Recently, BYD Electronics officially launched ceramic atomizer core (ceramic core) technology brand identity "BEEM CORE". Behind the release of this seemingly insignificant technology, electronic cigarette foundry field, is ushering in a turning point in the industry.
The ceramic core is the core component of e-cigarettes, which heats up the tobacco oil and turns it into the "smoke" that the user inhales into his mouth, which determines the smoking experience of e-cigarettes.
Over the past few years, Smallsmoke has become the biggest beneficiary of ceramic core technology, which is also its killer app in the e-cigarette market.
Among the manufacturers of ceramic cores, Smallsmart International is the leading OEM of e-cigarettes with a market share of 18.9%, while the market share of the 2nd-5th places combined is only 14%.
However, with the arrival of cross-border rival BYD and the gradual cracking of ceramic core technology, the aura of the king seems to be breaking down for Smallmore.
Negative market sentiment is gripping the company. In the capital market, Simcoe's stock price has been moving downward since January, and its market capitalization has been decimated. Yet BYD Electronics has seen the company's share price rise 50% from HK$22 all the way up to break the HK$33 mark since November.
On the one hand, BYD has a stronger experience in consumer electronics strength and technology, on the other hand, in ceramic core technology, "a fresh move" of Simo.
With the most critical ceramic core "wall" gradually broken by BYD, how long can Smallsmoke last on the iron throne of electronic cigarettes?
"The ceramic core has a higher degree of automation and can be mass-produced, [BYD's entry] will have a very obvious impact on the industry, and is expected to break the existing pattern." Ma Weimin, founder of e-cigarette vertical media Geru Consumer, commented to Interface News that BYD Electronics is currently the most challenging competitor to Smallscale International, and its introduction of ceramic cores is in line with the logic of the industry.
Smoke oil and atomizing core group is the core of electronic cigarettes, because the blend made of smoke oil is relatively simple, the atomizing core has become the "heart" of electronic cigarettes. It atomizes the oil by heating it, and the resulting vapor mixes with the air to become an aerosol, which is the "smoke" that the user inhales.
Cotton fiber and ceramic are the two mainstream heating materials for atomizer cores. Cotton wicks were commonly used in the early days of e-cigarettes, and were characterized by good oil conductivity (which facilitated the vaping experience) and low cotton costs, but their manufacturing stability and product consistency were poor.
BYD Electronics has earlier cotton core products, for example, this year for the e-cigarette brand blue Pei OEM a "separation of the oil core" products, the price of its cartridges only 49 yuan a box, than the use of ceramic core Yue carving cheaper than half.
After the cotton core, the ceramic material with better overall performance appeared, which balances the product performance and cost, and is able to realize more stable automation and mass production.
During the outbreak of e-cigarettes, the demand for products exceeded the supply, and Simcoe International, which was the first to develop ceramic cores with excellent performance, took this opportunity to seize most of the market. Its ceramic core can do 7200 pcs per hour capacity, but the automated cotton core production line can only do 1800 pcs.
"Ceramic core is not too high technology content, it is the existence of a certain 'Know-How', but can make up for it with manpower and time." A head of the e-cigarette business head told interface news.
As the e-cigarette "heart" of the ceramic core, its "Konw-How" mainly lies in the firing of the ceramic aperture, only the pore fine and high-strength ceramics in order to produce a good sense of vaping. According to the above people, these technical capabilities for large sums of money, big investment in BYD Electronics, will soon be able to make up.
BYD Electronics filed an invention patent for "a porous ceramic and its preparation method and application" in October 2019, launching its own ceramic core brand this year.
"Doing ceramic core itself is not too difficult a thing, the key also depends on its formula itself atomization reduction level and the pleasantness of the experience. BYD (made ceramic core) for now, is to improve the assembly efficiency and consistency and stability of assembly operations." Another small e-cigarette brand responsible person told Interface News.
The above person in charge believes that without market testing, it is not yet possible to conclude the technical sophistication of its ceramic core. But what is certain is that the brand endorsement and manufacturing capability of BYD Electronics can stir up water in the market.
"From the perspective of future trends, the production of electronic cigarettes is certainly the higher the degree of automation, the better, BYD Electronics wants to do a subversive innovation, it will be infinitely close to 100% automation." Ma Weimin said.
BYD Electronics currently **** has five major business segments: assembly, components, smart products, automotive intelligent systems, medical (masks), accounting for 43%/24%/13%/2%/18% of total revenue in 2020. The proportion of low value-added assembly business has decreased in recent years, and the company is looking for growth in higher-margin automotive and smart products.
E-cigarettes are seen as the most important growth engine. It's a good business, even if it still faces policy uncertainty. The gross profit margin of Simor International's enterprise-oriented products can reach more than 40%, while the gross profit margin of BYD Electronics' traditional assembly business is only about 4%, a 10-fold difference in profit, which is tempting enough.
According to public information, BYD Electronics' layout of e-cigarettes has begun in 2018.
In 2019, BYD Electronics completed the market analysis and product design, and most of the products were shaped, but the products were about to land when they caught up with the epidemic in the early 2020s, and the company's focus was then shifted to the mouthpiece machine.
After the mouthpiece capacity saturation, BYD Electronics continued to e-cigarette force, and led by the CEO himself. 2020 second quarter, the company completed the sampling, including atomized vape, ceramic core, smoke bomb, with the ceramic atomized core and smoke bomb system R & D success, the company began to carry out patent layout.
A research minutes in May this year, BYD Electronics said that the company's e-cigarette products "are technically unique, including ceramic holes", and by constantly adjusting the parameters, to achieve the customer's requirements for flavor, sweetness, and fullness. "Some of the technology applied for a patent, some Know-How belongs to the confidential did not apply for a patent." BYD Electronics management said.
The construction of e-cigarettes is simpler than the vast majority of electronic products, and outside of technology, the manufacturer's mass production capacity and stability are elements that brand customers value. BYD Electronics has said that the company has invested nearly 600 engineers to participate in research and development, and invested in 40 production lines in terms of production capacity, a single production line can produce 1 cigarette bomb per second, and the daily shipment under full load can reach 4 million units.
By 2021, BYD Electronics has cooperated with some domestic brands to launch a "cotton core" type of e-cigarette. The introduction of self-developed ceramic core means that BYD Electronics can capture more customers and realize the scale of mass production.
"Our R&D team visited many OEM factories and finally decided to choose BYD. Mainly because BYD Electronics, as a traditional OEM giant, has more advantages in processing and manufacturing", ICE Blizzard relevant person in charge of explaining the reasons for cooperation with BYD.
BYD Electronics in the three quarterly results of the exchange said that the company's new ceramic core products have been used in overseas customers products, such as smooth progress, next year, overseas customers will contribute considerable revenue.
Shenzhen is known as the "Global Fog Valley", where more than 95% of the world's electronic cigarettes and accessories are produced and exported.
Smallsmart International is one of the leading e-cigarette manufacturers in Shenzhen.
In 2007, Shenzhen Simoore started to get involved in electronic atomization equipment, which is one of the earliest companies to enter the e-cigarette industry. Its development has roughly gone through three stages: 2007-2014, the creation and development period, during which it began exporting to the United States in 2012; 2015-2017, the period of rapid growth in export business, during which the first generation of ceramic heating technology was introduced into the market; 2018 to the present, the leading technology to further stabilize the leading position in July 2020 listed on the Hong Kong Stock Exchange.
The reason for the company to go all the way is precisely the ceramic core. In 2016, Simaer International developed the first generation of "FEELM" ceramic core technology, and built its own patent moat, thus binding a number of high-quality large customers. The company's revenue also grew from 710 million yuan in 2016 to 10.01 billion yuan in 2020, an annualized growth of 70%, the market value of more than 400 billion yuan.
But as the world's largest e-cigarette maker, the seemingly solid position of the international leading No. 1 of Smallsmoke is not having a good time this year.
Its stock price has been going down since January, and its market value has been decimated. This, in addition to market sentiment fluctuations influenced by policy winds, the more important reason is that the market competition is becoming more intense, the giant entry challenge. The later in the capital reserves and technology research and development strength is no less.
The company is also involved in the electronic cigarette foundry in August this year, set up a subsidiary Liding Electronics, the scope of business includes electronic cigarettes, wearable smart devices, integrated circuit chips, etc., and has a patent layout related to electronic cigarettes.
Soochow Securities analyzed in the research report, comprehensively, BYD Electronics has the strength to compete with Simoleon, due to the e-cigarette industry is still in the early stages of development, the pattern is not yet determined, the competition is fierce, the competition is the manufacturers of the core technology understanding, BYD Electronics is expected to rely on its own accumulation of ceramics and other areas of the acquisition of a certain share of the industry's important players.
However, in the short term, SMART International can indeed maintain its advantage by virtue of the precedence of patent layout.
Interfaces News searched the website of the State Intellectual Property Office to show that the main body of the Simaer International Shenzhen MacWhite Technology Co.
And BYD (including a number of subsidiaries in Shenzhen, Huizhou, etc.) has 18 valid patents related to e-cigarettes, of which 3 are invention patents and 15 are utility model patents, the latter of which are less gold than invention patents. However, previously BYD Electronics has revealed in the research, the company has nearly 100 patents in the application.
In addition to the technical barriers, the depth of the binding of Simcoe International and the head of the e-cigarette brand, also makes it difficult for BYD to break through. VUSE (British American Tobacco's brand) and Yue carve is the head of the brand at home and abroad, but also Simcoe's big customers, in the short term, this market pattern will not change.
But in the long run, the domestic e-cigarette industry is still in the early stages of development, the overseas European market is relatively open to e-cigarettes, there is still room for expansion, and the market is far from settled. The market is far from settled. There are many functions and technical routes to be explored for e-cigarette products.
All indications are that in front of this huge cake of e-cigarettes, BYD Electronics is working hard internally to enhance its core technology on one hand, and expand its production capacity on the other hand, with the intention of competing with Simcoe.
Interface News in the interview survey found that the vast majority of e-cigarette brands, in the way of supply chain partnerships, are relatively obscure to express the impact of BYD's imminent impact on Smallsmoke.
The case of the latecomer catching up has been staged many times in business history, and in the face of the strong rivalry of BYD Electronics, Smallsmart International obviously can't rest on its laurels.
E-cigarette brand Vizen CEO Wang Jinbin believes that although the layout of BYD Electronics e-cigarette business soon, but with its strong manufacturing capacity and perfect supply chain supporting system, I believe that it will be the later to catch up, the impact on the Simoleon is self-evident.
"Wait until BYD has enough user data, ceramic atomizer core duo of trends will certainly appear, then, whether it is a new brand or traditional brand of e-cigarette customers, in the face of optional at the same time, there must be a variety of considerations." Wang Jinbin said.