Issue link: https://read.dmtmag.com/i/1537288
Tobacco Asia 21 densome for vape companies following the 2022 rollout of the Electronic Cigarette Management Measures (ECMM), which effectively banned domestic sales of flavored e-cigarettes. Under ECMM, e-cigarettes with flavors other than tobacco are banned for sale within China. The new regulations have also imposed strict technical standards on ingredients, additives, nicotine levels, and safety testing protocols. While these measures were in- tended to address public health concerns and curb the burgeoning vaping market do- mestically, they have inadvertently accelerated the movement of manufacturers toward international markets. That includes Ispire Technology Inc., which moved manufacturing of much of its vaping hardware to Malaysia, including its Sprout all-in-one cannabis vapor device. Pax Labs, another longtime industry player, relocated parts of its supply chain to Indo- nesia. "Companies started moving not because of tariffs, but because of the regulatory mess," Xu says. "That's why Pax and Ispire made their moves." Michael Wang, co-c.e.o. of Ispire Technology—a global company engaged in the research, development, design, commercialization, and distribution of branded vap- ing products—recalls the moment when the industry's trajectory became irrevocably altered: "We came to the conclusion it doesn't matter who is in the White House; the geopolitical train has left the station, and it will not come back." Today, while many of Pax Labs' products are still produced in China, many of its flagship products, such as the Pax Plus and Pax Mini, are now produced in Malaysia. KT&G, the South Korean company behind the lil Hybrid 3.0 heated tobacco device, shifted its production from Vietnam to Malaysia after abrupt policy changes halted operations in Hanoi late last year. A KT&G representative stated, "Due to supply issues caused by changes in Vietnamese policies, the problem is being quickly resolved [by moving production to Malaysia], and products have been restored to sup- ply since the beginning of [May]." While some companies have already moved parts of their operations to Indo- nesia and Malaysia, others remain hesitant. "Some companies set up in Indonesia but couldn't keep it running. They ended up selling the facilities," Xu notes. "It's not al- ways about tariffs. Sometimes, it's just not feasible." Even Xu's own vaping product is being manufactured with Chinese-produced components in Indonesia—not because of tariffs, he notes, but due to restrictions on shipping tobacco products into China. "It has nothing to do with tariffs. It is because of regulations, he says. "Our new product, Fav, contains tobacco [in the wicking]. And you can't ship tobacco into China," he explains. "So, we set up a small operation in Indonesia—final assembly only." That distinction is key. Xu says most of the operations moving to Southeast Asia are not full manufacturing facilities. Despite headlines suggesting an exodus from China, the reality is more nuanced. "Nowhere else has the ecosystem like Shenzhen" when it comes to vape manufacturing.