“20 yuan per hour, air-conditioned, sit to work, come or not?” At the entrance of the electronic cigarette factory in Shajing, Shenzhen, a dark middle-aged man lures every job seeker who stops at the recruitment bar.
Shajing, Shenzhen, is also known as the “e-cigarette Street”. 90% of the world’s e-cigarettes come from here. When entering the Shajing, there are many people in front of the door of the plant, including the workers who need to be recruited. It seems that there are dozens of e-cigarette processing plants, or large or small factories and workshops on the ordinary streets, creating an e-cigarette market with sales exceeding 100 billion yuan.
From the mobile phone ODM production “Counterfeit cell phones” to the production of electronic cigarettes, HanFang calls this “dimension reduction strike”.
“Shenzhen speed” has created a “wealth making myth” without brand copying design. “In the ten years from 2006 to 2016, I met too many of our small customers, that is, a small team of more than three or five people with more than a dozen people will make a cell phone of hundreds of millions.” HanFang, which was originally engaged in mobile ODM production, said that it was a decade of rapid development of the mobile phone industry, but with the rise of mobile phone brands, the head enterprises accounted for 90% of the market share of the mobile phone industry. Since 2016, the “Counterfeit” business has become difficult to do.
From BB messenge to cell phone to “Counterfeit” mobile phone, from half palm size MP3 to human size robot, Shenzhen will not let go of any “hot” products in hardware manufacturing industry. The manufacturing industry transformation takes only in the blink of an eye. Factory owners have a sharper sense of smell than investment institutions, and can detect market trends more quickly.
“In fact, the logic is the same. The electronic cigarette industry is very similar to the counterfeit mobile phone industry many years ago.” “The supply chain of e-cigarettes is very simple, and the level is too much lower than that of the mobile phone supply chain. In addition to an atomizing core to study materials, other chips, such as chips, feel like making a toy when you have made a mobile phone,” said the HanFang.
Chen Ming, who entered the e-cigarette industry as early as 2006, told the economic observer that he had a hard way to go.
Chen Ming, the boss of Shajing first batch ofelectronic cigarette processing factories in Shenzhen, is one of the first batch of people in the industry. He was originally engaged in the production and processing of the first generation of electronic cigarettes, such as Ruyan, but because the “smoke” is too far away from the taste of real cigarettes, and then it was stopped due to false publicity. The domestic electronic cigarette market was once stagnated. In addition, there are more than 100 relevant suppliers in the whole supply chain of e-cigarette industry, large and small, but none of them is dedicated to e-cigarette supply. The cost of mold opening is too high, so Chen Ming can only go to Huaqiangbei to buy some spare parts and come back to rub them with a steel file.
Since 2009, the second generation of e-cigarettes has been accepted gradually in the United States, the United Kingdom and other countries due to its large vapor effect, and has formed the e-cigarette player culture. E-cigarette players regard e-cigarette as a hobby and are keen to try different devices and e-liquid. Chen Ming gradually received orders from foreign customers, so he began to “transfuse” upstream suppliers and lay his own e-cigarette supply chain.
Chen Ming’s factory is in Shajing. Shajing, Shenzhen undertakes the supply chain of e-cigarette industry. At first, it is only because it is close to Huaqiangbei. It is convenient to purchase raw materials or recruit talents in e-cigarette industry. But now, electronic cigarette factories can’t leave Shajing, because no one can survive alone without the mature electronic cigarette industry chain in Shenzhen.
“Even though prices, rents and personnel costs are high here, you have to be here. If I am in Shajing, the mold factory is next door to the same plastic part. It can be arrived in an hour or half an hour, which is very cheap. But if the factory is in Huizhou, the transaction cost back and forth will also be counted in the factory. ” Chen Ming told the economic observer that no factory in the e-cigarette industry has the same appeal as Foxconn, which can do “I am moving to Shanxi, moving to Gobi and the desert in Xinjiang, and suppliers can follow me.”
Factories are king
Put on the shoe cover, wear the dust-proof clothes, wear the mask, the headgear, walk through the wind drenched room… Now the steps needed to enter an electronic cigarette production workshop give people the illusion that they are entering a food processing factory. In front of the long working table in the strong air conditioning and slightly low temperature electronic cigarette production workshop, there are rows of production workers who are working hard. Inject the cartridges with the e-liquid, fill the atomizing coil, glue, weld the battery, paste the anti-counterfeiting code on the packaging bag, plastic seal, product sampling… All the steps of an electronic cigarette production can be completed in the production workshop of this floor which is not large.
Use a small syringe to extract two times from the e-liquid jar, which is just the amount of e-liquid needed by a pod, and then manually glue the cart, so that the bottom of the contact point is firmly attached to the e-liquid part. Chen Ming said that the reason why the production capacity of the third generation of closed electronic cigarettes (pod system) is lower than that of the second generation of open electronic cigarettes (large cigarettes) is that only manual refilling can be used.
Production of pod system requires more complicated production process, which also puts forward higher production requirements for the factory. “The mod is easy to assemble. From the outside hardware, CNC (numerical control machine tool), you can get several shells, batteries and circuit boards, and then you can sell them with a dozen screws. The mod is not filled with oil. Consumers buy the oil and pour it back in, how much they smoke and how much they pour, and there is no oil leakage. Now the pod system is leaking after a long time storage. It’s very difficult to solve the problem. ” Chen Ming told the Economic Observer.
In the next production line, the workers are assembling the circuit board by welding. The welded circuit board will be assembled with the battery and shell of the electronic cigarette by the people in the next production process. Then take it to the workers on the next production line, pack it, and paste the anti-counterfeiting code on the packaging bag. It only needs to go through 5 production lines, and an electronic cigarette can be produced.
Workers in electronic cigarette factories usually work at long tables from 8 a.m. to 10 p.m., and each production line is coordinated by a leader. Workers work at fixed points, and the work on their hands is more unified. However, the workers who have been responsible for the shell assembly of electronic cigarettes are now flat as a U-disk, and will soon be replaced by another electronic cigarette brand with a pen like shell. During the visit, the reporter of the Economic Observer found that only in the first floor of the production workshop can we see that the workers are processing and producing at least five products of different brands of electronic cigarettes.
“The factory has allocated us almost 250 workers, but these 250 workers are not only for ours. If our materials don’t arrive, workers will make electronic cigarettes of other brands. We only put forward our production requirements to the factory, and the factory is responsible for the overall planning of the rest. ” Myst Labs electronic cigarette production staff told the economic observer.
“At present, the OEM is in short supply. It is the OEM that is looking for customers.” Chen Min, CEO of Myst Labs electronic cigarette, told the economic observer that new electronic cigarette brands are springing up one after another. It’s impossible to build a factory of our own at once. We can only look for OEM. However, the capacity and scale of the factory will not increase rapidly in the short term. At this time, the factory will choose brands and customers instead. In today’s electronic cigarette industry stage, the factory is in a relatively strong position.
According to Chen Min, the company has invested more than one million yuan in cooperative research and development with the factory in the production and manufacturing links such as the shell and packaging of electronic cigarette products. In September, RELX, an e-cigarette company, also said it would open a special e-cigarette factory in Shenzhen to operate and manage with Smoore. RELX said that the exclusive factory covers an area of more than 20000 square meters and has more than 4000 workers.
Chen Ming is also expanding the scale of his factory. “There are not enough workers. During peak production, 12000 workers are needed. Our larger factory is in Tangwei. The factory in Zhongshan will start production in May next year. Now it is being renovated.”
39 days to create an electronic cigarette brand
“If you can order 3000 at a time, I’ll give you the price.” In Huaqiangbei, an electronic cigarette stall, the boss of the stall gave the reporter the lowest price for a disposable vape, 28 yuan, on the calculator. “You don’t have to worry about anything from e-liquid, design to packaging. As long as you register a brand and we spray it on the product, and you can sell it.”
With less than 90000 yuan input and 10 days of production period, a new e-cigarette brand can appear on the market. “If you make a pod system, I can help you make it completely different from the outer package design of RELX, but the cart can use the RELX device.” The supply price of another e-cigarette is 33 yuan, while its online sale price is 169 yuan.
An e-cigarette industry practitioner told the economic observer that the entry threshold of the e-cigarette industry is very low. Now the e-cigarette supply chain is becoming more and more mature. It only needs one factory building, a little floor paint, and two production lines. Some workers are invited to assemble them. There is no testing link, leave alone the production standard. Tens of thousands of yuan can open a factory, and some raw materials can be directly loaded back. Find a customer and sell it. According to the industry, the whole process from brand registration to factory finalization to final product launch only takes 39 days.
In Huaqiang North, the boss assured the reporter that the price he gave was the lowest price in the whole industry. The reporter asked him whether it was really safe to vaping and whether his factory in Humen had corresponding production standards for electronic cigarettes. The boss waved his hand and didn’t care. “Isn’t there no standard now? Why do you bother so much?”
Billion level market
Although he made money from the production of “copycat” mobile phone ODM, Han Fang still felt that he missed the opportunity to become a first-line mobile phone brand, so this time he transferred to the electronic cigarette industry, and he wanted to change his tactics and make a brand. “It’s hard to change a mobile phone every year, but e-cigarettes are not the same. Its repurchase rate is high, and the cart is a continuous purchase behavior. There is still a lot of room for the market of e-cigarettes,” HanFang firmly believes.
There are more people like HanFang who dream of becoming “Juul of China”. In 2018, Juul’s valuation has reached US $38 billion, accounting for more than 70% of the U.S. e-cigarette market. The myth on the other side of the ocean stimulates the nerves of domestic entrepreneurs and investors. According to incomplete statistics, in the first half of 2019, there were more than 35 domestic e-cigarette industry investment cases, with a total investment of more than 1 billion yuan.
Great Wall Securities Research Report shows that the number of Chinese smokers accounts for nearly one-third of the world’s smokers. As a big smoking country, China’s e-cigarette penetration rate is far lower than that of the United Kingdom, the United States and other European and American countries. As of 2018, the penetration rate of e-cigarettes in China is only 0.32%. If the penetration rate of China’s e-cigarettes reaches 9.50% of that of the UK, the market size of China’s e-cigarettes will exceed 140 billion yuan.
Under the background of high gross profit and high growth space of industry dividend, many institutions are in the electronic cigarette industry. Zhu Xiaomu, former Smartisan technology product director, founded “FLOW” e-cigarettes, “Yooz e-cigarettes” jointly launched by Cai Yuedong, former uncle, and He Chang, former founder of Huang Taiji, and “Linx” jointly founded by Zhang Jinyuan, chairman of uncle, Sha Xiaopi, CEO of vision, Zeng hang, CEO of Junwu sub plane, etc.
In HanFang’s view, although the track has been crowded and the commodity homogenization is obvious, the e-cigarette industry has not formed a real brand. In his eyes, RELX, the biggest brand of Chinese e-cigarettes, whose annual sales should have exceeded 3 billion yuan, is just a sales channel company.
“There are only a few factories that produce e-liquid, and everyone can purchase from them. There is no obvious difference in the taste of each brand’s e-cigarettes, and there is no so-called core patent. E-cigarettes are more about different ways of publicity.” Han Fang said that he planned to distribute 10% – 20% of the profits of e-cigarettes to agents, 10% to R & D, and the rest to marketing.
Han Fang, who has missed out on building a first-line brand in the mobile phone industry, believes that he can seize the opportunity of the electronic cigarette industry this time.