Lego A/S plans to invest more than $1 billion in a new factory in Asia, seeking to serve growing demand for its toy bricks in the region and double down on a supply-chain strategy that held it in good stead through the pandemic.
The world’s biggest toy maker by revenue said Wednesday that the new factory in Vietnam would make products for big markets in the region such as India, Indonesia and the Philippines. Those places are currently supplied by Lego’s factory in China, which will now be dedicated to local consumers.
The Danish company makes most of its own bricks and other parts in factories located close to key markets allowing for lead times of just a few weeks. That model has helped Lego weather the worst of the supply-chain disruptions that have buffeted various industries during the pandemic, said Chief Operating Officer Carsten Rasmussen.
“We don’t have a lot of what I call ‘part tourism,’ where we have to fly parts around,” he said.
Construction on the new Vietnamese plant, about 31 miles from Ho Chi Minh City, is scheduled to begin next year and be completed by 2024. It will be Lego’s sixth factory globally, alongside sites in Denmark, Mexico, Hungary, the Czech Republic as well as China.
Most of those factories are replicas of one another, able to mold, decorate and package parts, which allows sites to help another out by moving raw materials between them if needed, as was the case during the pandemic.
Mr. Rasmussen said the new Vietnamese factory would start out molding and packaging before later adding decorating capabilities. It will be Lego’s first carbon-neutral factory, powered by rooftop solar panels and a nearby solar project, the company said.
Lego is betting big on Asia, which has been a strong growth driver in recent years. The company has reported double-digit percentage sales growth in the region since 2019 and has been opening dozens of new stores in China.
The Asia-Pacific toy and games market—the world’s largest—is forecast to grow about 28% by value between now and 2025, compared with growth of 24% for the world market, according to Euromonitor. The figures exclude videogames.
Lego also plans to expand its factory sites in Mexico, which serves North America, and Hungary, which serves Europe, in expectation of strong demand in those regions longer-term too, said Mr. Rasmussen. The company is adding new equipment and technology to all its factories.
Mr. Rasmussen added that Lego hasn’t faced problems fulfilling orders for Christmas.
Lego’s rivals Mattel Inc. and Hasbro Inc. have also been working to get through recent supply chain disruptions, which have impacted operations for companies across various industries around the world.
Barbie maker Mattel last month said it had expedited procurement of raw materials, pulled forward production of finished goods, contracted ocean-freight capacity and rates in advance, and secured access to additional ports and shipping lanes.
Hasbro, which has faced delays in getting products to customers, also recently said it is using new ports and has added ocean-freight capacity, while additionally hiring new truckers to get products to warehouses. The Monopoly board games maker has raised prices to cover the increased costs.
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