China’s biggest homegrown gadget is a hit—but not at home

Time to make the e-cigs.
Time to make the e-cigs.
Image: Reuters/Tyrone Siu
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The battle for dominance in electronic cigarettes got a little heated this week, as Imperial Tobacco launched a lawsuit against nine rival e-cigarette makers for patent infringement (paywall). But the story really began with a Chinese pharmacist’s nicotine-induced nightmare, more than a decade ago.

China builds the world’s favorite gadgets, but it doesn’t usually invent them. Its countless factories churn out millions of iPhones and PlayStations and ThinkPads, but those hit products were dreamt up elsewhere—with one exception.

In 2003 pharmacist Hon Lik invented the e-cigarette: a battery-powered device that vaporizes liquid nicotine to give smokers a less toxic and more discreet dose of the drug. Retail sales of the devices and their refills hit $2 billion in 2013 and are expected to reach $10 billion by 2020—a healthy sales surge for any electronic gadget, but especially one that delivers a highly addictive drug.

Appropriately enough, Hon says he created the e-cigarette in a nicotine haze—he was trying to quit a pack-a-day habit with a nicotine patch, which he forgot to take off, leading to a nightmare (“he found himself drowning in a sea that turned into a cloud of vapor“) that gave him the idea of a heating element that vaporizes a liquid nicotine solution.

The e-cigarette has become a runaway success, particularly in North America and Europe. Almost all the devices are made in China—leading firms include Shenzhen Smoore, FirstUnion, Shenzhen Seego, and Ruyan—but they have not made much of a dent in the country’s own colossal tobacco market, which is by far the world’s largest. (In 2012, China consumed 2.46 trillion cigarettes, equal to 4.8 per person, per day.)

Reliable statistics are scarce, but Reuters has reported that “vaping,” as the use of e-cigarettes is known, is not common in China, and “forms only a tiny part of China’s 1.2 trillion yuan (about $200 billion) cigarette business.” Hon has blamed China’s giant state-owned tobacco companies for discouraging the adoption of e-cigarettes, which would cut down on the country’s frightening lung cancer statistics—health authorities say there are a million smoking-related deaths every year, a number that’s on pace to hit two million by 2025.

“All tobacco companies disliked our products, especially the large ones, and they have influence over governments,” Hon told AFP last year.

But that viewpoint has certainly changed, at least for Western tobacco firms that have climbed onto the e-cig bandwagon. Blu was acquired by Lorillard last year for $135 million; Altria, BAT, and Reynolds have their own offerings; and Imperial Tobacco, Europe’s second-largest tobacco company, bought the e-cig division of Hon’s company Dragonite last year for $75 million.

The companies Imperial Tobacco is now suing over patents include Blu, NJOY and Logic, which control 80% of the US market. (Dragonite and Blu have already settled one patent lawsuit, before they were both acquired.) The idea might have been Hon’s at first, but now the e-cig industry has one of the classic hallmarks of a developing technology sector: An acrimonious fight over intellectual property.