Billionaire Francis Choi (蔡志明) built a toy-making empire from stuffing Snoopy dolls in a small Hong Kong warehouse four decades ago. Now, his son Karson Choi (蔡加讚) is seeking to rejuvenate the family business — one of the world’s largest toy manufacturers — by going high-tech.
By remote-controlling toys through smartphone apps, you can fly a drone or make toy soldiers battle each other with your fingertips, said the 30-year-old vice chairman of Early Light International Holdings Ltd (旭日國際集團), which supplies more than 30 toy brands for companies including Mattel Inc, Hasbro Inc and Walt Disney Co.
The high-tech toys are part of Choi’s plans to diversify the family’s toy and luxury watch businesses into high-margin areas, such as electronics and medical products.
“We’re no longer only a manufacturer of dolls or toy sets,” Choi said last month at a Hong Kong shop of the company’s luxury timepiece retailer Halewinner Watches Group (喜運佳鐘錶集團). “We’re very strong in terms of electronic toys.”
China shipped 97 billion yuan (US$15 billion) of toys abroad last year, an 11 percent increase from 2014 despite the country’s economic slowdown and falling total exports, data from China’s General Administration of Customs show.
Shifting production to pricier playthings is expected to help Early Light boost its profit margins and stay ahead of its competitors, Choi said.
China cranked out 70 percent of all toys globally, according to researcher IBISWorld.
Chinese manufacturers such as Goldlok Toys Holdings Guangdong Co (廣東高樂玩具) and Alpha Group (奧飛娛樂) are increasingly moving into making interactive toy robots, as well as animation and video games, amid rising competition from countries with lower labor costs, such as those in Southeast Asia.
“The toy-making industry has entered a stage of industrial upgrade and reshuffle,” said Fan Zhangxiang (范張翔), a Shanghai-based analyst who covers the manufacturing industry at SWS Research Co (申銀萬國證券研究). “Traditional companies that squeeze profits from labor-intensive mass production are being eliminated, while stronger companies have to upgrade by developing higher value-added high-tech products.”
The Hong Kong government earmarked US$128 million in funding spread over two years from 2013 to the territory’s toymakers to stimulate sales in China through rebranding and new product development.
“China is the world’s second-largest toy market after the US,” Hong Kong Toys Council chairman John Tong (湯誠正) said. “Given the geographic proximity to the mainland and close ties, Hong Kong toymakers are in the best place to tap the mainland market.”
Chinese parents can afford to spend more on their children due to rising household income and with many young families having only a single child, Fan said.
There are also an increasing number of young adults who are attracted by high-tech toys, he said.
In response, Early Light has come up with products such as robot dinosaurs that react to hand gestures, and a voice-activated Yoda figurine from the Star Wars movies, according to Choi, who said his three-month old twins and one and a half-year-old daughter are still too young to play with the company’s toys.
The company employs about 40,000 workers and operates 1.8 million square meters of manufacturing space. By comparison, Alpha Group, China’s largest publicly traded toy company, has a production area of 84,458.16m2, according to its annual report for last year.
Electronic toys account for 40 percent of Early Light’s 1,000 models, which mostly target children five years old and above, Choi said.
He said the company’s sales rose by a single-digit percentage last year, helped by a recovery in demand from the US and Europe, and the shutdown of smaller Chinese toy factories. He declined to give specific figures.
Hasbro, one of the toy maker’s main clients, last month reported profit and sales that topped analysts’ estimates, boosted by demand for Star Wars toys and Disney’s Princess and Frozen dolls, some of which are manufactured by Early Light.
“We’re very lucky that many of our products became big hits last year,” Choi said. “Kids can’t live without toys.”
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