The Ping­tung National Bikeway, currently under construction, winds its way near the ­Neipu Industrial Park headquarters of O-Ta Precision, a golf OEM industry leader.

Founded in 1988, O-Ta is now a dominant force in the golfing equipment market. However, as other Taiwanese companies struggle to break free from the OEM rut, O-Ta, a blue-chip firm, set out three years ago to transition into bicycle manufacturing under the private brand name Volando.

Under a blue sky and broiling sun stands O-Ta Precision’s 2,300-square-meter factory, where visitors can see finely crafted, well-balanced golf clubs on display. And soon, carbon fiber bicycles weighing no more than 10 kilograms and decked with Taiwanese cultural motifs will appear on the scene.

O-Ta Precision chairman Ken Lee, 61, was instrumental in the company’s shift toward private branding. Lee is the son-in-law of Kaoshiung’s shipbreaking magnate Pan Xiao­rui and the brother-in-law of Regent Tai­pei Hotel president Steven Pan.

Lee, born in Taiwan’s southernmost village of ­Eluanbi, graduated in finance and accounting from Ling Tung Junior College of Accounting, and then joined Kao­hsiung’s Far Eastern Department Store as a financial accountant. While there, he met the daughter of Pan Xiao­rui, and later married her.

Lee then worked in real estate and finance until a major fire broke out at O-Ta’s parent company, Da Yu Precision, in 1995. After this he entered the world of golf.

The fire at Da Yu affected its subsidiary O-Ta. Deep in debt, O-Ta’s top management sought out Lee for help. In 1996, Lee grabbed the hot potato and joined O-Ta as its president.

To exhibit the excellence of this “made-in-Taiwan” brand, Lee insists on adding local flavor to his private brand.

Lee was now faced with the fiercely competitive golf OEM market. With a background in finance but knowing little about production lines or R&D, he decided to take the lead in quality improvement.

The fate of an OEM company is often controlled by its clients, but Lee knew deep down that focusing on R&D was the only way they could take back the “right of service.” To this end, O-Ta allots 3–5% of its annual revenues to its R&D departments.

The years passed, and O-Ta gradually broke free from the passive OEM model of following clients’ designs and taking their orders, and transitioned to the original design manufacturer (ODM) model, establishing a basis for O-Ta to secure American and Japanese clients.

In the world’s golfing equipment market, the Taiwanese OEM companies Fu­sheng Precision, Advanced International Multi­tech and O-Ta supply 50% of the market. In 2011, sales of golf club heads, golf club shafts and complete golf clubs by O-Ta totaled 6.83 million units, for a global market share of 17%, or a third of the share among Taiwanese companies, making O-Ta one of Taiwan’s big three golf OEM companies. In 2011, the company’s revenues totaled NT$4.37 billion.

Having successfully rescued the teetering O-Ta, Lee moved on to write the first chapter of the story of the company’s transition.

To attract high-end clientele, Volando’s flagship store in Kao­hsiung has hired cyclist Lin Rui­long as store manager, providing professional service.

For many years, O-Ta has seen brilliant achievements in golfing equipment, but the nature of the OEM industry made it unable to break free from its longstanding fate of working for others. To develop carbon fiber materials, O-Ta opened a subsidiary, Inda Composite Technology Co., in Shen­zhen, China, in 2003, prompting the company to leave its comfort zone and stride into bicycle OEM. And unwittingly, that year’s attempt ended up sowing the seeds of O-Ta’s later development of a “made-in-Taiwan” brand.

At that time Lee sought out Chen Wen-hsiang, an expert in composite materials, a PhD in materials science from National Taiwan University and a former researcher at the Industrial Technology Research Institute (ITRI), to serve as manager of Inda Composite Technology. At first, Inda changed from using coarse wood and fiberglass to carbon fiber for manufacturing hockey gear, never expecting that the results would receive rave reviews.

One time at a product launch in Germany, the company won high marks from a European bicycle buyer. At his suggestion, Lee decided to apply the carbon fiber used for making hockey gear to his bicycles.

Because key parts of the technology, manufacturing processes and materials needed to make golf club shafts and heads are similar to those for bicycle frames and forks, O-Ta marshaled its years of accumulated technological and R&D expertise, and applied it to the field of bicycle manufacture, doing OEM for many international brands.

Volando participates in charity events to build its brand image. O-Ta sponsored mainland ­Chinese cyclist Wang Zi for a charity cycling expedition from Beijing to Tibet.

O-Ta, dominating the golfing equipment OEM market, quickly became a bellwether enterprise for Taiwan’s manufacturing industry. However, O-Ta, whose orders came chiefly from the North American and European markets, was affected heavily by the global economic meltdown in 2008. O-Ta’s earnings dropped from NT$5.13 billion in 2007 to NT$4.37 billion in 2008, with earnings per share falling from NT$7.21 to NT$4.69.

Looking at the sales fluctuation, Lee couldn’t help but lament the one-way road of the OEM industry. The situation reawakened a dream that had long lain dormant in his mind. In 2009, he decided to escape the fate of OEM and pursue his brand-building dream. He chose the Italian word Volando (“flying”) for his company’s bicycles.

The rigorous OEM experience gave O-Ta leverage in negotiations on quality and costs with clients. But as a neophyte in the bicycle field confronting the two long-time bike market dominators Giant and Merida, Lee remarks frankly that O-Ta had no technological problems in bike manufacturing, but lacked marketing and channel experience.

As a first stage for advancing into the bicycle market, O-Ta avoided the mid-price market, choosing not to engage these two industry leaders. Instead, O-Ta set its sights on the promising high-end market, selling carbon-fiber mountain bikes and road bikes priced between NT$60,000 and NT$200,000.

Volando’s aesthetic designs were well received at the Taiwan Designers’ Week exhibition, winning the chance to be put on display at the Pier 2 Art Center in Kao­hsiung

To lock in apex clientele, O-Ta opened its flagship store near the Kao­hsiung Museum of Fine Arts in early 2012. At nearly 130 square meters, the three-story show space consists of a showroom on the first floor, an accessories shop on the second floor, and a VIP service area on the third floor. At Lee’s request, Vol­ando’s flagship store opens daily at 8 a.m. sharp, the earliest-opening bike shop in Taiwan.

Says Lee, many believe the purpose of a store like this is to display and sell products, but to consumers, its most important function is to provide service. Though consumers coming to the store are not necessarily able to afford Volando’s high-end bikes, if one day they have enough spending power, brand loyalty accumulated over the years will conjure up the Volando brand in their minds.

But what gives Lee the greatest confidence is the carbon fiber technology he gained from his OEM experience.

Steel tubes and aluminum alloy have long been the chief materials for bicycle manufacture. But despite the great stability of these items, carbon fiber has the advantage of being lightweight and rigid.

The carbon fiber used for making Volando bikes is regulation aerospace-grade graphite fiber, which is 30% more rigid than traditional carbon fiber. Mi­tsu­bishi, the carbon fiber supplier, has cooperated long term with O-Ta through its golf OEM sales.

In recent years, Giant and Merida have been promoting carbon fiber bicycles aggressively, cutting into the high-end market. Lee believes that carbon fiber bikes will become a mainstream trend in the bicycle market.

Taiwan’s bike races are a key way in which Taiwan’s bicycle brands compete with each other.

In less than three years since the founding of the brand, O-Ta won the Taiwan Excellence Award two years in a row. John Chu, manager of O-Ta’s department in charge of branding, reveals that Volando’s secret to clinching this special honor, besides the high-tech carbon fiber, is designs highlighting local culture.

After O-Ta opened its branding department, Lee instructed that product design had to incorporate aspects of Taiwanese culture. “This is an exercise of Taiwan’s ‘soft power,’ and is a key product bonus point,” says Lee.

Volando looks to local culture throughout Taiwan for inspiration, incorporating it into the design. So far, the frames of 11 products are decked with motifs of Taiwanese cultural significance.

Lee admits he is not good at sports and seldom goes cycling, but he enjoys art and attends art-related activities as a pastime. Unlike other factories, in O-Ta’s 2,300-square-meter factory there’s a 650-square-meter space, the “O-Ta Art Appreciation Center.” On the corridors of the office areas on the second floor and above, paintings can be seen everywhere, and in his office Lee has a collection of many works by Taiwanese painter Chen Tsing-fang, whom he has known for 20 years.

An art aficionado, Lee defines “aesthetics” according to a standard far higher than most people do. When manufacturing golfing equipment, he goes beyond just turning out products, seeing his golf clubs as a craft both in aesthetics and design. After entering the brand business, he went all out in his demand for aesthetics.

Without the experience and sales channels amassed over the long term by Giant and Merida, O-Ta instead charged ahead with innovative materials and cultural creativity.

O-Ta has broken free from its OEM fate and built a bicycle brand, blazing a trail for Taiwan’s manufacturing industry.

According to the Taiwan Bicycle Exporters’ Association, Taiwanese bicycle exports came to nearly 4.38 million units in 2011, generating US$1.66 billion in export value, making it an important industry in Taiwan’s exports. One after another, Taiwanese bicycle companies have been moving into branding to gain a competitive edge in the global market.

Tsai Ming-hung is executive consultant of Chic Business & Brand Inc., a consultant for the ITRI and the Taiwan External Trade Development Council (TAITRA), and a lecturer at ­TAITRA’s Brand School. He observes that O-Ta has chosen an intelligent path in transitioning from OEM to a private brand.

Tsai figures that the main problem faced by Taiwanese companies doing export OEM, after moving toward developing their own brands, is their relationship with existing OEM clients. Some businesses choose to separate OEM and brand business. Others give up OEM and go fully into brand development. O-Ta does not sell any own-brand golf equipment, to avoid conflict with its OEM business; while with its Volando brand it bypasses its bicycle OEM clients’ chief domain of Europe and North America, switching its focus to the Asian market.

O-Ta has undertaken the most arduous and important stretch of transition under Lee’s leadership, transforming from OEM to ODM, and actively polishing its “Made-in-Taiwan” brand name. This is testament to Taiwan’s key position in global industry chains.