BYD research ignites vaping competition

BYD Electronics plots to disrupt the dominance of Smoore, another Shenzhen-based company, in e-cigarette contract manufacturing.

Photo from CFP

Photo from CFP

By GE Zhenwei, XU Shiqi

 

Vapers don’t give much thought to what’s inside their vape pods, or where they are made, but in Shenzhen, where over 90 percent of the world’s vaping devices originate, industry-defining changes are quietly taking place.

BYD Electronics, a spin-off from the automaker, recently introduced the world to a ceramic coil, making clear its e-cigarette ambitions in a direct challenge to Smoore, the vaping market leader and a pioneer in ceramic coils.

Less for Smoore

Both ceramic and cotton coils are widely used to heat nicotine-infused liquid into an inhalable aerosol. Earlier this year, BYD made a cotton coil for VapX. Cotton coils are cheaper but inferior in flavor delivery. For manufacturers, switching to ceramic means more automation and higher productivity (7200 units per hour vs cotton’s 1800), and requires some technical know-how.

BYD filed a patent for ceramic coils in 2019, but according to MA Weimin, founder of Great Retail, an online e-cigarette trade magazine, the actual products are still to be tested. The patented technique might improve efficiency and consistency, but only the vapers themselves can determine whether it provides a better vaping experience. Expectations are high given BYD’s background.

“For e-cigarette manufacturers, the more automated the better. BYD might be able to achieve 100 percent automation,” Ma said.

BYD poses a direct challenge to Smoore’s 19 percent of the market. Smoore’s breakthrough came in 2016 with a revolutionary ceramic coil. From 2016 to 2020, sales increased by 70 percent each year and the company went public in Hong Kong last year. E-cigarette regulations are tightening, but this hasn’t stopped large manufacturers from entering the crowded market. Smoore shares are now trading at about half their all-time high that came this February.  

Smoore will not give up easily. It has 191 e-cigarette patents, compared with BYD’s 18, and has shown itself to be unafraid of accusing competitors of IP infringement. Smoore also has long-term relationships with large US brands and it is unlikely that any of them will defect to BYD, at least in the short term. The EU and domestic markets are more fluid.

Breathing space

BYD Electronics is essential a maker of phone parts but has been diversifying into smart devices, medical equipment, and e-cigarettes. Smoore has a gross margin of about 40 percent, ten times that of BYD phone parts.

Plans for e-cigarette manufacture first emerged in 2018 but went on hold during the pandemic, when BYD was involved in PPE manufacture. R&D was completed in the second half of 2020 and production started this year with the potential to make 4 million cartridges a day.