Shenzhen e-cigarette factory, which was blown on the “window”, should they bet on the future?
Editor’s note: This article is from Interface News Technology Channel, author Lin Teng, < Span>佘晓晨,Edit Wen Qiqi.
“Luo Yonghao’s price is too low, we refused on the spot!” Zhang Long, the head of an electronic cigarette factory in Shenzhen, sprayed an electronic smog and shook his head.
Zhang Long, who used to count the money and countlessly, may not have thought that he would now have to bargain with Chinese entrepreneurs.
After 10 years ago, foreign customers found Zhang Long with a large bag of cash, asking them to produce e-cigarettes, set up a small workshop, and an electronic cigarette was shipped to the world. He clearly remembers that the boss’s famous saying at the time was: “Let the off-season come quickly.”
However, 10 years later, Zhang Long discovered that he was pushed into the guise of Chinese entrepreneurship, but making money has become more and more difficult.
The factory of Zhanglong is located in Fuyong and Shajing Streets in Bao’an District, Shenzhen. It is known to Shenzhen people as “shengsheng”. However, the capital and entrepreneurs knocked on the door, which made the industrial area that once had a partial stagnation break the calm.
Fuyong Street in Bao’an District is 10 kilometers away. A building that is not too conspicuous is located in the industrial park. There are dozens of workers at the door of the factory holding their resumes at the door. They are waiting for the foreman’s order to get a chance to work in the factory.
If you stay in a building for more than a minute, you may smell a smoky oil, or a white-haired old man will whisper to you: “How big is the floor? This layer can be packaged for you.”
In 2019, e-cigarettes became the first outlet for domestic entrepreneurship. Entrepreneurs from all walks of life flocked in. In less than two months, e-cigarette brands have sprung up, and the outside world called it a “thousand-smoke battle.”
Shenzhen became the first stop of e-cigarettes. According to the prediction of an industry person, 90% of the world’s electronic cigarettes are produced in Bao’an District, Shenzhen. There are 600 e-cigarette manufacturers hidden in a dozen square kilometers of blocks. From placing orders to getting products, the fastest 39 days can be done. To.
Looks like this is the moment of the “land of milk and honey”, but behind the prosperity, it hides the anxiety of the factory owners.
“We originally had 40% and 50% of profits, and now only 5% to 10%.” Zhang Long said helplessly.
Factory owner and Dr. Silicon Valley
At 4 pm, Zhao Wen, a partner of Shenzhen Heyuan Electronic Tobacco Factory, arrived at the factory on time.Customer communication, he is nearly 50 years old, dark complexion, wearing a burgundy shirt, and the shoes are shiny.
In the past ten years, Zhao Wencai has earned enough money, but recently, a Chinese entrepreneurial team asked him to make changes.
This company is called Hi-Mist, and the founding team is from Silicon Valley. Scientist Xing Chenyue, a Ph.D. in chemical engineering at the University of California, worked at the electronic cigarette giant JUUL and invented the “nicotine salt”. Now she has set up the laboratory in Silicon Valley and the production moved back to Shenzhen Baoan.
Another founder Yao Xiaochao, Stanford’s master, Silicon Valley investor, came to Shenzhen to invest in e-cigarettes in 2018. But he accidentally discovered that although the market is very embarrassing, there are very few qualified products. Therefore, finding a quality factory has become one of the important tasks of this company.
According to the practice of conventional workshops, after the arrival of customers, the factory owner will give each other ten e-cigarette molds. After the customers have selected them, they will be equipped with a workshop, brush the floor paint, buy two production lines, and recruit several workers. Just assemble it. No test, no standard, hand in hand, first-hand delivery, starting price of 5 million.
But the current team doesn’t want to repeat the past. Yao Xiaochao said that they produce better quality products in order to truly enjoy the love of old smokers. Therefore, there are requirements for design, process and production. For example, in order to create a sense of smoking ritual, it is necessary to add a design of “sliding out and accommodating” cigarette holders in the electronic cigarette.
Hi fog electronic cigarette design
“The factory has never done this kind of design before. They don’t know how many angles of the slides are optimal, and they don’t know what materials should be used for the slides. You have to tell them and teach them.” Yao Xiaochao said.
This is indeed a new challenge for Zhao Wencai.
First of all, he needs to be equipped with an early-stage R&D team. According to Zhao Fan, the company has now expanded from 10 R&D teams to 500 people. Secondly, the environment and equipment manufactured by the factory are constantly improving. Just recently, Zhao Wencai invested a lot of automation equipment in the factory.
e-cigarette production line
For example, in the oil injection section, most of the previous relies on manual syringe injection. But now more often than not, it is required to use automated oil filling.
Artificial oiling
“Everyone thinks that e-cigarettes are quite simple. In fact, some details are more difficult than mobile phones,” said Liu Yu, chief operating officer of Xiwu, former president of China’s former BlackBerry.
The principle of electronic cigarettes is to produce smoke by atomizing the smoke. Compared with traditional tobacco, the principle of combustion is different. The temperature of traditional tobacco burning can reach 800-1000 degrees, and the atomization temperature of electronic cigarette is 170~200 degrees.
In the case of airtightness, this is more precise for structural parts. The mobile phone is waterproof for the high precision of the structure, but if the precision of the electronic cigarette is 0.1, the suction resistance will rise from 800 to 1100.
Liu Yu said: “The mobile phone has a large number of seams. The batch is small and can’t be seen. But the electronic cigarettes are pumped today. They need to be pumped tomorrow. The taste, air tightness and resistance should be consistent.” .
On the other hand, device suppliers of e-cigarettes also have strong quality requirements. Liu Yu said that, for example, the product shell material may be the manufacturer of the lampshade for Mercedes-Benz, BMW and Toyota. The supplier of plastic parts is supplied to Samsung LED.
On the production chain of components, the current fog is similar to that of mobile phones. It is divided into battery raw material suppliers (batteries, batteries, control circuits), atomizer raw materials (plastic, glass, hardware, heating resistors) and Smoke oil raw materials. In the specific supply chain management and control, it is also divided into three parts, the secondary and tertiary suppliers of assembly plants and components.
“We cooperate with this customer, and we invest a lot. This single business does not lose money.” Zhao Wencai said that the general customer I have already shipped, and now I can’t miss a single oil. The hand board and the mold fee are not set for a 100,000 or 80,000.
The Golden Year of Shenzhen Yancheng
The way Zhao Wencai does business is not the case.
In 2003, pharmacist Han Li invented the first true e-cigarette and patented it, and founded the company. After that, as the smoke also developed rapidly, it will be listed two years later.
However, the smoke in its heyday was in crisis after 2008. CCTV anti-counterfeiting,Public opinion criticism has caused a series of negative effects such as smoke. The State Tobacco Monopoly Administration said that if the propaganda of the smoke is suspected of being inaccurate and contrary to scientific theories, such as the smoke is “openly punished.”
At the same time, there have been many factories in Shenzhen and Zhejiang that have copied counterfeit products, such as the sales of cigarettes and electronic cigarettes continued to decline. In 2013, Rugao was acquired by Imperial Tobacco, the world’s fourth largest tobacco company, for $75 million, including e-cigarette patents.
The golden age of Zhao Wencai and Fuyong Shajing e-cigarette entrepreneurs began with the collapse of “Ruyan”.
After the acquisition of the cigarette, the factory that copied the electronic cigarette found an opportunity. Perhaps it is out of the past, everyone turned their attention to foreign markets.
With the liberalization of e-cigarettes in the international market, the development of e-cigarette factories has accelerated. In 2012, the US Supreme Court ruled that the FDA banned the sale of electronic cigarettes, and determined that e-cigarettes are tobacco products. At the same time, countries such as Japan and South Korea have also introduced strict regulations on tobacco control in public places.
Zhao Wencai’s earliest business was computer OEM, while the other two partners were from a massage chair. The three people took a shot at this time and started the OEM business of e-cigarettes.
At a Canton Fair, Zhao Wencai spent 10,000 yuan on an electronic cigarette booth. Suddenly one day, Turkish and Israeli customers came to the door. If they didn’t say anything, they gave Zhao Fan a lot of money. Their request was simple: increase production capacity and sell the products overseas.
Although there are enough orders, it is very difficult for the workshop production team. The reason is that no one in Shenzhen at that time was willing to provide a supply chain for e-cigarettes, including hardware, batteries, and heating wires, which were not mass-produced. The mass production cost was extremely high.
“A small house, Huaqiang North bought some spare parts, and came back to recruit workers to assemble. At that time, it was all done,” said Zhao Fan.
The current electronic cigarettes are mainly divided into two categories, one is the heating and non-burning electronic cigarette represented by Japan IQOS. (IQOS is subject to the Regulations on the Implementation of the Tobacco Monopoly Law in China, and the formal channels prohibit the sale of this product). The second category is smoke and oil electronic cigarettes. Currently, the market is mainly for bomb-type and disposable electronic cigarettes.
In order to make the supply chain prosper, more and more e-cigarette practitioners who have eaten the soup are invited to participate in this industry. The popular phrase at the time was: “If you want to start a business, go to a hardware factory. If you don’t have money, I will give you a spare piece for me.”
One phenomenon is that Shenzhen Huaqiang North is mainly Hakka and Chaoshan people, but in the electronic cigarette industry in Fuyong and Shajing, it is mainly based in Jiangxi, Hunan, and Sichuan. These people are the earliest entrepreneurs of Shenzhen e-cigarettes. .
In this way, Shajing’s e-cigarette products began to sell globally, and formed a complete e-cigarette supply chain. In 2014, China’s electronic cigarette manufacturing industry reached its peak, and the number of electronic cigarette factories reached more than 2,000.
In this place, you can find any of the abrasives and components needed for e-cigarettes in the factory next door. In addition, the world’s most abundant e-cigarette industry talents are gathered here.
“It’s very easy to earn more than a billion dollars a year,” said Zhao Wencai.
Future and Bet
Everything has changed since the beginning of this year.
In January 2019, many e-cigarette brands were released. Luo Yonghao, the same uncle, the former hammer technology Zhu Xiaomu and others have entered the market.
In the eyes of Zhao Wencai, this type of customer is called a capital player. In other words, the Internet model is used to quickly educate the e-cigarette market in a fast and low-threshold manner, which is quite different from traditional manufacturing.
After being targeted by capital and entrepreneurs in the e-cigarette industry, the upstream and downstream industry chains are beginning to become crazy, with more and more participants including production lines. In front of customers, prices are getting more and more in recent years. Became the main means.
“Because of the capital coming in, there are more and more people who are now doing e-cigarette factories, and the competition is fierce. The customer is no longer a product of yours. He has so many choices, and our profits have not increased at all.” Say.
On the other hand, once the workshop-style production line began to be targeted by entrepreneurs chasing technology elements, they began to be asked to re-invest in automated industrial upgrades.
The original e-cigarette is a product such as “smoke”. The exterior is modeled after traditional cigarettes. It consists of batteries, atomizers and cartridges. The cost is relatively low and the technical threshold is low, but the atomizer is easy to be burnt. Broken, and the taste is single.
With the improvement of technology, the atomizer and the cartridge of the electronic cigarette are combined, and the atomizer has a protective cover outside, and the cartridge is inserted into the atomizer. Current mainstream products on the market, including both large and small cigarettes, fall into this category. After that, disposable atomizers and cartridges appeared, and the appearance and raw materials were upgraded.
E-cigarettes sold abroad
Liu Yu said: “The average small and medium-sized factory will recruit 200 factory sisters to do several production lines, but we will not use such a factory. Now we have many requirements for the quality of the production line.”
Evenly, if the market is growing wildly, then everything is worthwhile, but the problem is that today’s capacity is not directly proportional to input.
Zhao Wencai is also betting himself.
The current e-cigarette market is mixed, it seems to be lively, its