Multiple global trends drive manufacturers’ choices about where they want to locate their plants. In recent years, the challenges of COVID-19–related shortages, political tensions, and safety concerns have prompted many firms, in various industries, to seek to move more of their productions outside of their traditional locations in China and explore other international possibilities. These trends appear particularly acute in the toy manufacturing sector.

Major brands such as Hasbro and Mattel are in the process of reducing, minimizing, or eliminating their dependence on Chinese factories to craft the dolls, cars, knickknacks, and so forth that children demand for their playtime. These companies still cite the massive challenges they faced during the pandemic, when families stuck at home sought out more entertainment options, while supply chain constraints left the companies unable to supply that demand. Furthermore, it was not that long ago that Mattel was forced to recall millions of toys, produced in a Chinese factory, that contained lead.

Along with these historical but memorable incidents, the costs of doing business in China continue to rise. The country’s remarkable growth and development have supported rising wages in factories. In addition, if already obvious tensions between China and the United States intensify, it seems likely that new duties will get imposed on toys imported from China.

Unique to toys, the supply chain has distinctive timing constraints. Most companies want manufacturers to produce high volumes for certain times of year and reduce their output at other times. Such fluctuations rarely are profitable, so instead, many of the plants in China produce at relatively consistent levels, then store the toys until U.S. retailers ask for them.

As toy companies look to alternative sites for their production facilities, such as in India, Vietnam, and Thailand, they confront notable challenges. With their relatively underdeveloped infrastructure (compared with China), these other countries cannot hold inventory for months at a time, ensure consistent deliveries, and remain competitively priced. In addition, safety oversight is especially pertinent to toy manufacturers, and in some cases, factories have few such protections in place.

Even with all these motives though, only about 1 percent of all toys imported into the United States or Europe come from India. The need to diversify internationally is clear. The means to do so is less so.

Discussion Questions

1. Why is the demand for moving production beyond China especially acute for the toy industry? What features set it apart from other sectors?
2. If you were starting up a new toy company, where would you consider locating your factories? Provide justification for your answer.

Sources: Richa Naidu, “Toy Manufacturers’ Shift from China Is No Child’s Play,” Reuters, January 15, 2024