E-cigarette Supply Chain Facing Challenges: Performance, Profit, and Trends

In August of this year, various listed e-cigarette companies and e-cigarette accessory companies have released their performance reports for the first half of 2023. Based on the performance of eight companies involved in the e-cigarette sector, it is evident that four of these companies have experienced a significant decline in net profits compared to the same period last year.

Meanwhile, according to data released by the General Administration of Customs in China, the export volume of Chinese e-cigarettes has been continuously declining for the past three months. Additionally, the average export unit price of Chinese e-cigarettes in July saw a year-on-year decrease of 27.37%, reaching $45.61 per kilogram. According to statistics from 2FIRSTS, the export unit price of e-cigarettes has been consistently decreasing since February this year, with an average monthly decline of over 4%.

From a significant decline in sales for e-cigarette companies to consecutive drops in export value, these data undoubtedly prompt reflection on the magnitude of challenges the e-cigarette supply chain is currently facing.

Current Situation: Supply Chain Profits Cut in Half.

At the 2023 Vapor Supply Chain Expo, 2FIRSTS interviewed multiple e-cigarette suppliers and found that there has been a decline in demand for e-cigarette accessories in China in the first half of this year. Staff members at Shunxin Technology's booth revealed that the company's sales revenue has decreased in the first half, especially due to a nearly 50% price drop in cotton wicks over the past year.

The staff member pointed at a cotton core product on display, stating, "The price of this cotton core was over 1 yuan last year, but it has now dropped to 70 cents this year.

Employees of Huizhou Kaiyuan New Energy Technology Co., Ltd., a company primarily engaged in e-cigarette battery manufacturing, have expressed that their company's sales revenue for the first half of the year has seen a year-on-year decline of approximately 40%. Furthermore, the profit per battery has dropped by approximately 10%, currently only maintaining at around 6%.

Similarly, Zhang Xuantian, the CEO of Xiao Wa Technology, which had e-cigarette battery sales exceeding 100 million yuan last year, also stated that their company's e-cigarette battery revenue has seen a year-on-year decline of 20% to 30% up till now.

In addition, the staff of Cangzhou Renyuan Glass Products Co., Ltd., which primarily operates oil storage tank business, have also revealed that their company's performance is declining. Using one of their oil storage tanks as an example, the price of this particular product has dropped from the initial 3 yuan to slightly over 1 yuan now.

These circumstances reflect the challenges currently facing the entire atomization supply chain industry.

Change: Technological Iterations of Atomizing Core and Oil Storage Cotton

Despite facing challenges such as declining demand and decreasing sales, the e-cigarette supply chain industry has been actively seeking growth opportunities to adapt to market changes.

At the aerosol supply chain exhibition, multiple companies have unveiled innovative products and services to adapt to the constantly evolving market demands. For example, Huachengda has launched dual mesh cotton cores, Autogeek has upgraded their all-in-one cotton products, and Guanghua Weiye has introduced PLA materials to support the application and recycling of e-cigarettes. Additionally, Feihong Instruments has provided a new generation of automated oil injector, the resistance test machine has undergone technological upgrades, and Qi Yu Technology has brought forth ultra-fast atomization core ceramic 3D printing technology.

In addition, many suppliers are also focusing on technological upgrades to meet the high demand for disposable products. For instance, Mega Semiconductor has upgraded in areas such as micro-heads and components, while Yahan Plastics now offers disposable large-capacity transparent oil tanks.

Meanwhile, the responsible personnel of Dongguan Jingwei Precision Plastic Mould Co., Ltd. stated that their company has invested millions of yuan in building an automated production facility to expand its production capacity.

Amid intensifying competition and industry slowdown, the e-cigarette supply chain market continues to seek breakthroughs to adapt to market changes.

Trend: Major corporations are joining the game in the e-cigarette supply chain industry, despite facing challenges. However, some "cross-industry" companies are seizing the opportunity and reaping benefits from it.

Gold Dragon Automation, a company specializing in precision components for automation equipment, entered the e-cigarette component industry in 2022. In their semi-annual report for 2023, they mentioned signing a contract worth 1.784 billion yuan with Guangdong Vow. In a previous announcement, they stated that after Guangdong Vow's procurement of e-cigarette accessories, over 90% of the supplies would be supplied to IMiracle (Heaven Gifts).

According to Jinlong Machinery and Electronics, the penetration rate of the e-cigarette industry is still relatively low, indicating significant potential for growth. As a result, the industry is continuously attracting businesses to strategically expand and accelerate their entry into the market.

At the same time, large manufacturing companies such as Jiayao Holdings and Minxin Technologies have also entered the e-cigarette supply chain sector. Minxin Technologies has previously stated that e-cigarettes are one of their focus areas for growth by 2023.

In addition, six companies including Jincheng Pharm, Haopeng Technology, ST Tongzhou, Zhongrong Shares, Zhongke Information, and Xinlong Holdings have also expanded into the e-cigarette industry in July of this year, incorporating the concept and making strategic moves in this market.

The active foray of listed companies stands in stark contrast to the plight faced by the e-cigarette supply chain. With the slowdown in growth in the e-cigarette industry, do large corporations have greater financial capability to confront the intense competition and ever-changing landscape of the e-cigarette supply chain market?