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In episode 45 of TechBuzz China, co-hosts Ying-Ying Lu and Rui Ma talk about the rise of what has been touted as “the next big trend” in China tech: electronic cigarettes. Despite being criticized as a trap for entrepreneurs and investors alike, as well as concerns around ethical considerations, a large number of high-profile hardware entrepreneurs and consumer internet executives in China have jumped into the fray. Although China has yet to birth a decacorn in this sector like U.S.-based Juul, which is now valued at $38 billion, our co-hosts bet that at least one unicorn will emerge. After all, a recent research report by China’s Sinolink Securities projected the size of the domestic e-cig market to reach over $4 billion in the next four years — in many ways, we are only at day zero as measured against the market potential.   Rui and Ying-Ying begin by explaining that since smartphone purchases in China have slowed, a lot of the wealth and entrepreneurial talent that was focused on that product has shifted to four newer consumer electronics categories: smart speakers, wireless headphones, translating devices, and e-cigarettes. Our co-hosts comment that these product areas are similar to some of those that are getting major attention in Silicon Valley right now. In terms of e-cigarettes, most of the companies covered in this episode are very much like Juul in that they use a liquid cartridge to deliver nicotine. In contrast to electric smoking systems, which are a different category, e-cigs heat up — but do not burn — tobacco. While many Chinese articles reference both under the same label (电子烟), in this TechBuzz episode, Rui and Ying-Ying are only talking about the liquid cartridge device. Listen to find out: What are some of the factors that have contributed to the high, and growing, number of smokers in China? How is it that the country has one-third of the world’s smokers, but only accounts for 3 percent of the global e-cig market, despite also owning 90 percent of the world’s e-cig production? What inspired Han Li, a Chinese man and the first person to successfully commercialize the e-cigarette, to do so? What role does regulation — or the lack thereof, unlike in the 68 countries that have codified guidelines — play? Who are some of the celebrity entrepreneurs and well-regarded VC funds in China that have made a foray into the space? What role do WeChat mini programs, and other new marketing channels, have in the growth of this market? What about the impact of China’s state-owned media, CCTV, on both the telling of the story and on its outcomes? Importantly, how about ethical factors — how are these considerations affecting the moves, or non-moves, made by large internet players and top venture investors? At the end of the day, is the Chinese e-cigarette industry totally lit, or just a bunch of hot air? As always, you can find these stories and more at pandaily.com. Do let us know what you think of the show by leaving us an iTunes 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 our awesome producers, Shaw Wan and Kaiser Kuo, and our interns, Wang Menglu and Mindy Xu. Our sponsor for this episode is the University of San Francisco. USF’s new M.S. degree in Applied Economics is a STEM-designated program that combines economics training with the practical skills in data analytics needed to understand today’s new digital economy. To learn more, visit usfca.edu/techbuzz.

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