Toy manufacturers are facing challenges when it comes to shifting production from China to cheaper centers elsewhere. Six years ago, Hasbro approached Indian supplier Aequs to subcontract toy manufacturing, and today Aequs produces toys for Hasbro and others in India.
However, manufacturers recognize that countries like India cannot match China’s efficiency, which limits efforts to shift to lower-cost bases and could result in higher toy prices if most production remains in China. The COVID-19 pandemic highlighted the risks of relying on China for production, as ports struggled to export goods and were periodically shut down. While other industries have successfully diversified production, toy makers are struggling to do so.
According to import data, China still accounted for 79% of toys sold in the United States and Europe in the first seven months of 2021. Setting up production in other countries can also take a significant amount of time. Hasbro and Mattel have been addressing their dependence on China, with Mattel reportedly shifting away from China since 2007. Chinese wages are increasing, which is pushing up toy prices and creating a need to cut costs by moving production to cheaper centers. However, infrastructure in countries like India and Vietnam is a roadblock to diversifying sourcing, although the infrastructure is gradually improving as these countries invest in seizing business opportunities from China.
