Giant Manufacturing Co. is waiting as long as two years for bicycle parts as unprecedented disruptions and lockdowns roil the global supply chain, putting one of the world’s biggest bike makers at risk of missing out on a demand boom.
“It is a hell of job,” Chairperson Bonnie Tu said in an interview at Giant’s Taichung City headquarters in Taiwan. Some bicycle parts have a lead time of two years and even simple components can take six months, she said. That compares with a normal wait time of one-to-two months.
The global supply chain has been plagued by chaos for more than two years as sudden shortages, shipping delays and soaring prices hit everything from masks to cars and iPhones. Russia’s invasion of Ukraine and China’s hard line approach to stamping out its worst virus outbreak in two years has further exacerbated the problems, boosting the risk of a global recession.
Giant has temporarily shut four plants in Kunshan, which borders Shanghai, to comply with local lockdown measures. The restrictions have also meant components can’t be brought in, Tu said. The company has five manufacturing centers in China, which account for about 3.5 million bikes -- more than half its total capacity.
The disruption has underscored the importance of diversifying sourcing and production locations. “We understand we can’t put all our eggs in one basket,” Tu said, and Giant is joining many other manufacturers in shifting to producing more goods locally.
The company also has one plant in Taiwan, the Netherlands and Hungary. Giant plans to start production at its new factory in Vietnam by the end of the year, benefiting from the country’s free-trade agreement with the European Union, which accounts for almost 40% of Giant’s total sales. Competitors have shifted their supply chains away from China to Cambodia, which has zero export duties on goods sent to the U.S., Tu said.
There are tentative signs that the worst of the supply crunch is easing. Bike inventory has rebounded to about 4 weeks of demand from almost zero last year, though it’s still lower than the normal level of eight weeks, said Tu.
High-end bicycles face the worst shortages of parts, though Tu predicts that will likely ease by the end of this year. Some components, like the Shimano Inc. derailleur set that is a core part of a bike’s gear mechanism, may still be in short supply into 2023.
Tu estimates Giant will post high-single digit to low-teens revenue growth in 2022, after reporting a record NT$81.8 billion ($2.8 billion) in sales last year, in part due to rising demand for e-bikes, according to Tu. The sector may account for 40% of Giant’s total sales in three years, compared with 31% in 2021.
Still, Tu warned the company’s outlook will depend on supply conditions, particularly in China.
“No one knows what the China government will do” with its Covid Zero policy, Tu said, adding that measures to allow workers to live at factories during lockdown periods will help ease disruption.
A so-called closed loop system was deployed by some companies, including Hon Hai Precision Industry Co., in Shenzhen last month, with the city also allowing factory bubbles. In that setup, workers travel only from company housing to plants and are tested regularly.