, it will constrain the brand.
Liu Bingyun, chairman of Saima Capital, said that because there is too much capital to enter, e-cigarettes will definitely enter the bubble stage. At present, the industry still lacks certain core competitiveness and cannot see a particularly high technical threshold, except for a few There are no big brands that are particularly large in scale. Most companies are still at this stage of manufacturing and processing. If you want to be a brand, you must have technology.
It is undeniable that the rapid development of e-cigarettes and the driving of capital have played a role that cannot be ignored. However, the driving force of technology also has the power to be underestimated.
In the US market, Chen Min cited 60% of smokers who had been exposed to e-cigarettes before the birth of nicotine salt, but the conversion rate was only 6%. However, after the invention of the nicotine salt technology, the overall conversion rate has increased fivefold, indicating that there is still a technical drive.
From capital-driven to technology-driven, perhaps the next step for China’s e-cigarettes.
“Daily Economic News” reporter noticed that many well-known e-cigarettes on the market have begun to play “technical cards”, such as E-cigarettes, and McWay has established the world’s largest e-cigarette exclusive factory. A quality supply chain team of more than 150 people; such as the hi-foam electronic cigarette, set up a laboratory in Silicon Valley, USA, specifically for the development of smoke oil and next-generation nicotine technology.
Chen Min was the general manager of the TCL Group’s Communications Intelligent Applications Division. He was also the executive of Superman Intelligence, the first robot listed company in Hong Kong. He believes that the current stage of e-cigarette development is similar to that of the original smartphone.
It is true that when the smartphone industry first emerged ten years ago, there were many domestic mobile phone brands, Bird, Amoi, Panda… The current status of the electronic cigarette industry is exactly the same as that of the smartphone industry of the year. .
Chen Min said that the current supply chain threshold is relatively low, everyone can get more basic products to sell, but I am afraid that there will be only a few survived in the end, only continuous investment in products and technology. In order to build brand influence among consumers, it is possible to live to the end.
“There must be a core patent in order to have real barriers. The products that are eliminated may not be eliminated only because of national supervision and market regulation, and may also be out of the market because of their insufficient strength.” Chen Min said.