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The Whole Global Bike Industry Is in Danger

by John Neugent

Tech articles | Commentary articles |

John Neugent probably knows more about bicycle wheels than anyone else alive. Maybe more about bikes as well. He's spent his life in the bike business, at every level. He now owns Neugent Cycling, a firm devoted to delivering world-class equipment at the lowest possible price. If you are in the market for a set of wheels, please, check out John's site. He really knows his stuff. —Chairman Bill

Author John Neugent

Plato's dialogue Crito is available both in audiobook and Kindle eBook versions. To get your copy, just click on the Amazon link on the right.

John Neugent writes:

I have to admit that while I think the chances of this are not high, recent developments make me think the chances for a global industry meltdown is a possibility.

First, some background. I started visiting Taiwan in 1982 as a product manager for a bicycle distribution company. At that time it was almost third world. I was buying low end components. Tires, tubes, and anything that didn’t need to be high quality. The relationship between Taiwan and China was tense. For example, Taiwan didn’t allow taking anything made in China into Taiwan. This I found out when they told me the vase I bought in Hong Kong couldn’t be brought it. I had to check it into storage until I left the country.

In the late ’80s I remember taking a cab from the airport to my hotel. As we got close to the hotel, which was near the government offices in Taipei, everything came to a complete stop as the roads were filled with protestors, many carrying bats which were being used to smash windshields. I got out and made it to the hotel on foot. I believe this was all related to the election of their first Democratic President.

Fast forward 40 years and Taiwan now makes the majority of cycling’s high-end bikes and components. The island, once called Formosa, went from third world to cutting edge modern. One my last visit I ate at a Michelin star noodle restaurant in Taichung. Virtually all of the roads of the early ’80s had been upgraded. As many people know, the only maker of the highest end computer chips is TSMC, a Taiwanese company.

Warren Buffet, generally acknowledged as one of the best investors in the world, recently purchased a $4.1 billion stake in the company saying it was one of the best companies he’s seen. Buffet is famous for saying he likes companies with a moat. The moat being the lake-like perimeter favored by many European castles as added protection.

Many Chinese factories are owned by Taiwanese and many cycling related products made in China are now comparable to the Taiwanese made components. I don’t know the numbers but I would guess that 90% of quality bikes and parts are made in either Taiwan or China and for most of them there is no alternate source.

When China started making overtures about repatriating Taiwan. I gave it little credence. China is the biggest market for Taiwanese exports. Business ownership of mixed Chinese and Taiwanese ownership is common. The majority of Taiwanese speak Mandarin, the main Chinese language of China.

I recently heard that Buffet is selling his $4.1 stake in TSMC. So I have gone from thinking the Chinese repatriation of Taiwan from being virtually impossible to looking at it as possible.

The bike industry is small. If, for example, Sram or Shimano were affected in a major way there are no other options and the ones there are, are located in Taiwan or China. This affects almost all bike makers who are, for the most part in the same area. You can draw your own conclusions.

John Neugent was one of the first to establish the making of quality hand-built wheels in Taiwan around the turn of the century. He now owns Neugent Cycling, a firm devoted to delivering world-class equipment at the lowest possible price.