GUANGZHOU, Oct. [XX] — For decades, "Made in China" has been the backbone of the global toy industry, with the country accounting for over 70% of world toy exports. But today, a profound shift is underway: geopolitical tensions, rising production costs, and supply chain resilience demands are driving toy enterprises to move beyond a single China-centric model toward "global decentralized production." Vietnam, Mexico, and other emerging manufacturing hubs are emerging as key second production bases, while companies grapple with the complexities of coordinating multi-country supply networks. New industry data shows that 62% of top Chinese toy exporters have established or plan to establish overseas factories by 2026, up from 38% in 2020, according to the China Toy & Juvenile Products Association (CTJPA).
Drivers of Restructuring: Geopolitics and Cost Pressures
Two overlapping forces are accelerating the supply chain shift: persistent geopolitical risks and mounting cost pressures in China.
On the geopolitical front, trade tensions between major economies have disrupted traditional export routes. The U.S., the world’s largest toy market, has maintained tariffs of up to 25% on certain Chinese toy categories since 2018, with no signs of immediate rollback. "These tariffs have eroded our profit margins by 8-10% on U.S.-bound orders," says Wang Jian, supply chain director at Shenzhen-based Alpha Group, a leading global toy maker. The European Union has also tightened import regulations, requiring additional compliance certifications for Chinese toys, increasing lead times and administrative costs.
Cost pressures in China have further fueled the shift. Average labor costs in China’s toy manufacturing hubs—such as Guangdong and Zhejiang—have risen by 6.5% annually over the past five years, reaching \(380-\)450 per month in 2025, according to CTJPA data. Meanwhile, raw material prices (including plastic resins and electronic components) have fluctuated by 12-18% annually since 2022, driven by global supply chain disruptions. In contrast, labor costs in Vietnam’s industrial zones hover around \(200-\)280 per month, and Mexico’s manufacturing wages (\(300-\)350 per month) offer cost advantages for North American market access.
"Decentralization isn’t just about cost—it’s about survival," explains Li Ming, CEO of Guangzhou Auldey Toys, which launched a Vietnam factory in 2023. "Having multiple production bases lets us avoid tariff hits and keep supply lines open if one region faces disruptions, like the 2022 Shanghai lockdown that delayed our shipments for six weeks."
Key Hubs: Vietnam and Mexico Lead the Second-Base Layout
Vietnam and Mexico have emerged as the most popular destinations for toy enterprises’ overseas expansion, each offering unique advantages tailored to different markets.
Vietnam: Southeast Asia’s Manufacturing Powerhouse
Vietnam has become a top choice for serving Southeast Asian and European markets, thanks to its strategic location, preferential trade agreements, and growing industrial ecosystem. The country’s toy manufacturing sector has grown by 15% annually since 2020, with exports reaching $3.2 billion in 2024, according to Vietnam’s General Statistics Office.
Major Chinese toy firms have already established a strong presence. Alpha Group’s Ho Chi Minh City factory, which opened in 2024, now produces 30% of the company’s plush toys and action figures, primarily for Southeast Asian markets (including Indonesia and Malaysia) and the EU. "Localizing production here has cut our shipping costs by 40% compared to exporting from China to Jakarta," Wang Jian notes. The factory also benefits from Vietnam’s free trade agreements (FTAs) with the EU and ASEAN, eliminating tariffs on most toy exports.
Vietnam’s government has further sweetened the deal with tax incentives: foreign toy manufacturers enjoy 4-10 years of corporate income tax exemptions, followed by 5-10 years of 50% tax reductions. However, challenges remain, including a shortage of skilled workers (particularly in electronic toy assembly) and limited local suppliers of high-quality components—forcing many firms to import 40-60% of raw materials from China.
Mexico: Nearshoring Hub for North America
Mexico has become the go-to base for toy companies targeting the $38 billion U.S. toy market, leveraging its proximity and the U.S.-Mexico-Canada Agreement (USMCA). Nearshoring—locating production close to target markets—has become a buzzword in the industry, as Mexican factories can deliver toys to U.S. retailers in 3-5 days, compared to 25-35 days from China.
Auldey Toys opened a factory in Monterrey, Mexico, in 2025, focusing on educational toys and building sets for the U.S. market. "The USMCA lets us avoid U.S. tariffs on Chinese toys, and the shorter lead times let us respond faster to retail demand—like ramping up production for holiday seasons," Li Ming says. The factory now supplies 20% of Auldey’s U.S. orders, with plans to increase that to 40% by 2027.
Mexico’s advantages extend beyond geography: its manufacturing sector has a well-established workforce (with experience in electronics and plastic molding) and access to U.S. logistics networks. However, higher energy costs and security concerns in some regions have prompted companies to invest in on-site security and renewable energy solutions to mitigate risks.
Managing Multi-Country Collaboration: Challenges and Strategies
While global decentralized production offers resilience, it also introduces complex coordination challenges. Toy companies must navigate differing regulations, cultural differences, and supply chain visibility issues to ensure smooth operations.
Key Challenges
Supply Chain Visibility: Tracking components across multiple countries—such as plastic parts from China, electronic components from Vietnam, and packaging from Mexico—can lead to delays if not managed properly. A 2024 CTJPA survey found that 45% of toy exporters with overseas factories cited "poor supply chain visibility" as their top challenge.
Quality Control: Maintaining consistent quality across factories in different countries is another hurdle. "Vietnamese workers have different skill levels than Chinese workers, so we had to invest in additional training to ensure our toys meet EU safety standards," Wang Jian explains.
Regulatory Compliance: Each country has its own safety regulations (such as the U.S. Consumer Product Safety Commission’s standards and EU’s EN 71) and tax rules, requiring companies to hire local experts to avoid non-compliance.
Effective Management Strategies
To overcome these challenges, toy companies are adopting innovative strategies:
Digitalization: Many firms are using cloud-based supply chain management (SCM) systems—such as SAP and Oracle—to track inventory, production schedules, and shipments in real time. Alpha Group uses an AI-powered SCM tool that alerts teams to potential delays (such as a shortage of components in Vietnam) and suggests alternative suppliers. "This has reduced our production delays by 30%," Wang Jian says.
Localization Teams: Hiring local managers and engineers has become critical for success. Auldey’s Mexican factory employs a local operations team that handles regulatory compliance, labor relations, and logistics, while Chinese headquarters oversees global strategy. "Local teams understand the market and culture better—they’ve helped us negotiate better deals with local suppliers," Li Ming notes.
Strategic Partnerships: Companies are partnering with local suppliers to reduce reliance on Chinese imports. Alpha Group has signed agreements with two Vietnamese plastic manufacturers to supply 30% of its raw materials, cutting lead times and transportation costs.
Emergency Reserves: To respond to unexpected disruptions (such as natural disasters or border delays), firms are maintaining 10-15% emergency inventory of key components in each production base. "During Hurricane Otis in Mexico in 2024, our emergency stock let us keep production running for two weeks," Li Ming adds.
Future Trend: "China + N" Model Becomes Mainstream
Industry experts predict that the "China + N" model—keeping China as a core production base while adding 1-2 overseas hubs—will become the standard for large toy exporters. China will remain critical, thanks to its mature supply chain, skilled workforce, and scale: 60-70% of global toy production is still expected to be based in China by 2030, but with a more diversified network of secondary bases.
"China isn’t being replaced—it’s being complemented," says Sarah Lee, senior analyst at Euromonitor International. "Chinese factories will continue to handle high-volume, complex production (like electronic toys), while Vietnam and Mexico focus on market-specific products and quick-response orders."
Sustainability will also play a larger role in supply chain decisions. Many companies are designing their overseas factories to use renewable energy (such as solar power in Vietnam) and reduce carbon emissions, aligning with EU and U.S. sustainability regulations. "Our Mexican factory runs on 50% solar energy, which not only cuts costs but also makes our products more attractive to eco-conscious retailers like Target and Walmart," Li Ming says.
As the toy industry navigates a new era of global production, the key to success lies in balance: leveraging the strengths of each production base, investing in digital tools for coordination, and staying agile in response to geopolitical and market changes. For exporters, the shift from "Made in China" to "Made Globally" is no longer an option—it’s a necessity to thrive in the competitive global toy market.
Post time: Sep-19-2025
