Taiwan Today

After several decades of uneven performance, the past few years have seen the resurgence of 's bike industry.

At the 2004 Athens Olympics, 's Gunn-Rita Dahle of the Multivan Merida Biking Team crossed the finish line to take the gold medal in the women's cross-country mountain biking event. From 2004 to 2006, 's T-Mobile Road Racing Team won the team championship at the Tour de France riding carbon fiber Giant bicycles. And now, as the Beijing Olympics approach, members of 's women's cycling team are setting their sights on winning gold aboard Giant bikes.

Taiwanese companies like Merida Industry Co. and Giant Inc. hope that successes at high-profile events like the Tour de France and the Olympics will help them break from the peloton, or pack, of original equipment manufacturers (OEMs) to take the lead among global high-end bicycle brands.

In the 1960s and 1970s, thanks to the government's active organization of international trade shows, domestic bike makers began to receive purchase orders from abroad and entered an initial growth stage.

In the 1980s, by employing modern equipment and technologies, 's bicycle makers gained an increased presence in the international market and prospered as OEMs. As with toys and umbrellas, exports of 's bicycles reached a peak in the 1980s. In the industry, became known as the "." In 1986, Taiwanese manufacturers exported more than 10 million bicycles, which sold for an average unit price of US$41.

By the late 1990s, however, most Taiwanese bicycle makers were encountering intense competition from low-cost rivals operating in and , where labor and land costs were much cheaper. Domestic bicycle manufacturing risked becoming a sunset industry as more and more companies closed their Taiwan-based plants and moved overseas.

In response to this trend, some local bike makers began to concentrate on brand building, enabling them to survive--and thrive. Although export volume has declined over the past decade, the total value and the average export price of Taiwan-made bicycles have enjoyed steady increases.

According to statistics compiled by the Taiwan Bicycle Exporters' Association (TBEA), in 2006 's bicycle exports reached 4.1 million units, selling for an average price of US$207 each and generating US$839 million in revenue, compared with 4.8 million units, US$112 and US$536 million in 2001.

"The rising average price over the last 10 years points to the sustained progress of Taiwanese bike makers toward developing high-quality, high-value-added products," says TBEA secretary-general James Liu. "Their rich marketing experience and good after-sales service also enable them to make successful inroads into industrially advanced countries, which helps them avoid price wars with budget bicycle manufacturers in ."

TBEA statistics show the was 's top bicycle destination in 2006, followed by the , and . At the high end of the international bike market (generally bicycles with wholesale prices ranging from US$150 up to $2,000), with a volume of roughly 5 million units a year, now occupies an 80-percent share. Retail prices for these high-end bikes are generally more than triple the export wholesale prices.

"Taiwan's bicycle industry is strong today because it possesses fine manufacturing, design and marketing capabilities, as well as brand names and sales channels," says Edward Liao, general manager of the Cycling & Health Tech Industry R&D Center (CHC). "Plus, the bike and related parts makers have made joint efforts to build an efficient supply chain that quickly responds to market needs and trends."

With nearly 50 years of manufacturing experience, remains an important production site for prominent international bicycle brands, including Colnago of Italy, Trek and Specialized of the , Scott of Switzerland, Panasonic of Japan and the bicycle divisions of BMW, Mercedes-Benz and Porsche of Germany.

Liao's center, established in 1992 as the , has been a positive force in helping consolidate the international competitiveness of the nation's bicycle industry. With 51 percent of its funding provided by the Ministry of Economic Affairs' Industrial Development Bureau and the remaining 49 percent by industry representatives, the non-profit organization was assigned to research and develop bicycle-related technologies, provide testing and certification services for quality control and increase the standardization of bicycles and bicycle parts.

Pushing the Envelope

Accordingly, CHC has established several laboratories equipped with advanced machinery and information technology systems such as three-dimensional computer-aided design, material testing equipment, production technologies and design concepts.

Furthermore, in 1996 the center began organizing a domestic design competition, which was expanded into an international annual event in 1998. The International Bicycle Design Competition accepts more than 1,000 entries from designers from about 50 countries each year. A total of 24 submissions are awarded NT$500,000 (US$15,500) each. The center also works with the designers to explore the possibility of commercializing their design ideas.

"We want to use this competition as a communication channel for bicycle designers, manufacturers and aficionados from all over the world," Liao says. "Hopefully, a variety of design concepts and cultures can upgrade the functionality, look and performance of bicycles and thus boost their popularity, making them a part of people's daily lives."

Since last October, when CHC signed a contract with Bicycle Association (), bicycles made in can be certified for sale in before being shipped. Liao adds that this underscores the high standards reached by 's bicycle industry.

Indeed, led by Giant and , the nation's bike manufacturers have secured a loyal following among independent bicycle dealers and consumers around the world. Made-in-Taiwan bicycles are now widely recognized as high-end products.

In particular, Giant currently stands out as the leading brand in and , one of the top three brands in the and Europe and the largest import brand in , , and the .

While enjoying consistent double-digit sales growth over the last few years, Giant saw its revenues soar from NT$14.5 billion (US$450 million) in 2001 to NT$27 billion (US$840 million) in 2006. It has become the world's No.1 bike manufacturer. Giant's products have received numerous honors, winning 's Gold National Award of Excellence nine times, as well as 's IF Product Design Award and Microsoft Business Solutions' Pinnacle Award. Giant's products have also won bike-of-the-year honors in cycling magazines in the and .

Competitive Edge

"Many people are worried about the hollowing-out of 's industries," says Jeffrey Sheu, Giant's spokesman. "We want to use the bicycle industry as a model to show that still has strong manufacturing advantages. To this end, our company has undergone a five-step evolution from manufacturing to R&D, brand promotion, deployment of global distribution channels and partnership with retailers."

Giant has developed its international manufacturing capability by setting up eight factories in , and the to produce low-end through top-tier bikes. At the same time, the company has established 11 overseas regional headquarters and 10,000 shops in nearly 50 countries, selling its products only through authorized bicycle retailers. At R&D centers in , , the and the , Giant also employs about 150 professionals who have been responsible for the company's innovations in technologies, materials and designs. Giant became the world's first manufacturer to mass-produce bicycle frames and parts made from carbon fiber composites in 1987. Sheu says a bicycle's weight can be reduced to 6.5 kilograms with carbon fiber.

The leading Taiwanese bike maker has also developed efficient rear suspension frames for mountain bikes that ensure a smooth ride on rough trails and steep downhill sections. A key challenge in developing these frames was reducing the impact of rider movement on the suspension system.

Sheu says that along with establishing a worldwide manufacturing and marketing network to provide prompt delivery, sales support and after-sales services, his company also sets aside 8 percent of its annual revenue for marketing and brand building.

"Our company has had a very good OEM business since its establishment in 1972. Still, we're aware that our future lies in marketing our own branded products, which is why we began promoting our brand domestically in 1981 and overseas in 1986," he says. "Our brand name has become our most valuable asset. Currently, 70 percent of our sales come from our branded products." In 2006, the Giant brand was valued at US$250 million by Interbrand, an international branding consultancy.

Sheu adds that an important part of the company's brand promotion strategy has been its sponsorship of cycling teams. Giant's sponsorship of the T-Mobile Road Racing Team on the international circuit since 2003 and its support for the Chinese professional women's cycling team since 2006 have helped consolidate the company's reputation.

Goes for Gold

is also dedicated to promoting its brand by backing elite athletes. The company began to sponsor important cycling events and athletes in 1998 and founded its own team in 2001.

At present, the Multivan Merida Biking Team is composed of seven athletes, including Gunn-Rita Dahle of and Jose Antonio Hermida of , who won the cross-country women's gold and men's silver medals, respectively, at the 2004 Athens Olympics. also topped the mountain biking World Cup overall team rankings from 2003 to 2006, and Dahle won a cross-country gold medal aboard a at the World Championships in 2006.

Wang Lung-chin, 's assistant manager, says the outstanding feats of the company's cycling team have boosted the company's brand image, which in turn has enabled it to tap new markets. Moreover, must make continuous progress in product R&D to match the pace of its top-notch riders, who have very high performance requirements for their equipment.

Established in 1972, has evolved through several stages of development. "Our operations have changed over time, shifting from emphasizing production to focusing on technology and now on marketing," he explains. "The production technologies and management capabilities that we've cultivated through our OEM business and the promotion of our branded products and sales channels have led to sustained growth."

In recent years, Wang says his company has devoted itself to "3N" product development, which emphasizes new materials, new functions and new uses. Through 3N development, the company aims to make products that are lighter, perform better and cater to the needs of different consumer groups.

One of 's achievements, he adds, was the launch of mountain bikes with magnesium-aluminum alloy frames. The lightweight yet sturdy bikes debuted at the 2004 Athens Olympics.

By focusing on branding and product innovation, Merida saw its sales increase from NT$6 billion (US$180 million) in 2005 to NT$6.9 billion (US$215 million) a year later while average unit price climbed from US$377 to US$405 during the same period.

Another factor behind the continuous development of 's bicycle industry is the ability of domestic companies to work together in times of crisis. In 1998, the European Union levied anti-dumping duties ranging from 2.4 to 18.2 percent on Taiwan-made bicycles. The duties remained in place for five years. During that period, Chinese manufacturers engaged in price wars to grab market share.

As the slide worsened, industry leaders Giant and realized that they needed to cooperate to improve product quality, production efficiency and lead times. Thus, the two companies persuaded other bicycle and parts manufacturers based in to form an alliance called the "A-Team."

"If we wanted to remain rooted in , we knew we had to focus on something different from 's mass-produced, low-price models," Jeffrey Sheu of Giant recalls. "So we decided to start developing high-end, innovative products in more varieties but lower quantities."

Accordingly, the A-Team task force brought in the Toyota Production System (TPS), which promotes low inventory, lean manufacturing and collaboration on R&D while eliminating waste. At present, the A-Team consists of 23 members.

Wang of Merida says his company has benefited from the A-Team's promotion of production management principles, including just-in-time production, total quality management (TQM) and total productive maintenance (TPM). Collectively, these measures have cut production costs for the entire supply chain, allowing Taiwanese manufacturers to offer high quality, competitively priced bicycles and components.

"We've effectively lowered our parts inventory by 15 percent, reduced lead time by 60 percent and raised productivity by 25 percent since our implementation of TPS/TQM/TPM in 2003," he adds.

Lee Chi Enterprise, a domestic producer of bicycle brakes, levers and seat posts under the PROMAX brand name, is also a member of the A-Team.

The Plan Comes Together

"The introduction of TPS into our assembly lines has changed the way we work and trained our workers to be competent in handling different tasks. And by participating in the activities organized by the A-Team, we can learn from one another and find solutions to problems together," says Charles Chang, a special assistant at Lee Chi. "Our product quality and yield rates have improved and we can be more flexible in addressing customer needs."

Chang adds that thanks to increased computerization and automation, as well as standardization of production procedures, product lead times can be reduced to within 10 to 30 days from more than a month previously.

The close interaction among executives of participating A-Team companies, Chang continues, has reduced the incidence of turf battles. Moreover, while formulating their respective corporate development policies, the executives are able to attend to the needs of the industry as a whole.

Sheu of Giant believes the partnership has contributed substantially to the successful transformation of 's bicycle industry. "The establishment of the A-Team shoots down the theory that vendors only compete and cannot cooperate with each other," he says.

Meanwhile, global trends have also been conducive to the development of the bicycle industry and most domestic manufacturers are upbeat about their prospects.

"Cycling is getting more popular as a recreational activity and an environmentally friendly transportation tool," Sheu says. "Furthermore, we see huge potential for the demand for electric bicycles in , where many cities have banned the use of motorcycles, as well as in , where environmental awareness has hit new highs. By continuing to improve product design, quality and after-sales service, we are confident we can stay rooted in while securing a firm place in the international market."

Write to Kelly Her at kelly@mail.gio.gov.tw