South Korea’s ITM Semiconductor and Elentec have relocated their Vietnam manufacturing facilities in response to the country’s ban on the sale of heated tobacco. Both companies supply KT&G, and after the relocation, growth has shifted to cigarette sales, with KT&G planning to launch a Hybrid product to boost demand for cigarettes.
Core Points of Interest:
- Korea’s ITM, Elentec, moves out of its Vietnam facility following the ban on heated tobacco.
- Both firms supply heated tobacco-related products to KT&G, which accounts for 20% of the South Korean market.
- Industry growth is shifting to cartridge sales, with KT&G planning to promote Hybrid products.
- Cigarette cartridge production is a complex process that requires high productivity and yield.
Korea’s ITM, Elentec, moves out of Vietnam
The Elec reported on July 10 that ITM Semiconductor and Elentec. KT&G’s suppliers of heated tobacco equipment, had been forced to shut down their plants in Vietnam and had relocated their Vietnamese production facilities to other countries. ITM Semiconductor relocated its plant to Indonesia, and E-Lantech moved to Malaysia.
The move was in response to a law passed by the Vietnamese government in January that bans the manufacture, sale, and possession of heated tobacco products.
Both firms supply heated tobacco-related products to KT&G
KT&G equipment accounts for 20% of total heated tobacco use in South Korea through 2024, and the market is maturing. Elentec’s revenue from device sales was KRW 304.1 billion (~US$200 million), but declined to KRW 101.7 billion (~US$74.05 million) in 2024. Its revenue is expected to rebound to KRW 150 billion (~USD 100 million) in 2025.
Industry growth is shifting to cartridge sales
KT&G’s new growth will come from cartridge sales, not devices.ITM Semiconductor was initially the exclusive supplier of cartridges for KT&G’s Lil Hybrid (which combines heating and atomization), but Elentec has now entered its supply chain.
An industry source said, “As KT&G plans an aggressive marketing campaign in the second half of the year, there will be an opportunity for the smoke cartridge supplier to expand its sales.”
