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Taiwanese Pushing Investments

Published November 3, 2008

TAICHUNG, Taiwan (BRAIN)—Taiwanese manufacturers appear to be investing heavily in cycling’s future even as global industries retrench in one of the toughest financial downturns in decades.

When Michael Tseng, Merida’s president and the newly named chairman of Taiwan’s A-Team, was asked how the world’s economy is affecting the bicycle business, he paused, smiled, and said, “We’re very busy.”

Tseng’s company produces more than 600,000 units for sale in Europe and another 500,000 for the U.S. market. And, while on a quick tour of Merida’s factory where Tseng employs some 1,000 workers, no welding station was idle and employees were fast filling boxes with newly assembled bikes.

The same was true at TH Industries, FSA’s parent company, and at Velo, one of the world’s leading manufacturers of saddles. Another small company, Axman, a high-end carbon fiber frame designer and assembler, moved recently into a new office and factory and is still expanding.

Taiwan’s 22-member A-Team, a consortium of suppliers, is continuing to make improvements in R&D, quality control, employee training, marketing and just-in-time delivery. Over the next three years, its members must take an order and deliver it in less than 10 days, Tseng said. No small task, he acknowledges.

As for employee training, novice welders at Merida spend up to two months training before assignment to a full-time position. At Velo and FSA, dozens of employees now monitor every step in the production process so as to catch flawed products before final assembly.

FSA recently bought and installed an $80,000 X-ray machine so two employees could check every single hollow-arm carbon-crank it sells. “It’s 100 percent quality control,” said Douglas Chiang, the company’s managing director.

TH is also building a new multi-million dollar facility to house its offices, factory, warehouse and testing labs. Plans call for the complex to open next June.

Axman’s owner, Jackson Jiang, is installing a state-of-the-art paint facility along with a massive air filtering system to cleanse and recycle air from its sealed paint rooms. The company, which assembles Surly, Salsa and Civia bikes for QBP among others, also has a new water recycling system.

Jiang, speaking through an interpreter, said investing in environmentally friendly manufacturing is good for the environment and good for business. Many companies, especially in Europe, demand that manufacturers improve their environmental standards, he said.

Taiwan bicycle and component manufacturing is now the best in the world. For example, Taiwan makes a high percentage of branded Italian products in its factories or at Taiwanese-owned and managed factories in China.

“The bicycle industry is a very traditional industry,” said Tseng, “and because of its tradition it will still be here 100 years from now if not forever. I think we are very lucky to have chosen this industry."

Despite the ongoing investment and outward optimism, executives admit they are concerned—worried may be too strong a word. Some orders have been canceled or delayed. And companies are paying close attention to accounts receivables, and credit control is tighter.

And no one is predicting a stellar 2009. Instead, forecasts are pointing to a flat if slightly down year from 2008 with a definite softening in high-end road and mountain bikes. “Flat is the new up,” said Matt VanEnkevort, FSA’s general manager in the U.S.

—Marc Sani

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