Ep. 45: Totally Lit or Just Hot Air? The Rise of E-Cigarettes in China

In episode 45 of TechBuzzChina, co-hosts Ying-YingLu and Rui Ma talk about the rise of what has been touted as “the next bigtrend” in China tech: electronic cigarettes. Despite being criticized as a trapfor entrepreneurs and investors alike, as well as concerns around ethicalconsiderations, a large number of high-profile hardware entrepreneurs andconsumer internet executives in China have jumped into the fray. Although Chinahas yet to birth a decacorn in this sector like U.S.-based Juul, which is nowvalued at $38 billion, our co-hosts bet that at least one unicorn will emerge. Afterall, a recent research report by China’s Sinolink Securities projected the sizeof the domestic e-cig market to reach over $4 billion in the next four years—inmany ways, we are only at Day Zero as measured against the market potential. Rui and Ying-Yingbegin by explaining that since smartphone purchases in China have slowed, a lotof the wealth and entrepreneurial talent that was focused on that product have shiftedto four newer consumer electronics categories: smart speakers, wirelessheadphones, translating devices, and e-cigarettes. Our co-hosts comment that theseproduct areas are similar to some of those that are getting major attention inSilicon Valley right now. In terms of e-cigarettes, most of the companies coveredin this episode are very much like Juul in that they use a liquid cartridge todeliver nicotine. In contrast to electric smoking systems, which are adifferent category, e-cigs heat up—but do not burn—tobacco. While many Chinesearticles reference both under the same label (电子烟), in this TechBuzzepisode, Rui and Ying-Ying are only talking about the liquid cartridge device.Listen to find out: Whatare some of the factors that have contributed to the high, and growing, numberof smokers in China? How is it that the country has one-third of the world’ssmokers, but only accounts for 3 percent of the global e-cig market, despitealso owning 90 percent of the world’s e-cig production? What inspired Han Li, aChinese man and the first person to successfully commercialize the e-cigarette,to do so? What role does regulation—or the lack thereof, unlike the 68countries which have codified guidelines—play? Who are some of the celebrityentrepreneurs and well-regarded VC funds in China that have made a foray intothe space? What role do WeChat mini programs, and other new marketing channels,have on the growth of this market? What about the impact of China’s state-ownedmedia, CCTV, on both the telling of the story and on its outcomes? Importantly,how about ethical factors—how are these considerations affecting the moves, ornon-moves, made by large Internet players and top venture investors? At the endof the day, is the Chinese e-cigarette industry totally lit, or just a bunch ofhot air?As always, you canfind these stories and more at pandaily.com. Do let us know what you think of the show by leaving us aniTunes review, liking our Facebook page, and tweeting at us at @techbuzzchina! Thank you also to our listeners over at our partner, dealstreetasia.com.We are grateful for ourawesome producers, Shaw Wan and Kaiser Kuo, and our interns, Wang Menglu andMindy Xu.Our sponsor for this episode is the Universityof San Francisco. USF’s new MS in Applied Economics is a STEM-designatedprogram that combines economics training with the practical skills in dataanalytics needed to understand today’s new digital economy. To learn more,visit usfca.edu/techbuzz.