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SRAM to close its Kunshan factory in China; production to move to Taichung

Published November 14, 2016
UPDATED

KUNSHAN, China (BRAIN) — Jeffrey Winterkorn, SRAM’s vice president of global manufacturing, told employees at the company’s Kunshan factory Monday that closing the plant was a “difficult decision.” 

Winterkorn applauded the factory’s employees for the work they have done during the plant’s three years of operation. “They have shown great teamwork, strong employee engagement and commitment to quality,” he said. SRAM opened the factory in 2013 to supply China’s expanding domestic market. 

As the global market for bicycles has slowed, SRAM’s factory had a utilization rate of only 20 percent, he said. SRAM, starting in June 2017, will transfer products produced in Kunshan to its Taiwan factories for production.

“Without meaningful growth in the mid to high end of the domestic Chinese market there wasn’t the scaling in business necessary to grow a supplier base around Kunshan that we needed to keep the factory growing," Stan Day, SRAM's CEO, told BRAIN in a call from Taiwan. “We folded our Guangzhou factory into Kunshan when it came on line, so now we have no factory in China. We will be servicing all our Asian customers from Taiwan where we are concentrating our resources."

“Having the technical capabilities we do in Taiwan is more important economically than just low labor costs," Day added. "We will not grow our Taiwan footprint, but we will probably add some employees to accommodate bringing our Chinese business there."

Some assembly and parts manufacturing have moved to Cambodia and Vietnam, taking advantage of more favorable wage rates. Last year, for example, wage rates for Chinese workers rose 7.4 percent, and that’s a slowdown from 2014 when wages in general increased more than 9 percent.

Trade agreements with Europe also favor products produced in the two Southeast Asian countries, particularly Cambodia. And EU Commissioners have concluded negotiations with Vietnam on a free trade agreement.

The Kunshan factory is near two of China’s biggest manufacturers—Giant and Merida. The Kunshan factory produces mostly entry-level suspension, mechanical disc brakes and is a base to manufacture parts for the domestic Chinese market.

 

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