Vietnam Bans Heated Tobacco Production as KT&G Supplier Relocates to Other Countries

Jul.10

Due to Vietnam’s ban on heated tobacco, South Korean firms ITM Semiconductor and Elentec are relocating their production facilities out of the country. Both companies supply KT&G, which plans to shift its growth focus to tobacco stick sales following the move. KT&G is also preparing to launch hybrid products to drive demand for tobacco sticks.

Key Points:

·After Vietnam banned heated tobacco products, South Korean companies ITM and Elentec moved their production facilities out of Vietnam.

·The two companies supply heated tobacco-related products to KT&G, which holds a 20% market share in Korea.

·With the industry shifting towards pod sales, KT&G plans to promote Hybrid products.

·Pod production processes are complex, requiring high production rates and yield.

According to The Elec's report on July 10th, ITM Semiconductor and Elentec, which supply heated tobacco equipment to KT&G, were forced to shut down their factories in Vietnam and relocate their production facilities to other countries. ITM Semiconductor moved its factory to Indonesia, while E-Lantech relocated to Malaysia.

This move is a response to a law passed by the Vietnamese government in January that banned the production, sale, and possession of heated tobacco products.

By 2024, KT&G's devices account for 20 percent of South Korea's total heated tobacco usage, with the market reaching maturity. Elentec's device sales revenue was 304.1 billion Korean won (approximately 200 million USD), but is expected to decrease to 101.7 billion Korean won (about 74.05 million USD) by 2024. It is projected that their revenue will increase to 150 billion Korean won (about 100 million USD) in 2025.

KT&G's new growth will come from pod sales, rather than devices. ITM Semiconductor was initially the exclusive pod supplier for KT&G's Lil Hybrid (which combines heating and atomization functions), but Elentec has now entered its supply chain.

An industry insider stated, "Due to KT&G's plans to actively carry out marketing activities in the second half of the year, pod suppliers will have the opportunity to increase sales.

References:

[1] South Korean e-cigarette companies move production facilities out of Vietnam

Also Read:

[1] South Korea Busts Etomidate-Laced E-Cigarette Smuggling Ring; Devices Suspected to Serve as Drug Carriers for 2 Million Users

[2] Heated Tobacco Battle Heats Up in South Korea: KT&G Launches Half-Price Promotion, PMI Ramps Up Marketing

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