Explore Shenzhen’s “Vaping Valley”: 90% of the world’s e-cigarette production capacity now has 70% of the company’s job cuts

Shajing and Fuyong, two remote streets in Bao’an District, Shenzhen, have 600 e-cigarette manufacturers in just more than a dozen square kilometers of neighborhoods, producing 90% of the world’s e-cigarettes, making them the world’s veritable “Vaping valley”. Today, the “Vaping valley” suddenly stopped breathing. On November 1, the State Tobacco Monopoly Bureau and the State Administration of Market Supervision and Administration issued the Notice on Further Protection of Minors from E-cigarettes, which requires all types of market entities not to sell e-cigarettes to minors, and urge e-commerce platforms to close e-cigarette stores and remove e-cigarette products from the shelves.

With e-cigarette orders falling or even “partial disappearance”, from brands to foundrys, from foundry to upstream suppliers, the entire industry chain of e-cigarettes is experiencing a severe life-and-death pain.

Savage growth

Over the years, the e-cigarette industry has grown wildly in Shenzhen. Because of strong demand, the e-cigarette industry is a typical seller’s market, orders continue to pour from all over the world to the two streets in Bao’an, Shenzhen, where it becomes production capacity, capacity wave expansion, people along the pace of market demand.

Relying on the rapid and strong demand for e-cigarettes in Europe and the United States, Shenzhen’s e-cigarette industry  develops step by step , many factories from hundreds of people turned into  2000 people in the peak, mainly on  foreign trade.

Shenzhen HuaqiangBei E-cigarette sales shop

Such companies are easily found in a house on the streets of Shajing and Songgang. Large and small factories, in these two streets, some are still in Dongguan. They are in the high-rise buildings, in the dense town of the village, some occupy a small yard of the industrial area, some occupy a corner of the office building. From the name can not be seen is e-cigarette manufacturers, their names with technology, or “fog”, “steam”, this is the other name of e-cigarettes, like a connector only the insiders can identify the secret signal. If not related, they want people outside the industry to never come to them. There is no concentrated e-cigarette industry park, nor is it a big brother, and they are basically doing their own business.

Wang Xiaohua has been selling e-cigarette batteries for 8 years. His factory, which had a 30 per cent year-on-year rise in the first nine months of this year, is doing well.

But as the industry cools, the e-cigarette industry suddenly narrows like the track, and the entire train is tilted out of control.

“It’s like a happy man, suddenly being splashed with cold water. Wang Xiaohua said.

The market has a transmission process, first of all, the brand side, they directly contact the market, if the business is good,  orders will be sent to the processing plant , and vice versa, then the processing plant, followed by batteries, tobacco, plastic, data lines and other upstream.

Now the impact of the transmission link is also mainly in the processing plant. Securities Times reporter came to the factory located in the domestic e-cigarette producer leader McVeido is located in Fuyong Street, Bao’an District, Shenzhen. This is a new plant that started production last year and is part of a series of new ones in McVeido, where the number of workers has grown to more than a thousand in a year and is now down to five or six hundred.

Now employees are off at 5:30 p.m., working eight hours a day, and that used to be 14 hours a day. Because they can not work overtime, workers can only take the basic wage, only two or three thousand yuan, this money in Shenzhen to feed themselves are difficult, some workers can not stand up , leave on their own.

The factory hasn’t hired for two months, and six people were in charge of recruiting  at the door.

The president of the E-cigarette industry committee of the China Electronic Chamber of Commerce, Mr. Ou Junxuan, described the tragedy of small and medium-sized e-cigarette companies as “the corpse is all over the field”.

His observation targets are those head companies that produce e-cigarettes. He roughly counts more than 10,000 people out of work, which he thinks is very serious, because head companies did not take small and medium orders before, now because orders are not saturated, orders just in hundred s units have to be done. If the head of enterprises are not saturated, small and medium-sized enterprises can only be dead.

“It’s not known how many small factories are dead. He said.

Because a top e-cigarette company cut 1,500 jobs, resulting in the layoff of dissatisfaction, but also caused the local street office attention, and local officials go to  the various e-cigarette companies to investigate and stabilize.

Luo Haibo, general manager of Shenzhen Jumeirah Technology Co., Ltd., welcomed a wave of government workers earlier this month, and sent a questionnaire, writing about the reasons for the changes in the industry, hoping that the company will pay wages on time. Luo Haibo said that the company must be on time to pay wages, it’s just that there are no new orders, employees are leaving. At its peak, they had more than 2,000 employees, and now they have only  500 left.

Ou Junhui’s own factory, originally also has more than 1000 people, is now reduced to more than 300 people.

There are rumors that 40,000 people in the Shajing area will be affected, and Luo Haibo estimated the affect could be   more than that. He says that many industries have been in recession in recent years, and that e-cigarettes are a little bit better. in Shenzhen guanwai there are e-cigarette factory everywhere, laymen continue to come in, but now the situation has suddenly changed.

Double-hit both oversea and domestic

Han Li, a Chinese medicine practitioner from northwest China, pioneered an industry by inventing e-cigarettes in 2004. Han Li is a heavy smokers, the invention of e-cigarettes was originally intended to treat tobacco addiction, reduce the harm of traditional cigarettes. Cigarette addiction is mainly due to nicotine, and the main cause of cigarette harm is tar and carbon monoxide produced by the burning of tobacco leaves.

Although the first e-cigarettes were invented and sold in China, the Chinese market has been hard to crack. At first the brand is playing the concept of smoking cessation, but that went to  a dead end.

Later, e-cigarettes into the “opium” era, you can add their own smoke, a variety of different types, shapes and sizes, but this product only gains popularity among senior enthusiasts , in nightclubs and other scenes are relatively easy to promote.

The revolutionary change came from tobacco giant JUUL, which invented “nicotine salt”, the emergence of “small cigarettes”, changes in taste and shape, convenient and fast, ordinary consumers are also involved, small e-cigarettes occupy most of the market.

E-cigarettes seems simple, in fact, the industrial chain is also very long, the division of labor is very fine, some products have thousands of kinds, need a lot of links to cooperate. A lot of capital invested in the e-cigarette industry in 2018 is seeing the huge potential of cigarettes and the tens of billions of dollars in valuation of JUUL. Driven by this capital, China’s e-cigarette market has been opened up under change led by outsiders. The market is growing fast, especially attracting young people.

The change began in September.

First is the U.S. market. On September 15th, New York Governor Andrew Cuomo announced an “emergency executive order” banning the sale of flavored e-cigarettes. Mr. Trump has announced a ban on the sale of non-tobacco e-cigarettes to curb the trend of teens smoking e-cigarettes. “We’re going to have some very strong regulations to prevent teenagers from becoming addicted to nicotine,” Mr. Trump said at the time. ”

The United States is the world’s largest e-cigarette market, but also the industry’s bellwether, the U.S. market after the ice, many countries are also watching.

The domestic market has also been subject to change. On November 1, the State Tobacco Monopoly Bureau and the State Administration of Market Supervision and Administration issued the Notice on Further Protection of Minors from E-cigarettes, which requires all types of market entities not to sell e-cigarettes to minors, and urge e-commerce platforms to close e-cigarette stores and remove e-cigarette products from the shelves.

It was a thunderbolt. Originally the domestic e-cigarette sales momentum is good, can break down part of the pressure of the oversea market , now  domestic and foreign markets are both hits.

Previously, there are many brands in order to prepare for the “double 11”, will prepare a lot of goods, it is said that a larger e-cigarette company, the “double 11” sales are expected to exceed 100 million yuan.

To accommodate the growth of new brands in the country, McVeido has been expanding, even creating new factories specifically for a brand. Industry insiders revealed that now these orders from the domestic also have zero, factories are resting.

Practitioners are also eyeing the actions of the U.S. and Chinese governments. Luo Haibo thinks the U.S. will move this week to loosen regulations on e-cigarettes.

Many domestic practitioners say problems in the U.S. market have nothing to do with e-cigarettes themselves, mainly those with marijuana added to them, and other thinners to dilute cannabis oil, which have adverse effects on the body. They believe that the United States will identify these problems. Last week, the United States announced that a potential toxin was detected in biological samples of patients with lung damage——— vitamin E acetate. These findings directly prove that the main cause of lung damage is vitamin E, which occurs in patients throughout the United States. 11, Trump said on social media that he would meet with e-cigarette industry advocates to discuss the plan.

On the inside, Luo Haibo in the street to come to the investigation, in the investigation of the form of corporate appeal, he filled in “don’t one size fits all.”

Reporter’s observation: tobacco control or not debate no debate Standard scale is the key

Is e-cigarettes  cigarettes, or drugs? In fact, each country has different perceptions, there is no unified identification. But the reporter visited the enterprises think that the e-cigarette control should be, but the key is to have standards, in the management process can not be excessive law enforcement.

Just after the government demanded that e-cigarettes could not be traded online, many places began to require offline e-cigarettes to be taken off the shelves, and there were excessive law enforcement conditions, including in Nanjing, Chongqing, Chengdu, Shiba and other places, forcing operators not to sell e-cigarettes. Later, the higher authorities also emergency notice, including “do not force e-cigarette products off the shelf, to prevent negative public opinion.”

In response to the problem of excessive law enforcement in many places, the president of the E-cigarette industry committee of the China Electronic Chamber of Commerce, Mr. Ou Junxuan, said they had submitted a report to their higher authorities in the hope of protecting legal living space.

Shenzhen Tobacco Control Association Vice President Zhuang Runsen told the Securities Times reporter, e-cigarettes have nicotine will be addictive, in addition to nicotine and some ingredients are not conducive to health, these are objective existence, spray this form if there is no harm, as a toy is no problem, but now misleading minors, will make smokers younger age.

Zhuang Runsen believes that Shenzhen in the anti-smoking regulations to include e-cigarettes, that is, taking into account the harmfulness of e-cigarettes, in fact, over the years can be vigorously developed, is because all countries are smoking ban, e-cigarettes in the publicity drill edgout.

He argues that the government bans online sales of e-cigarettes, mainly to prevent minors from buying them. He believes that traditional cigarettes are not a problem on the way to sale, e-cigarettes can also. “The government has not yet controlled e-cigarette sales, more from the point of view of protecting minors. ”

Zun a product deputy general manager xiang Jie also believes that the government after the introduction of notice not to excessive law enforcement, it means that is not to the industry a stick to kill, but a degree of problem.

For the government suddenly introduced a policy, an e-cigarette head business executive said that regulatory policies to comply with, pay attention to scientific law enforcement, can not be over-enforced, scientific supervision, such as can not be sold online, to give all parties buffer time, otherwise enterprises and employees will suffer a lot of losses, consumers also have rights and interests to protect, Given a month or two to digest, all parties have a reaction time and the government can control it.

In China, there have been a part of the group has become a loyal consumer of e-cigarettes, reporters yesterday in Shenzhen Huaqiang North Huaqiang Electronic Building, saw Yuechi Monopoly came to a pair of young lovers, they have been smoking e-cigarettes for several years, because the Internet can not buy, so to the scene to buy. There are nine shops near China Qiangbei, yesterday afternoon reporters also saw a Hong Kong tourist surnamed Xu, he came from Hong Kong to buy, he said the e-cigarettes used to smoke too expensive, his friends came to Shenzhen to buy e-cigarettes at a time to buy more than 10 boxes.

In theory, when demand on the line is suppressed, it will turn offline, and there is no data to support it. Most requirements are hard to convert offline, with limited physical store coverage and a small number.

Industry insiders are calling on the country to quickly introduce standards, according to the standards.

In an interview with the Securities Times, Mr. Ou said he hoped shenzhen e-cigarette manufacturers, as well as industry associations, would have the opportunity to participate in industry standard-setting.

He says they don’t have the opportunity to participate in industry standards and have no agency to consult them. The E-cigarette industry committee was established in 2017 and its member companies account for more than 90% of e-cigarette exports.

The e-cigarette industry has no public standards, are the company in accordance with market demand for research and development. Tobacco agencies are said to be setting standards.

Industry insiders say that the most critical part of the industry standard is smoke oil, other areas such as batteries will also encounter, the standard is relatively easy to develop, other including plastic casing sand is also easy to reference and other industry standards, but the core part of e-cigarettes, is the composition of tobacco oil, atomization standards, etc. are difficult to learn from.

There is also a more important problem, the composition of smoke and oil may be harmless, but after atomization may be harmful, and the separation from the dose talk harm is not scientific, so to be associated with intake. But there has been a lack of research in this area. Some industry sources say that they often take foreign research as a reference.

The China Electronic Chamber of Commerce E-cigarette industry association in 2017 has formulated the “Electronic Smoke Applianceproduct products general specification” and “electronic smoke liquid specification.”

“Hope that the country hastened to set the standard, so that our industry will strictly abide by, or even do better than the standard, such a large industry, old not to give identity, with identity is not now the industry said the wind is rain, the country should see e-cigarettes in China 1 trillion yuan or even 10 trillion yuan value.” Mr Ou said.

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