Bruised Bicycle Bellwether: Giant Reeling in China Market

China, once the most promising bicycle market is now a heavy burden for Giant harming the company’s financial results. There are even no signs for improvement as Giant points to China’s slow economy. Even the country’s booming bicycle sharing systems, in which Giant is involved directly as well as via its own bicycle sharing program YouBike, could not give much financial relieve.--Bike Europe (11/14/2017)

The bicycle industry is already suffering with multiple pressures from a shift in retail channels to currency exchanges and cultural change in areas traditionally more favorable to higher-end cycling equipment. For most of a decade we have heard one of the industry leaders beating the drum for Taiwan's economic (and political) integration with the People's Republic of China. 

Or as Ralph Jennings wrote in 2009:

TAICHUNG, Taiwan (Reuters) - Economic powerhouse China and export-reliant Taiwan, political rivals for six decades, agreed on Tuesday to negotiate a trade deal that would cut tariffs and bring the two sides closer. 

Of course ECFA was never intended to be entirely about economic, but rather a means to rein in Taiwan's independence, which is supported by a vast majority of the population, in creating an economic dependency with deep political implications. 

ECFA garnered vocal support from Giant Manufacturing and Ma Ying-jeou's re-election campaign even saw then Giant chairman, Anthony Lo, issue a last minute vote of confidence to Ma's Kuomintang Party in the closing days of the election with an urgent call for support of his China-centered policies. He continued to remain bullish on Ma's vision and brushed the issue with tones of urgency. 

In 2010 Giant put its money where it's mouth was. 

According to reports from Taiwan media, appreciating the huge potential of the mainland market after the signing of the ECFA, Taiwan Giant Global Group plans to strengthen the capability and competitiveness of the mainland headquarters this year by launching a new investment plan to invest an initial RMB 1.16 billion for the establishment of the Bicycle Industrial Park in Kunshan, Jiangsu Province.

Reports disclosed that with the expansion of the market, Giant Global Group will increase its investment to raise its market share in the mainland bicycle market. Based on its original SUV brand GIANT, the Group will vigorously develop a new brand MOMENTUM to raise the market share of passenger vehicles. The medium-priced brand will be aggressively promoted through about 2,000 distribution channels.

Giant Global Group plans to increase its investment to build a bicycle plant in Kunshan, which has gained great support from the mayor of Kunshan Guan Aiguo. The 40-hectare new plant will consist of plants for bicycles, frames, carbon fiber and electrical vehicles. Besides, the cycle track & bicycle theme park plan will also be pushed forward. The investment in the initial stage amounts to USD 36 million (NTD 1.16 billion).
Reports disclosed that with the expansion of the market, Giant Global Group will increase its investment to raise its market share in the mainland bicycle market. Based on its original SUV brand GIANT, the Group will vigorously develop a new brand MOMENTUM to raise the market share of passenger vehicles. The medium-priced brand will be aggressively promoted through about 2,000 distribution channels. 

Giant Global Group plans to increase its investment to build a bicycle plant in Kunshan, which has gained great support from the mayor of Kunshan Guan Aiguo. The 40-hectare new plant will consist of plants for bicycles, frames, carbon fiber and electrical vehicles. Besides, the cycle track & bicycle theme park plan will also be pushed forward. The investment in the initial stage amounts to USD 36 million (NTD 1.16 billion). (6/2010)

Giant's self proclaimed "Godmother of Women's Cycling", Bonnie Tu, doubled down on ECFA and the China market. According to a Bicycle Retailer article (7/2010), Tu could barely suppress her enthusiasm for the post ECFA China boom.

Bonnie Tu, Giant Manufacturing’s chief financial officer, told the Financial Times the agreement could help the company better manage its production. Giant has factories in Taiwan and China. Giant builds its high-end bikes, particularly carbon fiber, in Taiwan. Lesser value models are made in China. 

“If there is no tax issue, we can really integrate our factories and shuffle production as we like,” Tu said. “China’s economy of scale for high-end bicycles could be really big,” she added.

This despite the beginnings of a quiet exodus of Taiwanese firms from China. 

“Our future lies in China and one of our goals is to develop this rapidly expanding market”, said Tony Lo, CEO of Giant Global Group at the press conference hosted by the Taiwan External Trade Development Council (TAITRA) at last week’s Eurobike show. “The best platform to build up this emerging market is the Taipei Cycle Show which is taking place from March 7 – 10, 2012,” said Lo.-- Bike Europe (8/2011)

... and later: 

Anthony Lo (羅祥安), chief executive officer of local bicycle maker Giant Global Group (巨大集團), said the government needs to establish a vision.
“What Taiwanese enterprises want to see is the government striving to help businesses build unique brands that can provide innovative products and services,” Lo said on the sidelines of the forum. 

Lo said Taiwan needs to integrate into regional markets as soon as possible so local firms can enjoy the trading privileges that other nation’s companies do, such as tariff exemptions. 

“The markets are changing so fast that the rules have been reset, and if we don’t catch up, it is going to be harder for us to hold our own in the global market,” he added.--Taipei Times (4/3/2013)

The China market has been a quagmire for some time and several indices have highlighted this situation.

The Chinese market for Taiwanese bicycles declined by 33% to 79,000 units. Though not yet that large, the Chinese market was seen as a main growth market for several years. This development has now stopped due to the economic decline in China.--(11/17/2015)

This past year Bicycle Retailer reported:

The weak link in global sales for Taiwanese companies, including Giant, remains China. "Giant China's performance continues to suffer from soft demand and the popularity of bike sharing, which affected sales recovery in the first half," Giant said. 

China's infatuation with bike sharing has forced companies like Giant and Merida to close some company-owned stores as retail sales have plummeted, particularly for higher end models. Independent shops have also been hurt by a lack of demand brought on by bike sharing. 

Still, Giant said it believes its co-sponsorship of pro-cycling's Team Sunweb, and its performance in the Tour de France and the Giro d'Italia, has elevated its global brand awareness and will drive future demand, especially for its carbon frames and accessories.
"Looking forward to the second half of the year, Giant projects Europe and the U.S. will continue its growth momentum," the company said. However, it cautioned that unpredictable exchange rates as well as continued turmoil in the Chinese market would be of concern for the remainder of the year. 

But if we just wait a bit longer...maybe China will do us a solid....

How's that China Market Thing Coming Along? Giant Feels the Pinch

Bicycle Retailer has a little article to rub salt in Giant's wounds. 

TAICHUNG, Taiwan (BRAIN) — Giant Manufacturing, a bellwether company within the industry's manufacturing sector, reported a 7.4 percent decline in revenue to $887.9 million through the first half of the year.
And net after-tax income also posted a significant drop to $39.3 million, a 29.5 percent decline, due primarily to unfavorable exchange rates, Giant said in a statement. For example, over the first half of the year the U.S. dollar had strengthened against the NT, up about 7.5 percent as of June 30.
Giant's first half report follows on a weak 2016, when it posted annual revenue of NT$57.09 billion, a 5.5 percent decline from 2015.
.....................
The weak link in global sales for Taiwanese companies, including Giant, remains China. "Giant China's performance continues to suffer from soft demand and the popularity of bike sharing, which affected sales recovery in the first half," Giant said.

In 2016 I wrote to some degree of commotion on the trouble for Taiwan's largest bicycle manufacturer. (Read the whole thing. Some people agree... others think I am a nincompoop) Giant has long seen China as the land of 2 billion toothbrushes. In 2000, just after the inauguration of Chen Shui-bian, former Giant Chairman, Anthony Lo, was quoted in the Washington Post:

"Whoever is president," Lo said, "is going to have to face reality. And the reality is: China is there, it won't go away, and it has a huge market that we are uniquely positioned to exploit."

Remember in 2012, Giant was a major pre-election cheerleader for Ma Ying-jiu and his ECFA, the cross strait economic framework that was supposed to latch Taiwan's economy to China and money would rain from the skies. Bicycle Retailer wrote in 2012:

Taiwan’s manufacturers will benefit from a stable cross-strait relationship, said Tony Lo, chairman of the Taiwan Bicycle Exporters Association and CEO of Giant, the island and the industry’s leading frame maker.
“Taiwan’s high-end bike export to China has grown 87 percent in 2011. It could double again in 2012. This will have a positive influence of the transformation of the Chinese bike market toward recreational and sport in the future,” Lo said in an e-mail.
Lo cited Ma’s ECFA, or Economic Cooperation Framework Agreement, which eliminated duties on bikes shipped between Taiwan and China as of January 1. Since Ma signed the ECFA in June 2010—gradually reducing duties on bicycles and other consumer goods exported from Taiwan—the trade pact has already boosted business in China for Taiwan manufacturers like Giant, Merida and rim maker Alex Global.

So, here we are in 2017....

A Giant Step Backwards: LA Times Promotes Giant

Something is afoot as there seems to be a sudden influx in cycling related news regarding bicycles and Taiwan. And why not? There is something to be sold. 

Tiffany Hsu has a very lengthy piece that made it into the Los Angeles Times detailing Giant as a major shaker in the bicycle industry. Hsu does an admirable job in her reporting as she refrains from annexing Taiwan to China or creating artificial conflict in that regard. The more interesting pieces of the article are the points where Giant CEO, Anthony Lo, speaks his mind and reveals a little bit about Giant, the company's trajectory, and moreover, it sheds a little light on how Giant is writing its own mythology.

Tony Lo says he has the solution for traffic- and smog-choked Los Angeles: Get people to hop on bikes. 

For Lo, it’s a convenient proposal to make. He’s chief executive of Giant Manufacturing Co., a Taiwan-based company with U.S. headquarters in Newbury Park that calls itself the world’s largest bicycle producer by revenue.Such concerns weigh heavily on the small island nation, which is trying to reduce its reliance on fossil fuels as smog drifts across the strait separating Taiwan’s western coast from China.

Of course, as I have recently written in an earlier post, it is not entirely accurate to simply blame China for our own air pollution. For much of the year Taiwan's air pollution is the result of domestic polluters and our reliance on coal-fired power plants. Naphtha cracker production is also a major source of airborne pollution as we have seen with the Formosa Plastics foundry in Yunlin, which was recently the focus of a protest against PM2.5 emissions as the topic has gained some political traction. Taiwan continues to rely on the burning of fossil fuels with two recent dips, which correlate to periods of negative economic growth.

In recent years the Taiwanese have embraced cycling culture as never before, Lo told a group of American journalists last week. 

“In the past 10 years, Taiwan has turned from a biking desert into a biking island,” he said at Giant’s original manufacturing and assembly plant in the Dajia District of Taichung City. “If Taiwan can do this under not very favorable conditions, there’s no place where it cannot happen.” 

The number of motorcycles and scooters in the country is declining, he said. Increased demand for bikes allowed Giant to launch a hotel that caters to cyclists, a public bike rental system with more than 5,000 bicycles and a brand dedicated to women called Liv.

Mr. Lo's assessment is a cynical one at best. According to the government's own statistics (through 2013), while the number of scooter drivers has dropped in recent years to 2007 numbers of 6073 scooters per 10,000 residents, the number of private automobiles has risen to 3152 for every 10,000 residents, an increase of 204 vehicles. The data spanning from 2007 to 2013 shows shows very little change in the reduction of private motor vehicles and, at first glance, appears to follow Taiwan's economic health as opposed to an interest in physical health. The numbers do not include bicycles for transportation, but the real difference seems to be from mass transit, such as trains and MRT systems which respectively saw large increases in ridership with the introduction of more frequent trains an expanded MRT systems. The bicycle is really insignificant in Taiwan's transportation infrastructure.



Of Course, Tony Lo should know this. Both Lo and Giant's founder and president, King Liu, have close ties to the government as the latter served as a special presidential advisor on transportation and bicycle policy.

This partnership between the corporation and the government has produced little by means of emissions reduction-- the U Bike program being the only meaningful program that is aimed at transportation-- and instead focused largely on the more lucrative side of the business, which is to view the bicycle as a tool for prestige and leisure. I have written multiple times that there is nothing wrong with leisure cycling. It is a great way to exercise and see Taiwan. I would also argue that it does little to reduce emissions as it is simply replacing other activities that also do not produce emissions-- activities such as jogging, badminton and crochet. I might also argue that the focus on leisure cycling could potentially be adding to the very problem Giant claims to be solving. Since leisure cycling does not act to limit an individual's regular carbon emissions associated with necessary transportation it is important to look at Giant's goal of producing and selling more product.

If we consider the environmental impact of bicycle production, it is far lighter than a car. On the other hand, industrial bicycle production requires sourcing raw materials, energy from fossil fuels, toxins and other emissions. It is important to consider the greater environmental impact of these machines of leisure. As Giant has helped reduce the cost of leisure and recreation bicycles, it has increased the number of carbon fiber frames and components on the roads. Carbon fiber is not a commonly recyclable material and will often end up in a landfill. The longer a bike lasts, the smaller impact it will have. Unfortunately, the bikes Giant wishes to sell are the bikes with the highest profit and the highest rates of turnover.  Giant's recommendation to the government has been to construct more leisure cycling paths. One of the best studies on the topic concludes over the course of the 20 year lifespan of a bicycle path, it would require 115 cyclists 440 commutes per year over 5km to offset the carbon footprint of the cycle path. Of course, this is for commuters in which the cycling is a substitute for other forms of transportation. Read the whole paper HERE.

Giant launched in 1972 making bike parts for companies such as Schwinn Bicycle Co. but introduced its own brand in 1981 after losing orders to China. 

Not long after, Giant and its Taiwanese rivals decided to focus on high-end bikes to distinguish themselves from the cheaper models churned out by Chinese competitors.

I find this section of Hsu's piece very interesting as it almost entirely focuses on the Chairman, Tony Lo, rather than the president and founder, King Liu.

Giant has, at great expense, promoted the story of King Liu to capture the hearts and minds of Taiwanese. I personally enjoy this recent characterisation from Want Want China Times:

I find King Liu a very interesting case, in examining how much of the story was left on the editing room floor.

The King Liu story is built upon the foundations of a Horatio Alger narrative-- scrappy a down-on-his-luck figure overcomes adversity to pull himself up by his bootstraps and realize his ultimate boon.

He began his own business raising eels at the age of 35, but he was brought to the brink of bankruptcy when a typhoon destroyed his eel ponds. 

He subsequently founded Giant in 1972 as a contracted manufacturer of bicycles, where he struggled for three years to keep the new company from collapsing.
Just when he was able to turn his company from running in the red to running in the black, a client whose order accounted for three-fourths of Giant's revenue suddenly stopped working with Liu's company. 

More miseries lied ahead, he says in the book. At the age of 63, Liu was diagnosed with gastric cancer and had to have half of his stomach removed, and then many of Taiwan's bicycle component makers moved overseas, causing Giant to lose nearly all of its suppliers overnight. 

At 73, Liu found himself plagued with sleep apnea, blood clots, and a slipped disc. Despite the obstacles, he decided it was time to ride around Taiwan on his own Giant bicycle in defiance of the opposition of every one of his family members and friends.

In many ways this is the Taiwanese monomyth that resonates throughout Taiwanese culture. As the locus of multiple colonization projects, Taiwan's social, economic and political structures have been forced to adapt to changing realities. Taiwanese have a history of pragmatic change and adaptation. The unfolding narrative is one of survivors. An examination of Taiwanese popular music and literature is full of fantastic tales of the wandering man who leaves home to make his fortune, only to return home or to dream of returning to his hometown. Songs such as, 離開故鄉來流浪, 舊皮箱的流浪兒 and 出外人 are classic examples of the popular image of the wandering man.

The myth of King Liu is, in my opinion, deliberate in this type of imagery to appeal to an existing sense of local pride. The moniker "Bicycle Kingdom" that is often used in fawning print articles is a cute reference to King Liu. 

What Giant seems to ignore in the mythologizing of King Liu, was the mighty hand of the KMT party-state and the role of the Lo family in Giant's success.

By the mid 1960's Taiwan was entering unfamiliar territory. As a sojourn state, the prospects of American aid in "retaking the mainland" were quite dim. Taiwan was under strict martial law with an strong state controlled economy (price restrictions, monopolies and tariffs). Taiwan had been protected from world economic fluctuations due to artificial government stimulation, few foreign investments and the infusion of American aid. (See Gold;1986)

Under pressure from the United States, Taiwan embarked on economic reforms that stemmed from multiple state directed plans to use Kuomintang funds to spur investment and economic growth in the private sector. As the term "private enterprise" tended to euphemistically mean "owned by local Taiwanese", the state hoped to curtail opposition. These SMEs became subcontractors for Japanese manufacturers in an export economy. Taiwanese' close ties to Japan made the arrangement a smooth transition. By 1972, the KMT party state searched for a new 6 year plan and investments to boost the economy. This is the time of King Liu's misfortune with eels. He essentially was given a KMT backed loan to switch from the local economy to the export economy. There is speculation that Tony Lo's "mainlander" background may have served as a buffer or guarantee for the fledgling bike manufacturer and its state patron. I am curious if Lo will be stepping up to replace Liu as the "Visionary Giant". 

About 2,000 people work in Giant's Taichung complex. Roughly 20% of them hail from Vietnam and Thailand and are housed in dormitories. 

Like many other major economies, Taiwan is facing a disconnect between employers and the workforce. Many companies have positions to fill but can’t find the needed applicants locally. 

“We don’t have enough labor in Taiwan,” Lo said. “Young people don’t want to go into manufacturing.”

I find the quote above to be quite interesting. In Taiwan we often see tycoons and wealthy politicians lament the "laziness" of young Taiwanese. In one recent Want Want China Times article: 

Pan Wei-kang, a lawmaker from Taiwan's ruling Kuomintang, says members of the country's younger generation lack ambition and have lost competitiveness compared to their contemporaries in mainland China and the Philippines, writes our Chinese-language sister paper Want Daily.  

Pan said young people in Taiwan are generally well educated but many of them are unwilling to face reality. Many college graduates fail to find jobs and continue to depend on their parents financially or go on to graduate study or take part in working holiday visa programs to defer joining the workforce, the lawmaker said. 

These sentiments were often hurled at the students who came out in force to support the Sunflower Movement and are, in general, feeling ever marginalized in Taiwan.

The anthropologist, Anru Lee, in her excellent work on labor in Taiwan In The Name of Harmony and Prosperity: Labor, Gender and Politics in Taiwan's Economic Restructuring, writes:

The myth that Taiwanese young people are spoiled and lazy is false. Young Taiwanese with college degrees take low starting salaries. Last year, Terry Gou, another famous tycoon based in Taiwan, insisted the young people of Taiwan were spoiled and that a reasonable starting salary for a college graduate at the technology colossus, Foxconn, should make NT22,000 per month (roughly USD$729). Many Taiwanese are pressured into working massive amounts of unpaid overtime. Many foreign workers make just over NT15000 per month. 

I was recently privy to both an applicant and potential employer's negotiation. The applicant has 10 years of experience as a buyer. She had been a stay-home mom for two years and was hoping to go back to work. She demanded NT26,000 per month. The potential employer would edge no higher than NT24,000. 

When we consider the problem of unaffordable housing from the current housing bubble, where the rich have saturated the housing market for safe investments, the rising cost of utilities, young people can not afford to work for Giant. 

Meanwhile....

Tony Lo is in China helping to shift the leading role of the Asian bicycle industry to a China based organization that will likely promote industry centered growth for whatever is best for the few at the very top of the food chain. 



Lee, Anru. 2004. In the Name of Harmony and Prosperity: Labor and Gender Politics in Taiwan's Economic Restructuring. New York, State University of New York Pres. 

 Gold, Thomas B. 1986. State and Society in the Taiwan Miracle. New York, M.E. Sharpe, Inc. ISBN 0-87332-399-8