By: David Salvaraj
There are currently three major toy manufacturing countries: China, India, and Viet Nam. In this article, David Salvaraj (david.selvaraj@source4india.com) makes the case for his country, India as the world’s next big toy manufacturing hub. David, a familiar face at global trade shows, is an experienced India Toy Consultant-Manufacturing, Sourcing and Marketing
Is India The Next Big Toy Manufacturing Hub?
The answer is quite obviously Yes and NO! – it is unlikely that we will ever see again a single toy manufacturing hub become as dominant as China was between the 1990s and 2019.
However, India is set to become a significant toy manufacturing hub due to some fundamental underlying strengths, which we will go into below… In the same way that international toy companies made China a significant manufacturing hub in the 80s, it is in their best interest to do so again with India. Except, this time it will not take long to make India a single manufacturing hub like China.
According to Forbes, China’s population is currently on track to drop from 1.4 billion to 732 million in 2100. The ultimate reality is that at some point, and with a risk of this being sooner rather than later, China’s toy factories will either go out of business or find something else more expensive to produce. This is a significant risk for the toy industry because right now, China’s capacity is still critical to ensure a sufficient global supply of toys.
At the same time, the other toy production hubs are growing but not yet ready to take on the bulk of toy production. Should the international toy communities choose to support India, it will help the industry in the long term because of the sheer population in India, which has overtaken China. The other crucial factor is that most babies are born in India, 23 million per year, and the toy industry can boom here more than in Europe and other developed countries.
In conclusion: if the global toy business found itself in a situation where it had to ramp up production capacity outside of China quickly, only one country with the latent industrial capacity and workforce available to respond en masse – and that country is India.
India is the only place where available labor force, plastic domain knowledge, and entrepreneurial factory owners can ramp up to any significant level in a comparatively short time.Companies that will benefit from going to India need to do a higher level of ‘hand-holding,’ and critical parts supply will typically benefit from some cost savings and the potential to increase available capacity rapidly. Other countries would have to play a part, of course. Still, India would have by far the largest quickly accessible production capacity, even versus Vietnam’s more established and currently larger toy manufacturing hub.
AVAILABILITY OF LOW-COST LABOUR IS A MAJOR DRIVER OF TOY MANUFACTURING LOCATIONS: INDIA HAS CHEAP, ABUNDANT LABOUR
The golden rule of toy sourcing is that toy production is most viable at the intersection of the component supply chain, capacity, labor availability, and low labor cost.
Today, India is more like China when toy production started to consolidate. India’s estimated population of 1.4 billion has an average salary of just over USD 5,000 p.a., with factory production line labor available for somewhere in the region of USD 2 per hour, less than half of what is currently expected in China.
India has one of the youngest populations in the world – more than 67% of the population is between the ages of 15-64. Also, to put the workforce in a comparative context, India has more than 500 million workers, with a few more hundred million potentially available to work but without opportunity. As the primary toy manufacturing hub outside China, Vietnam has 56 million people in the workforce. According to UN projections, India’s population is expected to peak at about 1.7 billion in 2064. Currently, more than 40% of the country’s residents are younger than 25, and the estimated median age in 2023 is 28 — nearly a decade younger than China’s — according to UN data.
So, India is the only country with a similar population size as China but with much more potential labor availability for production labor line work on low-cost products like toys. India’s economy and workforce are crying out for more employment opportunities.
Vietnam is currently the second biggest toy manufacturing hub, with over one hundred export-level toy factories. Compare that to China’s estimated 5,000 to 10,000 toy factories, and you can see how big the challenge is & just how much progress still needs to be made in developing production capacity outside of China. One notable feature of Vietnam’s toy factories is that Chinese business people predominantly own them.The fundamental difference between India & places such as Vietnam is that India aspires to produce all the component elements of toy production locally and looks likely to do so eventually. In contrast, Vietnam is more reliant on a supply chain from China and looks set to remain more dependent on China versus India.
EXISTING INDUSTRIAL CAPACITY – ESPECIALLY PLASTIC & MECHATRONICS
India is an advanced automotive manufacturing hub, with around 23m cars produced every year, making India the 3rd largest in the world in car sales and the 4th biggest toy manufacturing country in the world with automotive making up 8% of India’s total exports.There is enormous plastic domain expertise in India, both in production techniques and engineering, with a robust supply chain for plastic raw materials and components. While the toy-specific supply chain needs to be established (although deepening and broadening all the time), the essential elements of plastic production are certainly in place.
INDIAN TOY MANUFACTURING: CURRENT STATUS
I get at inquiries every week from various manufacturing companies looking to set up new toy manufacturing plants in India, suggesting that manufacturing businesses in India are keen to enter the toy business. There is also some significant impetus in terms of government support for increased toy manufacturing capacity and capability in India.
The reality in India, though, at this point, is that there are only a few export-level, certified factories with significant experience in OEM/contract manufacturing for toys that ship to major Western retailers. The service levels and consistency of production standards take some management and oversight via inspections. Still, genuine cost savings are available on many products due to the lower labor cost in India. These cost savings are far more viable for Indian factories to deliver versus factories in China, which cannot make money when offering similar or lower pricing to those in countries with lower labor, such as India & Vietnam.
The local employment laws tend to offer much more protection to workers in India than in China, and the factory workers in India come from the local urban population, so there is no dorm culture in India’s toy factories. On the other hand, because India’s supporting supply chain for toy-specific components is not as established as China, delays can be caused by needing to import components from China.
IN SUMMARY: INDIA’S FUTURE ROLE IN THE TOY BUSINESS
India is the only country in the world with massive potential for capacity uplift for toy manufacturing. Although many toy companies report that sourcing from India has its challenges, the reality is that of all the countries in the world; only India can eventually match China’s toy production capacity and available cheap workforce. In addition, of all the alternative toy manufacturing hubs, India is the only hub with the existing latent industrial capacity and ambition to develop a complete local supply chain for toys.
While the major toy companies have been wrestling with the challenges of developing new suppliers and new production hubs, many companies have yet to seriously embrace the fact that the status quo as we knew it in China has entered a moment of considerable change. The future of toy sourcing will be more challenging, riskier, higher maintenance & require more resources and management time to manage going forward effectively. Moving away from China’s 40-year experience, knowledge, and supply chain will inevitably be painful.
It seems clear that India will grow in importance and relevance for toy production; it will be ‘The Next China’ if International toy companies can support it in the same way they did in China in the 1980s. While work certainly still needs to be done on building up local supply chain and inspection capabilities, the reality is that the toy industry is on the cusp of needing a substantial increase in toy manufacturing capacity outside of China. India is going to be an inevitable part of the story in the future, therefore, in my view. It’s not just my opinion; both Hasbro & Spin Master have publicly stated on investor earnings calls that they are already nearly at 50% of manufacturing outside of China. Multiple major toy companies have local sourcing offices in India. India is up and coming as per the significant toy companies who have to take a more strategic view of Toy Sourcing.
Those customers heading to India for production will not find it quite as smooth as they have been used to in China; things work differently – there are contrasting strengths & weaknesses between the two countries when it comes to toy manufacturing – But above all else, India offers by far the most substantial production capacity of any alternative hub, and it could just be critical if there is any acceleration of production needing to move out of China.
For general inquiries about how our company helps toy companies to grow profitably,Contact us David Selvaraj at david.selvaraj@source4india.com.
