China toy factories face troubles

By Steve Toloken
Staff Reporter / Asia Bureau Chief

Published: January 12, 2012 6:00 am ET

Related to this story

Topics Consumer Products, Injection Molding

HONG KONG (Dec. 12, 3:55 p.m. ET) — Hong Kong’s plastic toy factories face tough conditions, squeezed between weak markets overseas and rapidly rising wages and costs in their mainland China factories.

In interviews at the recent Hong Kong Toy Fair, the world’s second-largest toy exhibition after the Nuremburg International Toy Fair in Germany, local plastics executives and industry leaders struck tones somewhere between caution and pessimism.

Looking at the numbers it’s easy to see why: The global toy market grew only 1 percent in 2011, according to market research firm NPD Group, and the head of the Hong Kong Toys Council estimates local factories will see only 1 percent growth this year.

Add in wages in Chinese factories going up 15-20 percent a year, labor shortages, and other rising costs, and toy factory executives said they have no breathing room.

“2011 was a disaster for the toy industry overall,” said Lawrence Chan, chairman and CEO of Hong Kong-based plastic toy maker Wynnewood Corp. “The first half of last year was unbelievably bad. It hurt most of us.”

Hong Kong is the world’s second-largest toy exporter, and along with mainland Chinese firms, make up by some estimates 70 percent of world toy production. Hong Kong firms have substantial toy production in the Pearl River Delta region around Guangzhou.

Yeung Chi Kong, executive committee member of the toys council and vice chairman of plastic toy maker Blue Box Group, predicted that Chinese factory wages would rise 15 percent this year, after going up 20 percent each of the last two years.

China’s strengthening renminbi also rose 5 percent against the U.S. dollar in 2011, which added another 3 percent to factory production costs, he said. Raw material costs for plastics, metals and cotton also have risen.

“I am seeing a lot of badly run factories going out of business, leaving the cream of the crop,” Yeung said.

He and other Hong Kong toy factory executives at the Jan. 9-12 fair called on toy brand owners to accept higher prices to ensure quality. But Yeung also urged toy factories to treat workers better, upgrade management systems and invest more in automation.

“In the mainland in the last 30 years, we have gotten used to hiring more workers” to solve a problem, Yeung said.

From interviews with toy brand owners, however, it seems unlikely they’ll accept much in the way of higher prices.

Canadian plastic action figure maker Round 5, for example, said it was very aware of problems facing the Chinese injection molding factory it contracts with for production, and is working to address them, but toy retailers are not accepting higher prices.

“We definitely feel the labor shortage,” said Barron Lau, CEO of Markham, Ontario-based Round 5, which has licenses to produce Bruce Lee action figures, among others. But, he said, “Retailers keep our price steady. We have to eat the costs.”

The shortage of workers in Pearl River Delta toy plants means orders that used to require four-month lead times now require six months, complicating his company’s planning, he said.

China’s higher costs had some toy factories elsewhere in Asia seeing opportunities.

In Taiwan — where factory wages are still much higher than mainland China but have been flat over the last decade — the rising costs in China could bring business back, said Meiko Wang, sales manager with Cyber Giant Enterprises Co. Ltd., a manufacturer of plastic ride-on toys in Tainan.

But executives of several factories from Taiwan, Korea and elsewhere in Asia said they had not seen much movement of toy orders from China.

One longtime toy industry analyst, Jane Zimmy with NPD Group Inc. in Port Washington, N.Y., said she was skeptical that much production would leave China, even with higher costs.

Zimmy, who has followed the industry for 30 years, said toys increasingly have substantial electronic components that require skilled manufacturing and strong supply chains, which is hard for lower-wage countries to match.

“Moving the production processes is pretty complicated,” she said, noting, for example, that the production lines for popular toy tablet computers like the LeapFrog have many of the same requirements as manufacturing iPads.

It’s a point echoed by others at the fair, including Round 5’s Lau. He said that while Vietnam and India are sometimes mentioned as alternate locations for making toys like his PVC action figures, they lack the infrastructure, supply networks and experience of China.

“It would take a lot to get us out of China,” Lau said.


Comments

China toy factories face troubles

By Steve Toloken
Staff Reporter / Asia Bureau Chief

Published: January 12, 2012 6:00 am ET

Post Your Comments


Back to story


More stories

Image

How CEO Santi is changing ITW

April 23, 2014 2:48 pm ET

Scott Santi is showing he can do more than just cut costs at Illinois Tool Works Inc.    More

Image

Unilever puts Dove brand on a MuCell diet

April 23, 2014 1:57 pm ET

New technology employed by Unilever NV in the manufacture of bottles for its Dove Body Wash range of products could end up saving the brand owner up...    More

Image

Coffee roaster looks to improve footprint of single cup systems

April 22, 2014 1:30 pm ET

One of the largest coffee and tea manufacturers in North America has introduced a single-serve beverage capsule intended to curb the waste created by ...    More

Image

German electronics firm expanding in Hungary

April 22, 2014 9:46 am ET

German electronics manufacturer Provertha GmbH has announced plans to set up a new plastic galvanizing plant at the Kapuvár Industrial Park, in...    More

Image

Inventor taps into TV exposure, crowd funding for water bottle project

April 21, 2014 3:26 pm ET

An Australian inventor has developed a reusable plastic water bottle with a filter in a bid to get more people to drink tap water instead of buying di...    More

Market Reports

Market Data Book - Rankings & Lists

A one-stop download of Plastic News' exclusive annual lists and processor rankings containing essential data including sales, employees, end markets, materials and more.
EXCLUSIVE EXCEL FEATURE: full mailing address details for available plant locations.

Learn more

Thermoformed Packaging 2014 Market Review & Outlook – North America

This in-depth report provides analysis and discussions of economic and political conditions, market trends, legislative/regulatory activity impacting supply and demand, business opportunities and threats, materials pricing, manufacturing technology, as well as strategies being implemented by thermoformed packaging companies. In addition, there are reviews of 25 leading thermoformers in the packaging segment, assessing their growth initiatives and performance metrics over 10 years.

Learn more

Mold Making and Tooling Review and Outlook 2014 – North America

This report provides in-depth analysis of the mold and toolmaking market for North America, including discussions of trends, opportunities, threats, the latest developments in production and labor and equipment trends impacting moldmakers.

Learn more

Upcoming Plastics News Events

May 6, 2014 - May 8, 2014Plastics in Medical Devices 2014

May 12, 2014 - May 12, 2014Plastics News Brazil Pharma Summit

September 10, 2014 - September 12, 2014Plastics Caps & Closures 2014

February 3, 2015 - February 7, 2015Plastics News Executive Forum 2015

More Events