There are hundreds of bicycle component manufacturers around the world right now, but only three make complete groupsets on a significant global scale: Shimano, SRAM and Campagnolo. Now TH Industries, whose customer brands include FSA, Vision, Gravity and Metropolis, aim to become the fourth major groupset manufacturer.
Recently Douglas Chiang, proprietor and Managing Director of TH Industries, visited Australia accompanied by Scott Sun Marketing and Sales Manager.
Despite being the owner, leader and son of the founder of one of the world’s leading component manufacturers, Douglas Chiang keeps a very low profile and very rarely gives interviews.
Instead he prefers to work extremely hard, stay focused and let his products do the talking.
Not long after his visit to Australia it was announced that Australian distribution of TH’s brands was moving to Cassons, who plan to invest heavily in stock as part of their strategy to grow the Australian market.
Douglas has a good understanding of English, but preferred to answer most of the following questions in Chinese, which was interpreted via Scott. In some cases Scott may have added comments, but as they were communicating closely on each point, we have attributed all answers solely to Douglas.
Bicycling Trade: Let’s talk about TH Industries. I understand that you started making hunting rifles, is that correct?
Douglas Chiang: Yes. My father made hunting guns which were sold to native people.
BT: Did he start the company himself?
DC: Yes. It was a very small operation in Taichung City (in Taiwan), where I was born. He had about five staff. My father made everything by hand, with some machines.
BT: Why did he go into bicycles?
DC: After his hunting gun business was stopped, my father started to produce bicycle headsets and bottom brackets. At that time bicycle manufacturing in Taiwan was a very new industry. My father thought that bicycles would be good business, so he started the bicycle business. He also produced industrial tools.
BT: Wasn’t it 1970 when he started making headsets and bottom brackets, making you two years older than Giant?
BT: Who was around before Giant? Who could sell your headsets and bottom brackets to?
DC: Before Giant started, there were many small bicycle brands in Taiwan.
BT: How long did you keep on making industrial tools, or do you still make them today?
DC: After Giant started, we got more business from bicycle parts. After 1974 TH was purely a bicycle parts maker.
BT: When did you first start working at the company?
DC: When I was in kindergarten I started helping my father in his factory. After school and summer vacation, winter vacation. I did not have holidays, I just worked in the factory. So now I enjoy work, I do not enjoy holidays. Because I do not have those childhood memories, holidays mean nothing to me.
BT: What’s your typical working week?
DC: Weekdays about 12 to 15 hours. Weekends about four to six hours each day. But it’s getting better because now we’ve had more and more talented people join us. I can spend less and less time working in the company, but I still like to work.
BT: Do you mainly work on the engineering side of the business or the financial side?
DC: I control everything except the financial side of things. This is managed by my wife.
BT: When did your father die?
DC: 1997, 16 years ago. But he was already retired. I took over the running of the company in 1990.
BT: Please paint a picture of what the company was like when you took over in 1990.
DC: There were maybe 50 staff. We only made headsets and bottom brackets.
Today we have 460 people in Taiwan, and we have an Italy office in Milan and a US office in Seattle, which each have about 20 staff. We make almost everything except for frames: headsets, cranks, bottom brackets, handlebars, seatposts, stems, chainrings, hubs, wheels, chains. We are working on the drivetrain too.
BT: How important is the Australian market to you?
DC: This is my first visit to Australia. Every country is very important to our brand. We came here to better understand the Australian market.
This year we will promote Vision very hard in Australia. We sponsor the Cannondale pro road team and the Giro d’Italia. You only have 22 million people, but triathlon is very big over here and Vision started from triathlon, although we’re trying to move it more to road as well. We believe Vision can have a very good result here and that’s why we want to come here and make Vision dominant in Australia.
BT: I’m curious about your brand strategy. You’ve got FSA which is already a strong brand. But now you’re promoting Vision. Why run two brands?
DC: Actually we have four brands: FSA, Vision, Gravity and Metropolis. Our strategy is that there are different brands for different markets. FSA is for road and mountain bikes. Vision was for triathlon and now road time trial. Gravity is for freeride and downhill. Metropolis is for city bikes and e-bikes.
There are two different specific goals for Vision and FSA. FSA always pursues the lightest product. Vision is more aerodynamic. Aerodynamic doesn’t mean the lightest.
Our next strategy is that we want to make Vision higher end. Because FSA now has OEM (Original Equipment for Manufacture) spec all over the world, which somehow makes FSA lose the uniqueness.
Some of our customers say, ‘FSA is everywhere, we want another brand’. When they buy Merida or Giant bikes already fitted with FSA, they may not want to upgrade to K-Force, our top model. Our next few years target is to make Vision higher end, so all the top end products we will re-categorise under the Vision brand.
BT: So even some of the FSA products might potentially be re-categorised?
DC: Yes. We’ll have some overlapping, we use current FSA products as Vision products but gradually we’ll only have the top products only for Vision.
BT: I notice that you already have a Vision front and rear derailleur, but neither Vision or FSA has a complete groupset like Dura-Ace or Ultegra. Are you looking to offer a groupset and when might that be?
DC: Yes of course. We have already been working towards groupset construction for over 15 years. We previewed our drivetrain groupset three years ago at Eurobike. Our target is to launch it in mass production soon, but first we must make sure it works perfectly. This will include front and rear derailleur and cassette.
Our Vision drivetrain is for triathlon and we already have the Vision shifter with a simpler mechanism. And the road one of course we are working on. The biggest issue is the shifter, (combined brake/gear lever system) there are more than 200 existing patents that relate to that tiny shifter.
BT: I know from talking to SRAM that working around the patents is difficult.
DC: It’s a big challenge. Because of the drivetrain, we have a dedicated intellectual property team of four staff, which is very high salary cost! (laughs)
BT: Are they in America or Taiwan?
DC: We have an American engineer located in the US office who is helping us to check patents. The four staff I referred to are Taiwanese but have very good English.
BT: You would already have your own patents that you are protecting…
DC: So far, we are not that strong. What we try to do is develop new products that avoid infringing other patents. But gradually we will establish our own patents. We call our competitors big S and small S. There is a saying, ‘work with the second (competitor)’.
BT: If you were to visit Australian bicycle dealers, many would talk to you about international mail order companies who sell your products at low prices. What is your philosophy regarding these companies and your supply chain?
DC: We cannot deny that CRC, Wiggle and others impact on our dealers and distributors in a negative way. From our side, we are improving this problem. Online shopping is like a train that we have no way to stop, but we need to find a way to help our distributors find a balance and let them be competitive with CRC or Wiggle. That’s what we are trying to do and that’s why we visit Australia this time.
BT: Please comment about the OEM market versus aftermarket. How do you see those two distribution channels and through which do you sell more product?
DC: OEM is the biggest value, but our after-market is also growing because we sponsor many teams through our European office led by Claudio Marra and they are doing a very good job.
BT: Are you contract manufacturing for other brands as well?
DC: Yes. Small, very specialised products like aero parts for Cannondale. Merida, Lapierre, Bianchi, and parts for their pro teams.
BT: It sounds very high end. Is that under a different name?
DC: Their brand. We also produce special parts for Pinarello and the aero brake set for BMC. Some Cannondale crank spiders and rings are also made by TH. We can do 100 per cent pure OEM. Those customers come to us because we have a strong technology background and we operate with excellent quality control.
Because we have the capacity and ability for manufacturing and also design engineering, when the customer has a problem they come to us. GT’s iDrive pivot has also been made by TH for over 10 years.
We have a joke about our design and engineering department that they’re our ‘money burning team’ because they only produce prototypes (laughs). The team is very strong, with high end CNC prototyping machines.
Actually it’s the team members who make jokes themselves. They know they are burning money all the time. When we have customers visit our factory we also say, ‘This is the money burning department!’ This is just joking and we explain to our customers that this is necessary for good product development.
In China it is a religious tradition to burn paper money to ask for blessing for the company.
BT: Looking to the future, what are your plans and goals for the TH Industries group?
DC: We would like to launch our drivetrain groupset to become a force in high end drive trains. Our spirit is to create innovative new products and always pursue the lightest products.
BT: Have you also had a son working since kindergarten in the company, like you did?
DC: My children are very lucky and don’t need to work in the company from kindergarten (laughs).
BT: You seem very fit. Do you ride a bicycle?
DC: I do triathlon. Before I was so busy, but becoming a triathlete was one of my dreams. I want to make my dream come true.
So far the furthest I have been is 53 kilometres cycling, then jogging 10 kilometres then one hour swimming. I have not done a race yet, but hope to soon.