The Chile international has struggled since arriving from Arsenal in January, scoring just twice and registering four assists in 17 Premier League outings.
Giggs believes that Jose Mourinho has the tools to get the best out of Sanchez, but only if he starts him with the right personnel on the left of United's forward line.
"I'm a big fan of Sanchez," he told Sky Sports News. "I was a big fan of his at Arsenal and sometimes it just takes players a bit longer to settle in. Even though he's a top player he just looks like he's a bit short of confidence, but I'm sure he'll come good as he's a top goalscorer and a good player as well.
"He can play anywhere across the front, he played on the right for Barcelona and up front in his better days for Arsenal. I've seen him just off the left the most for United so it just depends who he's playing with and who they're playing against.
"He can also play that No.10 role but I think the best performances I've seen from him at United are just coming off the left, but it's just not quite happening for him at the moment."
Sanchez is expected to return to Man United's starting lineup for Saturday's trip to West Ham United after being left on the bench for the EFL Cup clash with Derby County.