Rumor: Lego moving brick production away from China

[Aanchir]

Check this out.

Extended-line products like that are not made by LEGO, they are licensed out to different companies to manufacture. This product is apparently made by Blip Toys. Likewise, there are LEGO minifigure-shaped pens made by MZB Imagination and LEGO key lights, flashlights/torches, and head lamps made by Play Visions.

Now, this topic is of course referring not to bricks made in facilities TLG owns, but rather to bricks that are contracted out to Chinese manufacturers. I forget the name of the Chinese manufacturer that produces the parts for the Collectible Minifigures and magnet packs among other high-detail/high-production-volume parts. Front, could you enlighten us any further about the situation with Chinese production? You're probably more qualified to comment on this than I am.

Incidentally, the Chinese manufacture was not the first instance of LEGO parts being manufactured by other companies. Starting in 2005 with BIONICLE canisters and Duplo parts, and expanding in 2006, many LEGO parts were outsourced to a company called Flextronics. In March 2008, LEGO went through a period of "insourcing" in which they took over the production at the Kladno campus. Later that year, they did the same with the plants in Hungary and Mexico. I have long been hoping they will do that with their Chinese production, since I think that'd be a speedy way to get quality control for those parts up to the same level as in their other facilities.

Edited November 11, 2012 by Aanchir

[AndyC]

With that said, I will be taking this with a grain of salt. I certainly haven't seen Chinese production quality decrease each year-- on the contrary, I haven't encountered any major quality issues with the LEGO Collectible Minifigures since Series 2, and I haven't heard any major criticisms of Chinese LEGO production outside the AFOL community. It's entirely possible that TLG has reasons to diminish the amount of parts produced in their Chinese plant (for instance, the logistical complexity of having a production facility so far away from their other plants was part of the reason that Chinese production of the Ninjago spinner sets was eliminated for all but a select few parts), but it seems odd that quality concerns would be the primary motivation.

Whilst I completely agree that most of the "Chinese plastic" complaints don't really stand up to much scrutiny (what difference there is can just as easily be attributed to other factors rather than China specifically), it's entirely possible that TLG have traced failing parts back to that factory or indeed just had significant issues that were caught by internal quality control before ever seeing the light of day. If TLG really is moving away from Chinese production, there may be any number of reasons for it and it's certainly possible that quality control factors in somewhere.

[davee123]

If the rumor is true, I'd guess it's not based on company-perceived quality issues so much as customer-perceived quality issues. IE, a lot of people online are continually talking about low quality Chinese LEGO elements. And sometimes they're correct, sometimes they're incorrect. Sometimes the parts in question are due to lower QA or plastic quality in China, and sometimes it's something totally unrelated.

However, regardless of what the real issue is, people have come to associate China with cheap plastic crap. That's not just an association in the LEGO community, that's an association in society at large. So when LEGO has to constantly try and defend itself from attacks of poor quality resulting from Chinese manufacturing, chances are they're fighting a losing battle. Even if the Chinese parts were HIGHER quality, they'd probably still get complaints about Chinese LEGO elements being lower quality. Hence, it wouldn't totally shock me if they decided to retreat from China in an attempt to avoid negative PR.

And LEGO seems to be in a pretty good position right now-- they've increased their overall reputation in the industry, and they've made a name for themselves, as well as some sizeable profits. So it's possible that LEGO can actually afford to pull out from China, whereas in 2005, Chinese manufacture was seen as a big step towards profitability. But that's obviously LEGO's call. We don't know how much they're saving by being in China, and how much of a profit margin they've got to balance it if they migrate that production segment elsewhere.

DaveE

[Aanchir]

If the rumor is true, I'd guess it's not based on company-perceived quality issues so much as customer-perceived quality issues. IE, a lot of people online are continually talking about low quality Chinese LEGO elements. And sometimes they're correct, sometimes they're incorrect. Sometimes the parts in question are due to lower QA or plastic quality in China, and sometimes it's something totally unrelated.

However, regardless of what the real issue is, people have come to associate China with cheap plastic crap. That's not just an association in the LEGO community, that's an association in society at large. So when LEGO has to constantly try and defend itself from attacks of poor quality resulting from Chinese manufacturing, chances are they're fighting a losing battle. Even if the Chinese parts were HIGHER quality, they'd probably still get complaints about Chinese LEGO elements being lower quality. Hence, it wouldn't totally shock me if they decided to retreat from China in an attempt to avoid negative PR.

And LEGO seems to be in a pretty good position right now-- they've increased their overall reputation in the industry, and they've made a name for themselves, as well as some sizeable profits. So it's possible that LEGO can actually afford to pull out from China, whereas in 2005, Chinese manufacture was seen as a big step towards profitability. But that's obviously LEGO's call. We don't know how much they're saving by being in China, and how much of a profit margin they've got to balance it if they migrate that production segment elsewhere.

DaveE

Sadly, I agree with this. Ignorant people were complaining about Chinese production of LEGO bricks years before LEGO actually began producing bricks in China, so I wouldn't be surprised if customer perception is something TLG would want to deal with in one way or another.

In general, though, I don't think it's something that they would pull out of China for in and of itself, since K'nex is one of their only quality competitors I know of that can claim not to produce parts in Asia (and even they have their electronic components manufactured in China, or did at one point).

If they can afford to pull out of China, that's great, though, as I'm sure the other countries housing LEGO plants could increase efficiency if they have one less step of global coordination to maintain.

Edited November 13, 2012 by Aanchir

[ShaydDeGrai]

Sadly, I agree with this. Ignorant people were complaining about Chinese production of LEGO bricks years before LEGO actually began producing bricks in China, so I wouldn't be surprised if customer perception is something TLG would want to deal with in one way or another.

It's not just a question of product quality. I think there is also an image problem of guilt by association connected with China. Some people will protest their labor practices, some will protest their environmental policies, others will cite their track record of human rights abuses, and still others - particularly in America - resent them for "taking away" jobs, violating IP and trade treaties and "owning" so much of our national debt. Any one of these issues has the potential to translate into bad press for TLG somewhere down the line.

I remember years ago when protesting apartheid was the crusade of choice on American college campuses in the 1980's. Several major American companies that were doing business in South Africa came under fire with crowds of people screaming for product boycotts and total divestment of their stock to punish the companies for promoting racism and exploiting blacks when, in reality these same companies were drawing fire from the government of South Africa because they _weren't_ (fully) following the proscribed policy. They were guilty of things like offering equal pay, being "lax" on enforcing segregation and offering educational opportunities that, at the time, were otherwise being denied to large segments of the population. This is not to say that ALL U.S. companies had such noble practices by any means (there were plenty that deserved every sit-in and boycott they got), but there were a few that, by third party standards, did a lot to raise the standard of living for a marginalized people and worked hard at social engineering within the system to try to change the system. The self-righteous mob didn't care, in their minds apartheid was wrong and every company or government that had anything to do with South Africa was equally guilty. If anything, the socially conscious companies got hit harder than the abusers because they weren't as profitable to begin with and yet were economically punished just as severely by the well-intended but under educated crowd.

If the choice is inflating the cost of sets slightly in order to avoid a similar indiscriminate protests and controversies, be they over human rights, quality, safety, politics, whatever, I think it's just cheap insurance for TLG. Sooner or later, something is going to hit the fan and it's best not to be standing next to it when things start to splatter. The recent presidential election in the U.S. was already running attack adds that were very anti-China. Republicans aired ads against Obama and his dealings with China focusing on the national debt, trade practices, and treaty violations; the Democrats attacked Romney by associating him with job outsourcing and turning a blind eye to environmental and human rights issues in the name of profit. Whichever side you favored, the one message both sides agreed on was that being associated with China was bad. It may not be fair or logical, but it is what it is.

Marketing drives headlines, headlines drive perception, perception drives reality; facts are lucky to get a word in edgewise. In that context, supposedly low quality Chinese plastic is just the tip of a very large iceberg.