Looking at the Vietnamese Bicycle Industry

Special Reports
Stepping Stone to the ASEAN Market
Looking at the Vietnamese
Bicycle Industry
Text & Photos: Editorial Dept.
S
teadily rising wages in China are leading many major
bicycle brands and other Taiwanese companies to contemplate moving to Vietnam in order
to disperse their risks and take
advantage of Vietnam’s lower
labor costs. Vietnam now has the
most extensive overseas cluster of Taiwanese bicycle firms
apart from China. And as the
European and American markets
become more saturated, the vast
potential markets of Vietnam
and other ASEAN countries look
increasingly attractive to bicycle
manufacturers.
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ASEAN Appeal
Vietnam has an area of
331,410 square kilometers and
a population of approximately
90 million. The country’s 5.89%
economic growth during the
depths of the global recession in
2011 demonstrates its economic
dynamism as an emerging nation. The large population and
rapid economic development in
recent years make the country
well-positioned as a gateway
to the ASEAN market. The ten
ASEAN member states have
a combined population of 560
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million and a GDP of US$1.2
trillion, and this has attracted
numerous foreign firms.
Among the attractions are
access to the immense Southeast
Asian bicycle and motorcycle
markets, eligibility for preferential duties under ASEAN free
trade agreements, and even a
chance to enter the Chinese, Japanese, and Korean markets under
the ASEAN Plus Three cooperation agreements. And as Taiwan
cannot become an ASEAN member, using Vietnam as a stepping
stone to the ASEAN market may
be quite advantageous.
Special Reports
Investment Conditions
Vietnam adopted a new
economic reform policy in 1986
offering numerous tax benefits
to attract foreign investors, and
the first wave of foreign firms
started arriving in 1988. Taiwanese bicycle companies began
establishing plants in Vietnam
about a dozen years after that,
as many local governments were
providing four-year tax reduction or tax exemption incentives
at that time. More than 20 years
have passed since Vietnam embarked on its economic reforms,
and industry in the country has
enjoyed widespread growth.
Consequently, the sectors that
still enjoy tax exemption and reduction benefits are chiefly high
added value, high-tech, and low-
pollution industries such as the
electronics, biotechnology, and
medical industries.
Looking ahead to the coming decade, traditional industries
will continue to predominate in
Vietnam. In spite of high inflation, which was over 18% in
2011, other factors such as the
country’s size, big population,
and youthful demographic (people under the age of 35 account
for 70% of the population) continue to make it a very favorable
and promising manufacturing
base for Taiwanese firms. Further in the future, manufacturing of such high added-value
products as cosmetics and cell
phones may also shift to Vietnam. But for the present, Vietnam is still developing its basic
industrial base and resourcewww.biketaiwan.com
intensive industries. As a result,
high-tech industry will not thrive
in Vietnam until it can obtain
support from basic industry.
Labor Costs
Low wages tend to be Vietnam’s biggest draw, but as Vietnam is communist country, it
pays great attention to workers’
rights and interests, and wages
and work conditions are improving all the time. Employees may
work no more than 8 hours per
day, and 48 hours per week. Any
work performed after 5pm, on
weekends, or on national holidays, counts as overtime. Pregnant women currently receive
four months of maternity leave,
which will extend to 6 months
this year.
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Special Reports
The monthly minimum
wage for most of the country is
approximately VND 2.15 million
(roughly US$110). When overtime and various subsidies are
included, monthly labor costs are
approximately US$150-200. The
minimum wage is constantly being adjusted – it was raised three
times in 2012 and is expected to
be hiked again in early 2013 –
but is still only about half of the
Chinese minimum.
▲Prices of lands and goods are continuously rising in economic centers like Ho Chi Minh City and the
neighboring Binh Duong province.
Overview of Vietnam’s
Cycle Industry
Effects of EU Duties
By 2005, there were seven
bicycle assembly plants operating in Vietnam, and the Taiwanese bicycle firms that had
established themselves in the
country were thriving. However,
the cycle industry in Vietnam
suffered a severe blow when
the European Union unexpectedly decided in 2006 to impose
anti-dumping duties on bicycles
imported from Vietnam. Bicycle
exports went from almost one
million units a year to practically
zero. Most assembly plants either moved to nearby Cambodia
or closed down. A small number
of assembly firms shifted their
focus to the domestic market.
The EU duties had a ripple
effect on parts manufacturers
and other supply chain firms, and
many companies had to write
off costly investments. Parts
manufacturers were forced to
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▲Song Than Industrial Park features a row of Taiwanese restaurants.
focus on the export market and
make intensive efforts to boost
their competitiveness. Although
the EU revoked its anti-dumping
duties on Vietnamese bicycles in
2010, this has been of little use
to domestic whole bicycle firms,
who are undercut by Cambodian
bicycle assemblers which still
enjoy a duty advantage when exporting to Europe and the United
States. There is consequently no
room for bicycle assembly plants
in present-day Vietnam. If, however, the EU revokes its preferential treatment of Cambodian
exports in the future, Vietnam’s
competitiveness as a bicycle assembly site will take a big jump.
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▲ Most industries in Vietnam are labor-intensive,
and labor management requires a lot of attention.
Special Reports
The Domestic Market
Although Vietnam is still
somewhat of an emerging nation, most people would much
rather ride a motorcycle than a
more economical bicycle. There
are only around three million bicycles on the road in the country
compared to over 30 million motorcycles. Bicycles are chiefly
used for commuting in Vietnam,
and are seldom used for sports
and recreation. Professional bike
shops are extremely rare, and
there are only small number of
serious cyclists and teams.
T h e Vi e t n a m e s e m u c h
prefer Taiwanese bicycle brands
to their Chinese and Vietnamese competitors. Although they
are more expensive, consumers
know that Taiwanese bicycles
are extremely sturdy, and they
can obtain service at retail bike
outlets. As a result, Vietnamese
consumers have a growing ap-
preciation for Taiwanese bicycles.
The leading bicycle assembly plants in Vietnam chiefly
produce commuter bikes. In addition, many local bike shops
and family-style workshops assemble their own bicycles from
parts and frames purchased
elsewhere. Many inexpensive bicycles purchased on the market
were assembled in bike shops,
which may even apply their own
decals. Some low-price bikes are
also smuggled in from China,
especially along the convenient
route from Nanning in China’s
Guangxi Province.
E-bikes appeared in Vietnam as early as 10 years ago,
but they are still few in quantity
and type. In view of today’s rising oil prices and growing environmental pollution, though,
growing numbers of Vietnamese
consumers are considering using e-bikes. However, as sales
remain relatively stagnant for
all types of bikes, most bicycle
firms in Vietnam are only finding
room for growth in the steadily
growing motorcycle market.
Taiwanese Firms in Vietnam
I n 1 9 9 9 , a s Ta i w a n e s e
bicycle firms faced strong competition from China, Asama GM
Paul Fang and several other
members of the bicycle industry
conducted a fact-finding tour
of Vietnam, and subsequently
bought land and built plants.
Roughly 30 Taiwanese bicycle
firms now have plants in Vietnam, including the whole bicycle
plants Asama and Strongman,
and the parts manufacturers Active Interna, Alhonga VN, Wang
Shend, Tsai Yarn, Bor-Yueh,
Sheang Lih Cycle, Yaban, KMC
Chain, VP, Astro, Olympic,
Sheng Kai, Kenda, Link Fortune,
Cheng Shin, Co-Union, Super-
▲The rise and fall of local assemblers has a direct impact on downstream ▲The Vietnamese bicycle industry stresses self-improvement. Members regularly
supply chain development in the bicycle industry.
organize TPS observations and exchange opinions and ideas.
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▲Traditional bike shops are the major sales points in Vietnam.
▲ The China Bicycle Association (CBA) led 19 Chinese bicycle companies to
organize a bike show in Vietnam.
▲Vietnamese streets are always full of motorcycles, just like other Southeast ▲The 2012 China Cycle International Exhibition (Vietnam) was held at the
Saigon Exhibition and Convention Center (SECC) in Ho Chi Minh City.
Asian countries.
sonic, Daily Full, Te-I, Taifa, Song Tain, Guo
Xiang, Hsin Lien, Tiger, Lung Hui, Gold Well,
Ho-Shin, and Sun Rise. Active Interna CEO
Tsai Wen Jui is the chairman of the Taiwanese
Bicycle Association in Vietnam.
Taiwanese bicycle firms in Vietnam have
established a fairly complete supply chain,
including bicycle assembly, frame and parts
production, and electroplating and processing.
Those Taiwanese firms that survived the 20062010 European Union anti-dumping sanctions
generally have a very solid foundation. The EU
revocation in July 2010 of anti-dumping duties
on bicycles imported from Vietnam has proved
a godsend for Vietnamese cycle manufacturers,
and Taiwanese bicycle firms strongly consider
the country when making their overseas expansion plans.Bor-Yueh: High Bor-Yueh: High
▲Pregnant women are usually arranged on easier production lines.
▲Worker skill levels have improved in recent years.
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Special Reports
Active Interna: Continuing
Refinement
Saddle maker Active Interna, a subsidiary of foming in
Taiwan, opened its Vietnam factory in 2000. The plant occupies
14,000 square meters, and has
a monthly capacity of 700,000
saddles. Thanks to the plant's
plastic injection molding capabilities, it has also developed
saddle covers and other peripheral products. In order to differentiate its plants in Vietnam
and Taiwan, Active Interna has
moved production of mass-market products to Vietnam to take
advantage of that country's low
labor costs. Small-batch products and products with a short
delivery time are manufactured
in Taiwan, along with high-end
and high added-value products.
Active Interna's Vietnam
plant exports 90% of its output
and sells the remaining 10% on
the domestic market. Products
supplied to the Vietnamese market chiefly go to local assembly
plants, with small quantities
sold on the aftermarket. Exports
chiefly go to Cambodia, other
ASEAN countries, and Europe.
Active Interna formerly sold
made-in-Taiwan products to several ASEAN countries, but had
to cope with tariffs of as high
as 45%. In contrast, the tariffs
between ASEAN member states
are very low, so Active Interna's
Vietnam plant is well placed to
export to other ASEAN countries. Active Interna has enjoyed
significant annual growth since
establishing its Vietnam plant,
and has set its sights on ASEAN
markets such as Thailand and
Indonesia.
Active Interna now plans
to establish a second plant in
Vietnam in an effort to differ-
entiate its domestic and export
products. The company plans to
continue to produce mass-market products at its first plant, and
produce the high-end products
currently being made in Taiwan
at its second plant. Over the past
few years, Active Interna has
established production lines with
a relatively high level of added
value, and has also selected its
most outstanding employees to
man production lines for highend products.
In line with its decision to
emphasize branding and OBM
production, Active Interna has
strengthened its R&D and accessory brands. The company
formerly marketed products
under the Active brand name,
but had to switch to the new
brand DDK because of registration limitations. Active Interna
also updated its molds, achieved
compliance with the new EN
▲ Foming Deputy GM Renbin Tsai (third from right) and CEO Richard Tsai (fourth from right) lead their
company colleagues in promoting the DDK brand around the world.
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▲Foming Deputy GM Renbin Tsai is
stationed in Vietnam, and is committed to
the continuous improvement of the Vietnam
factory production line.
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Special Reports
standards, met the European and
American REACH standards,
and enhanced the grade of its
products. Active Interna also
changed its business strategies
in order to give its brand better
positioning.
The company is now cooperating with the well-known Ital-
ian brand SMP, and the two parties have jointly developed the
Strace brand, which draws on
SMP's brand and R&D strengths
and Active Interna's production
capabilities. Strace products are
designed in Italy and manufactured by Active Interna. Both
parties are making use of their
respective strengths, while jointly engaging in marketing and
simultaneously enhancing quality and brand recognition. This
cooperative undertaking has allowed Active Interna to absorb
its Italian partner's knowledge
and strengths, which it is using
for self-improvement.
▲Ho-Shin GM Ming-Dong Lai.
Ho-Shin transformed
diversified products.
company currently makes bed
frames, TV cabinets, system
cabinets, baby beds, and aluminum handles for furniture.
These products are chiefly supplied to furniture makers serving
the Vietnamese market. As part
of its transition, Ho-Shin has
moved into processing areas,
such as welding and polishing,
that it avoided previously. Company sales grew by 20% this
year.
Ho-Shin: Proceeding with
Caution
Originally a producer of
bicycle parts and accessories,
Ho-Shin first invested in Vietnam in 2003. At that time, the
company supplied products such
as saddle rails and chromoly and
profiled tubing to the seven assembly plants in Vietnam. After
the EU imposed anti-dumping
sanctions in 2005, Ho-Shin lost
its assembly plant orders and
was forced to shift to production
of furniture hardware. Bicycle
parts currently account for only
5-10% of the company’s sales.
The Ho-Shin plant occupies 11,500 square meters, and
has 70-80 Vietnamese workers, three Taiwanese staff, and
one Chinese staff member. The
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itself
to
produce
Special Reports
Alhonga VN :
Enjoying Steady Growth
Brakes maker Alhonga
VN was established in the Song
Than Industrial Zone in 2000.
The plant, which occupies
15,000 square meters, has eight
Taiwanese managers, two Chinese managers, 500 employees,
and a monthly capacity of 3-3.5
million sets of brakes. Due to
the labor-intensive nature of
assembly work, the company
continues to invest in automatic
equipment to reduce its labor
costs and increase quality.
Alhonga VN mainly produces aluminum alloy V-brakes,
which are designed and developed in Taiwan and produced
in Vietnam using raw materials
mostly imported from Taiwan.
Processes at Alhonga VN that
were once outsourced, including surface treatment, powder
coating, die-casting, forging,
and grinding, are now being
performed at the plant. In-house
processing enables Alhonga
VN to have better control of
product quality and deliveries,
while also helping to reduce
production costs. As a result,
▲Complete testing equipment.
the company’s competitiveness
has increased significantly. Currently, high-end hydraulic brakes
are mostly made in Taiwan, but
the Vietnamese plant will produce higher-grade products once
employees have improved their
skills and qualifications.
Alhonga VN is currently
the only Taiwanese bicycle company in Vietnam specializing in
brake system production. The
company supplies its products to
three Taiwanese assembly factories in Vietnam and Cambodia,
and also exports its products
to Europe. Of Alhonga VN’s
output, 10% is sold in Vietnam,
70% is exported to European
market, and 20% is exported to
other countries and regions.
Aside from supplying the
domestic market and exporting
products to Europe, Alhonga VN
also supplies brakes to the local
motorcycle market and serves
as a production base for the
ASEAN area, since Vietnamese
exports face low tariffs in other
ASEAN countries. Because GM
Alan Chang has high expectations for the 600-million consumer ASEAN market, the company may consider setting up a
▲Alhonga VN GM Alan Chang is quite
optimistic about the ASEAN market.
second plant in Hanoi.
A major goal of Alhonga
VN is to put down roots and
achieve sustainable operations
in Vietnam. For this reason, Alhonga VN emphasizes personnel
management and pays close attention to government regulations. Alhonga VN has passed
Social Accountability 8000
(SA8000), and areas such as fire
protection, safety, and environmental protection fully meet local
government regulations. Alhonga
VN even has three drainage systems: one for rainwater, one for
industrial wastewater, and one for
household sewage, demonstrating
just how serious the company is
about protecting the environment.
▲Taiwanese businessmen support each other, ▲Factories are gradually replacing traditional manual
and avoid plant investment duplication. Pictured: labor with automated machinery, thereby narrowing
powder coating equipment.
tolerances and improving quality.
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Special Reports
Asama: Parallel Domestic
and Export Sales
In Taiwan, Asama focuses
on both the domestic and export
markets, and its Vietnam plant
has adopted a similar strategy.
When the EU imposed antidumping measures on imports
from Vietnam, Asama’s Vietnam
plant still retained its domestic
sales, which enabled it to weather the storm. At the same time,
in order to continue its sales to
Europe, Asama also established
a new plant in nearby Cambodia.
After the EU revoked the antidumping measures, Asama’s
Vietnamese plant resumed exports of chiefly mountain bikes
and travel bikes to Europe.
The plant occupies roughly
seven hectares, and has 1,500
employees and a dozen or more
Taiwanese staff. The company
sells around 300,000 bicycles
annually on the domestic market under the Asama brand.
Commuter bikes are the biggest
sellers, followed by e-bikes. Because of high tariffs, imported
bicycles are scarce in Vietnam.
One of the biggest domestic
brands is 107, and some of its
bikes are assembled under contract by Asama. In addition,
▲Asama and a number of other companies went to Vietnam together in 1999, and
many of their plants are on the same road.
Bor-Yueh: High In-House
Content
Bor-Yueh was one of the
earliest Taiwanese bicycle companies to enter Vietnam. Company brands include Bor-Yueh,
Branc, and Move. The Branc
plant in Taiwan focuses on contract manufacturing, while the
Bor-Yueh subsidiary in Vietnam
produces its own brand and
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some Asama brand bikes are distributed by 107.
In spite of the large size of
the ASEAN market and the fact
that exports from Vietnam to
other ASEAN countries are eligible for preferential duties, GM
Paul Fang is well aware that the
several ASEAN countries with
relatively large bicycle markets
also have their own domestic
bicycle manufacturers producing mostly low-price bikes.
Although he doesn’t rule out
making forays into the ASEAN
market, Fang realizes that this
will take considerable time and
effort.
▲Asama produces all kinds of bicycles. Commuter bikes are for the
domestic market, while mountain bikes and trekking bikes are primarily
for export to Europe.
exports its products to Europe.
Bor-Yueh’s European exports
account for 85% of its overall
sales, and products include carrying racks, water bottles, and
baskets. Bor-Yueh and Branc
are mid-priced products, while
Move collaborates with a German company to develop and
design mid-/high-end products
suitable for the German market.
Currently, all Branc orders prodwww.biketaiwan.com
ucts are taken in Taiwan, and
the Vietnamese plant – which
accounts for 75-80% of the company’s output – is responsible
for production.
Bor-Yueh’s Vietnamese
plant occupies a 30,000-square
meter site, and the factory itself
takes up 15,000 square meters.
The company has a total of 300
e m p l o y e e s . Tw o Ta i w a n e s e
employees and two mainland
Special Reports
Chinese employees are in charge
of molds, and one Chinese employee is responsible for quality control. Monthly production
capacity consists of 70,000 aluminum carriers and one million
water bottles. Because there are
relatively few up-/downstream
processing plants in Vietnam,
Bor-Yueh has been striving to
increase its in-house production
rate. After a new coating plant
was completed in March 2012, it
began taking over coating work
that had been outsourced in the
past. Except for raw materials,
screws, and plastic bags, all other parts for carriers are all pro-
duced in the plant. The in-house
production rate is over 90%,
which enables the company to
ensure quality and timely deliveries.
Regarding future business
targets, Branc Manager Chen
Huang-jen stated that the company is working on reducing the
defect rate and costs. In order
to improve product quality and
increase the competitiveness
of Bor-Yueh’s Vietnam plant,
repeated quality control inspections are performed after the
welding of carriers is completed,
before and after coating, and
during packing.
Sheng Kai: Dedicated to the
Domestic Market
ers an area of 1,500 square meters, with the maximum production capacity of 9,000 units for
a single line in one month. The
total staff includes five in quality
control, seven in management,
20 in the material preparation
department, and 30 in welding.
Factory facilities include punching, tube cutting, professional
notching, tube bending, tube
reducing, and argon and CO2
welding.
Sheng Kai focuses completely on the Vietnamese domestic market. Businesses include
Sheng Kai hails from Kaohsiung, and has been in the bicycle industry for more than forty years. The company produced
kids’ bikes in the early years.
Following Sheng Fa, Sheng Kai
set up its Vietnam factory in
2003. During the past few years,
the company has changed its
production focus to complete
women’s bikes, BMXs, MTBs,
and suspension bikes.
The Sheng Kai plant cov-
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▲Shiwen Fang (left) of Bor-Yueh Vietnam with
Branc manager Huang-jen Chen (right).
bicycles, sporting equipment,
medical equipment, and hardware processing. The company
has devoted significant effort to
establish its brands on the Vietnamese domestic market, so there
are no plans to develop an export
market. The company has accumulated a lot of experience in the
production of professional bikes
in recent years, and continues to
absorb new technology. Sheng
Kai hopes to concentrate on production to achieve a better product quality management and bring
customers excellent products.
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Special Reports
▲Gold Well GM Yin-ming Chen says that his company focuses on
product quality.
Gold Well: Diversified
Development
Aluminum alloy tubing
producer Gold Well purchased
land in Vietnam and applied for
a construction license in 2000,
and began plant construction in
2003. The company originally
specialized in aluminum tubing
extrusion, then branched out into
other types of processing, such
as punching, tube bending, and
spray coating, in 2004. In order
to diversify, Gold Well set up
another plant on the same site to
perform aluminum extrusion and
make other aluminum products
such as outdoor furniture.
The Gold Well plant occupies 50,000 square meters, and
has over 400 employees, 10 Tai40
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▲In addition to aluminum alloy tubing, Gold Well also produces aluminum
furniture.
wanese staff, and three mainland
Chinese staff. The plant has a
monthly production capacity of
over 400 tons of aluminum materials, which consist of structural materials (40%), industrial materials (20%), and other
products, including automobile
and motorcycle parts, bicycle
frames, and aluminum tubes
for carriers. Because Gold Well
sells mid-/high priced products,
it focuses on quality and not
unit price. Gold Well sells most
of its products to Taiwanese
companies in Vietnam. Its raw
pure aluminum comes from the
Americas, is smelted into alloy
in Taiwan, and then is imported
to Vietnam. At present, there are
not many processing and satellite plants in Vietnam, so Gold
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Well’s products are all produced
in its own plant. Processing procedures such as punching, bending, argon welding, grinding,
powder coating, and anodizing
are all carried out in-house.
Unlike its parent company
in Taiwan, which mostly sells
raw materials and semi-finished
products, the Vietnamese plant
chiefly sells finished products. In
addition, the Vietnamese plant
also makes aluminum furniture
in-house. The company decided
to make its own furniture since
it had already long made aluminum frames used in furniture. As
a result, more and more finished
furniture products are exported
to Europe, the United States, Japan, and Taiwan.
Special Reports
Kenda Continues to Expand
Located in Dong Nai Province, Kenda Vietnam was established in 1997 and went into
production in 1998. The plant
chiefly produces tires for the aftermarket and for export to Europe, and sales have been good.
Kenda Vietnam has since added
inner tube and tire production
lines, and a second motorcycle
tire plant was added in 2011. Annual sales have grown through
steady plant expansion, and currently top US$110 million.
Kenda’s Vietnamese plant
occupies 60,000 square meters,
with 1,400 Vietnamese workers and seven Taiwanese staff.
Demand continues to grow, and
all production lines are currently running at full capacity.
The plant has a daily production output of 45,000 bicycle
tires, 30,000 bicycle inner tubes,
30,000 motorcycle tires, and
30,000 motorcycle inner tubes.
Domestic sales account for 60%
and export sales for 40% of the
plant’s overall sales.
According to GM Huang
Fong Chou, local bicycle stores
and small family-run assembly
plants in Vietnam account for
a majority of the company’s
domestic sales, and monthly domestic sales can reach as high as
400,000 units. Exports chiefly
go to zero import duty ASEAN
countries such as Thailand and
Indonesia, as well as to Europe.
While facing competitors in
Vietnam that include three state-
owned tire companies and one
Japanese company, Kenda is vigorously marketing its brand on
the basis of its fine quality, and
is focusing on the mid-/high-end
price market. As a result, Kenda
Vietnam is highly profitable with
10% of the market share.
Due to the company’s high
expectations for the ASEAN
market, as well as the zero import duty advantage of Vietnamese exports in ASEAN countries,
Kenda decided to set up a plant
in Vietnam to supply products
to the Vietnamese and ASEAN
markets. Kenda will also focus
on motorcycle products in the
future, and will build motorcycle
inner tube and tire production
facilities. In addition, to consoli-
date its presence in the ASEAN
market, Kenda will actively
market its products to consumers
and build up its sales network in
Southeast Asia.
▲Kenda Vietnam plant GM Fengzhou Huang says that
ASEAN countries have impressive motorcycle market
potential.
▲The Kenda factory in Vietnam continues to expand and add new production lines in response to
increased market demand.
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Special Reports
KMC Chain Pursues Domestic and Export Markets
KMC established its Vietnamese plant in 2000 and began
production in 2001. Company
headquarters relies on the Vietnamese plant to provide support
when the company receives order surges. From the beginning,
KMC Vietnam has primarily
focused on motorcycle chains,
with bicycle chains making up
about one quarter of total production. KMC has been able to
thrive in motorcycle-crazy Vietnam. The company sells about
half of its motorcycle chains on
the Vietnamese domestic market,
and half in other ASEAN countries. The biggest domestic buyer of KMC motorcycle chains is
Honda, followed by Yamaha and
SYM.
K M C Vi e t n a m m a i n l y
supplies its bicycle chains to assembly plants in Vietnam and
Cambodia. Many EU customers request that their orders be
shipped from Vietnam, so exports chiefly go to the EU, where
they currently enjoy preferential
import duties, as well as to ASEAN countries such as Indonesia
and Cambodia. Exports account
for 60% of KMC Vietnam’s bicycle chain sales, while the domestic market accounts for 40%
of sales.
KMC’s Vietnamese plant
occupies 60,000 square meters,
and has 650 employees, three
Taiwanese staff, and 11 mainland Chinese staff. The plant
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BMU 2013 Spring
▲Automated machinery can help reduce
manpower.
▲KMC Chain (Vietnam) Deputy GM Samuel Wang is
optimistic about the motorcycle market in Vietnam and
other ASEAN countries.
has an annual capacity of about
3-4 million bicycle chains and
10 million motorcycle chains.
According to Deputy General
Manager Samuel Wang, KMC
Vietnam has been able to reach
its current size thanks to correct
strategic decisions made at the
time it was established. In order
to overcome the language barrier, KMC found workers from
Guangxi in China who could
speak Vietnamese, and hired
them as seed employees. These
employees, who had received
training and gained experience
in China, came to Vietnam with
other Chinese technicians in
2001, and helped duplicate the
systems then in place at KMC’s
Shenzhen plant. As a result, the
language barrier was minimized,
and the Vietnamese plant was
able to quickly get up and running.
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Besides chains, the plant
also produces motorcycle chainwheels, which currently account
for a quarter of KMC Vietnam’s
total sales. KMC has very high
expectations for the motorcycle
markets Vietnam and other ASEAN countries, and the company
will continue to diversify by
developing other types of motorcycle parts.
According to Deputy GM
Wang, it is very important to
insist on quality if companies
want to maintain their competitiveness in Vietnam, and the key
factors involved are raw materials and labor. KMC insists on
using high-quality raw materials from China Steel in Taiwan.
While using similar manpower
and equipment to competitors,
KMC’s big difference is its willingness to pay higher prices for
raw materials.
Special Reports
Olympic: Agile Production
Olympic’s old plant was
established in Song Than II Industrial Park in 2002. Following
a reorganization and shareholder
change in 2007, the company
established a new plant on purchased land in the Nam Tan
Uyen Industrial Park in 2011.
While Olympic chiefly supplied
the Dutch firm Gazelle in the
initial years, it has also begun
cooperating with other manufacturers and trading companies for
the past three years.
Unlike most other Taiwanese bicycle firms in Vietnam,
Olympic has put down strong
roots. The Vietnam plant handles
all production and sales matters,
and the company only maintains
an office in Taiwan to purchase
raw materials. The Olympic
plant occupies 12,000 square
meters and has an annual capacity of 15,000 frames and 30,000
front forks. Five Taiwanese staff
handle management tasks for
150 employees.
Olympic’s products chiefly
consist of steel frames and front
forks, as well as forged aluminum alloy parts. The company
currently exports 70%-80% of
its mid-/high-end bikes to Europe, and 50% of its frames to
Gazelle. Olympic’s alloy forging department produces frames
for the Vietnamese market and
local assembly plants. Other
forged alloy parts include front
fork crowns, dropouts, bottle
cages, and cup holders.
▲According to sales manager Yuan-yu Liao, Olympic
has the advantage of product diversity and flexible
production, so it can easily make smaller batches for
custom orders.
▲Many believed that it would be difficult to
train Vietnamese workers to do quality brazing
work, but Olympic found that their workers
learned quickly.
The relatively low cost of
labor in Vietnam enables Olympic to engage in small-batch
production. Olympic’s minimum
order quantity (MOQ) is among
the lowest in the industry, and
the company does not impose
many requirements. Especially
now that the market has broken up into many small niches,
Olympic can provide its customers with even greater agility, and
has consequently collaborated
well with small and mediumsized trading companies accepting small orders or trial batches
orders.
Ol y m p i c’s fram e p l an t
www.biketaiwan.com
processes incoming raw materials in-house. However, because
the prices of raw materials in
Vietnam are not necessarily
lower than in Taiwan, the company must rely on its relatively
low labor costs. Steadily rising
labor costs in Vietnam during
the last few years have squeezed
Olympic’s profit margins, while
overseas customers have come
to expect even lower prices. To
make up the difference, the company has upgraded processing
technology and boosted in-house
content. Olympic’s in-house
content is as high as 90-95% for
unpainted products.
BMU 2013 Spring
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Special Reports
Song Tain: Crossing
Industries & Building
a Reputation
Song Tain established a
plant in 2000 and began production in 2001. The company
has long pursued a diversified
business strategy, and gradually switched from its original
production of steel parts such
as handlebars and seat posts to
bicycle assembly and e-bike production. Song Tain consequently
has a very wide business scope,
and assembles bicycles, e-bikes,
small folding bikes, women’s
bikes, and mountain bikes. It
also produces 80% of its parts
in-house, including frames, rims,
handlebars, and brakes. Song
Tain exports products to Europe
and the United States, and produces handlebars and seat posts
for the Italian brand RMS. The
company has an annual capacity
of 400,000-500,000 handlebars
and seat posts.
S o n g Ta i n h a s f u r t h e r
branched out to produce motorcycle and auto parts. According
to Special Assistant Meng-yeh
Tung, Song Tain has never restricted itself to only producing
certain products. It began as a
mold producer, so it possesses
some mold development ability, and its plant contains diecasting, painting, electroplating,
and heat treatment machinery
and equipment. As a result, it
is prepared to make almost any
kind of product.
Song Tain’s plant occupies
20,000 square meters, with 200
employees and a dozen Taiwanese staff. Song Tain bicycles
and e-bikes are chiefly sold in
Taiwan and Vietnam under the
company’s own brand name.
Bicycles account for roughly
50% of Song Tain’s sales, and
it is constantly developing new
products. Song Tain can respond
to customers’ requests by creating a new design, improving an
existing product, or providing
integrated services.
▲From left, Song Tain special assistant Meng-ye Dong, VP Wu-liang
Dong, and deputy plant manager Hsien-chin Cheng.
▲Song Tain produces e-bike hubs.
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BMU 2013 Spring
▲ Song Tain’s own Song Tian brand folding bikes ▲ Song Tain also produces a small number
are sold in both Vietnam and Taiwan.
of e-bikes.
www.biketaiwan.com
Special Reports
Taifa: Successful Cultivation
of the Vietnamese Market
Ta i f a w a s f o u n d e d b y
Taiwan’s Chien Fa, which produced cables for bicycles and
agricultural machinery, and focused on high-end products. In
2004, motivated by deteriorating
economic conditions in Taiwan,
Chien Fa set its sights on the
Vietnamese motorcycle market,
and established a plant in Vietnam.
According to company
manager Liao Jung-chou, Taifa
manufactures front and rear
brake cables for bicycles, and
produces four types of cables
for manually-shifting motorcycles and six types of cables for
automatically-shifting motorcycles (locally known as plastic
scooters). Motorcycle products
include brake cables, throttle cables, odometer cables, and luggage carrier cables. Because of
the large number of motorcycles
in Vietnam, and the many cables
needed by these motorcycles,
the market for motorcycle cables
is far larger than the market for
bicycle cables. In addition to
supplying products to the Vietnamese subsidiary of Kymco,
Taifa sells products on the local
aftermarket, and also exports
cables for Canadian beach buggies and agricultural vehicles.
The Taifa plant occupies
3,000 square meters, and has 60
employees and one Taiwanese
staff member. Monthly capacity
is approximately 60,000 cables.
▲Taifa GM Rong-zhou Liao and his Vietnamese wife Mei-zhi Huang.
▲The Taifa factory.
Domestic sales have accounted
for 85% of the company’s revenues since 2012. Taifa continues to develop a wide range of
new products, such as motorcycle locks and vehicle-related
products. One of its major recent
products consists of a galvanized
steel wire fence that is sold in
rural areas of Vietnam as a yard
fence or trellis for vines. While
fencing exports account for 20%
of sales, domestic use of the
fencing is gradually increasing.
Taifa plans to establish another factory in a different part
of Vietnam in the future. The
second plant will exclusively
produce woven mesh and motorcycle parts, chiefly for sale on the
domestic market. Taifa Vietnam
www.biketaiwan.com
▲Motorcycle production has become Taifa’s
primary line.
▲ With automated machinery, 16 operations
require only three employees.
will also participate in a division
labor with its parent company in
Taiwan, with the Taiwan headquarters taking orders and producing chiefly export products,
and the Vietnam company focusing on the domestic market. Taifa
also plans to increase in-house
processing, boost its level of inhouse content, and continue to
develop more new products.
BMU 2013 Spring
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Special Reports
Tsai Yarn: Small-Batch
Production
After scouting out a number of countries in 2000, bicycle
basket specialist Tsai Yarn concluded that Vietnam seemed
relatively stable, and followed
Asama into Vietnam. Tsai Yarn
began building a plant in March
2001, and started production in
November of the same year. Tsai
Yarn’s Taiwan headquarters is
primarily in charge of taking orders and developing and manufacturing high-quality products,
while its Vietnam plant is responsible for producing small
batches of highly diversified
product types. Tsai Yarn’s ability to achieve excellent results
in the midst of poor economic
conditions and intense competition can be attributed to its
stable supply of orders, ability
to manufacture superior quality
products, and highly competitive
unit prices, which have won customer approval.
Tsai Yarn’s Vietnam factory occupies 12,000 square
meters, has 260 employees, and
chiefly produces bicycle baskets.
Traditional steel baskets constitute the company’s leading product, and are chiefly exported to
Europe. Tsai Yarn has achieved
success producing small runs
of highly diverse products, and
it can nimbly make products
tailored to customers’ needs in
small quantities. When each type
of bicycle is equipped with a
different basket, customers may
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BMU 2013 Spring
▲ Tsai Yarn Deputy GM Maosheng Li
(right), with Vietnam factory director
Hanxing Lin (left), believes that Taiwanese
factories in Vietnam must have excellent
management and quality.
only order 300-500 of each basket type. As a result, Tsai Yarn
may pack many different basket
products into a single shipping
container.
The Tsai Yarn plant currently has six production lines,
for a daily production capacity
of 9,000 baskets. Most baskets
are made from steel mesh or
aluminum alloy; in-house content is approximately 75%. The
company’s most impressive
product line consists of handwoven bicycle baskets. Hand
weaving is a flourishing craft in
Vietnam, and machinery cannot
duplicate the handmade look of
these baskets. Tsai Yarn’s ability
to apply traditional Vietnamese
craftsmanship to its products has
attracted the interest of European
customers. While many materiwww.biketaiwan.com
als, such as polyethylene, can be
used to make woven baskets, the
European market prefers baskets
made of natural materials such
as locally-produced Vietnamese
rattan.
Deputy General Manager
Lee Mao-sheng frankly admits
that after 11 years in the country, doing business in Vietnam
is getting harder and harder.
Wages and employee benefits
keep climbing, and so do the
cost of raw materials and parts,
all of which are imported from
Taiwan. And although the cost
of labor is low in Vietnam, employee qualifications and working efficiency lag behind those
in China. Because of this, those
Taiwanese companies that have
already established plants in
Vietnam will live or die on the
Special Reports
basis of their management and
quality. In the case of Tsai Yarn,
in addition to passing ISO and
SA 8000 international certifications, increasing its in-house
content has also been very important for increasing efficiency,
lowering costs, and giving better
control over delivery times.
VP Strives for High Quality
VP Components (Vietnam)
started out in 2001 producing
pedals for assembly factories in
Vietnam and Southeast Asia, and
added electroplating in 2004. In
the beginning, in-house production was VP’s primary business,
and processing for other companies was secondary. However,
VP completely dropped its pedal
production in 2007 the wake of
the EU’s anti-dumping duties on
Vietnamese bicycles, and electroplating processing for other
companies became the primary
business of VP in Vietnam.
The majority of the company’s business now involves
motorcycle parts, which account
for 60-70% of its total sales. At
present, VP is the electroplating
provider for the major motorcycle brands Yamaha, Honda, Sanyang, and Suzuki, with Honda
accounting for the largest sales
share. VP also added a galvanizing production line this year to
meet the demand for high-end
motorcycle and bicycle screws,
with some output also going to
the furniture industry. Currently,
only around half of the 30,000square-meter VP plant is in use,
with 60-70 Vietnamese employees. VP may consider restarting
production of pedals to supply
assembly plants in Vietnam and
other ASEAN countries.
Demand is growing
for high-end screws
for many different
uses. Motorcycles use
hundreds and hundreds
of screws.
www.biketaiwan.com
▲VP Components manager Cheng-kang Lin
believes that VP’s high quality products will be
competitive in the local market.
▲VP recently put in a new galvanized production
line.
BMU 2013 Spring
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Special Reports
▲ Wang Shend held a TPS presentation, and representatives were present from many Taiwanese
bicycle companies in Vietnam.
▲ Wang Shend Vietnam Deputy GM Jin-Shun Huang
(left) and factory director Zhi-jian Hung (right) are
optimistic about Vietnam's domestic market.
Wang Shend: Developing
High-End Products
First founded in Taiwan
30 years ago, Wang Shend established its Vietnamese plant
in 2000. The Vietnamese plant
chiefly produces hubs, rims,
steel spokes, nipples, and brake
drums for other Taiwanese firms
such as Asama and Strongman,
which make bikes for the Vietnamese market. Wang Shend
also supplies Vietnamese assembly plants such as Tong Yi, Yueh
Mei, Yueh Hsiung, and 107, as
well as bike shops and familyowned small assembly plants.
Among these customers, 107 has
relatively large orders for fairly
high-price products.
Wang Shend’s plant occupies 10,000 square meters,
and has over 200 employees,
four Taiwanese staff, and two
mainland Chinese staff. Annual
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BMU 2013 Spring
capacity consists of enough parts
for 300,000 bikes. Wang Shend
electroplates its own products,
relying on its superior processing technology and mechanical
equipment. Bicycle and motorcycle products currently account
for two-thirds of Wang Shend’s
sales, while contracted processing accounts for the remaining
one-third. However, contracted
processing orders are typically
not large, and mostly call for
processing of small batches of
diverse products.
Domestic sales account for
70% of Wang Shend’s overall
revenue, while exports account
for the remaining 30%. The
company’s chief export consist
of motorcycle spokes supplied
to a Honda motorcycle plant in
Indonesia. According to Wang
Shend’s deputy GM, because
of the poor roads in Southeast
Asia, seven or eight out of every
www.biketaiwan.com
10 motorcycles employ spokes,
which allow larger and sturdier
wheels.
Plant manager Tzu-chien
Hung notes that the company’s
products are of higher quality
than competing local products,
and are considered high-end
items in Vietnam. As a consequence, Wang Shend possesses
excellent competitiveness, can
readily enter different domestic
markets, and can easily obtain
favorable brand recognition from
local consumers. Because of the
steady growth in motorcycle
sales, Wang Shend has continued to focus on the development
of motorcycle parts, and has
relied on its high-grade parts to
stay ahead of products imported
from China. The company has
received ISO certification, which
has enabled it to supply wellknown motorcycle brands such
as Honda.
Special Reports
Yaban Expands Plant
Yaban’s Vietnam plant occupies 15,000 square meters,
and has 400 employees and
seven Taiwanese staff. This
plant chiefly produces bicycle
and motorcycle chains, as well
as small quantities of industrial
and automotive chains. Bicycle
and motorcycle chains respectively account for 60% and 40%
of the plant’s output. Monthly
capacity is currently 1.2 million
chains, and the company hopes
to increase capacity to 2 million chains per month, as well
as establish a distribution warehouse in China. Approximately
30% of output – mostly bicycle
chains – is sold in Vietnam, and
the remaining 70% – mostly
motorcycle chains – is exported,
chiefly to countries in Southeast
Asia and Latin America.
According to GM Andy
Wang, the Vietnamese motorcycle market is strong. Because
of the poor state of most Vietnamese roads, small motorcycles
▲ Yaban GM Andy Wang (left) and Yaban Vietnam GM
Hui-min Chen (right) are seeking land to expand the plant.
with gear shifts are quite popular, and there is consequently a
great demand for chains. However, due to weak motorcycle
sales in 2012, sales of parts and
components to motorcycle plants
fell. But as more than 30 million
motorcycles are currently in use
in Vietnam, aftermarket demand
is also huge. Yaban’s bicycle
chains are chiefly supplied to
assembly plants, which include
Asama, state-owned assembly
plants Yueh Mei and Yueh Lung
located in Northern Vietnam,
Dashichang, and 107.
In the future, Yaban will
continue to focus on exports.
Because it expects to increase
capacity, the company plans to
establish another plant. Yaban’s
specific plans for the Vietnamese
market include increasing motorcycle product output and reducing bicycle products. In view of
the good economic prospects of
the ASEAN bloc, Yaban hopes
to tie its growth to the development of the ASEAN market.
▲Products must go through a variety of test checks to ensure quality.
www.biketaiwan.com
BMU 2013 Spring
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Special Reports
Astro Emphasizes
Innovative Design
In March 2000, Astro set
up a 20,000 square meter aluminum frame plant at the Dong An
Industrial Park in Binh Duong
Province, and started its first
shipment in September of the
same year. The company established a new 50,000 square
meter coating plant in 2003, and
added a 9,000 square meter carbon fiber frame plant in 2007.
Astro has an annual production
capacity of 500,000-600,000 aluminum frames and 30,000 carbon fiber frames. The company
has a total of 1,800 employees.
According to administrative manager and long-time resident Daphne Tung, the reason
Astro decided to go to Vietnam
instead of China was due to the
unstable political climate in
China. And although Taiwan and
China share the same culture
and ethnicity, and communication is easy for people from both
countries, it is also easier for
China to copy ideas from Astro.
In contrast, the industrial park
is only 20 kilometers away from
the Saigon Harbor, which makes
shipment easy, labor costs are
lower, and there is less worry
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BMU 2013 Spring
▲Astro sales director Teng-wen Chang (left) and administrative manager Dong (right) have a company
goal to manufacture products with improved added value.
about product technology being
copied.
Astro’s Taiwanese plant is
in charge of technology development, and its Vietnamese plant
bears responsibility for mass
production. The stable climate
in Vietnam facilitates the frame
plant’s welding and painting processes. At present, frame painting is carried out in-house at the
www.biketaiwan.com
company’s plant. The majority
of Astro’s frames are exported to
Europe, which accounts for 90%
of its total sales. Astro’s contract
manufacturing products consist
mostly of e-bikes sold to the
Derby Group. Astro continues to
pursue a mid-/high-end strategy
and its goal is to increase added
value via innovative design.
Special Reports
Cautions About the
Vietnamese Market
The European Union canceled anti-dumping duties on
Vietnamese-made bikes in 2010,
but the recovery of the bike industry in Vietnam has not been
as quick as expected. Also, if
the EU revokes the high antidumping duties on bikes made
in China, then competitiveness
of setting up factories in China
will significantly be enhanced
and advantages in Vietnam will
be weakened. Furthermore, the
zero EU tariff on Cambodianmade bikes is very attractive to
many European bike manufacturers, who are placing orders
with Cambodian factories. Given
these factors, it is not likely that
complete bike manufacturers
will return to Vietnam any time
soon.
For many Taiwanese manufacturers, Vietnam and Cambodia both offer tariff preferences,
low wages, and abundant labor.
However, competitiveness is
not only based on tariffs and
cheap labor, but also on superior
technology, product quality, and
cooperative relations. Language
difficulties and frequent strikes
often discourage foreign investment in Vietnam, and local infrastructure and industry are still
poorly developed in many respects. Dependence on Taiwan
or China for many raw materials
means that there is little room
to reduce costs further. When
manufacturers look to enter the
▲G7 is a popular coffee brand in Vietnam. Many Taiwanese buy the coffee for a gift.
▲Vietnamese firms supply frames and parts for ▲Asama bikes are a common sight.
Cambodian assemblers.
Vietnam market, they should
consider not only the existing
www.biketaiwan.com
competitiveness, but also evaluate the overall market.
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