Restructuring Asian Toy Supply Chains

By on February 4th, 2022 in Ideas, news

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Container Ships Transporting Tonka Trucks and Other Toys in the Port of Los Angeles [Source: LA Times] 

Charles R. Goulding and Preeti Sulibhavi suggest more use of 3D printing for toy manufacturing could be considered.

The global toy market is a $95 billion market and many toys, particularly plastic toys and metal car, rail, and boat models, are designed and increasingly produced with 3D printing. 

The December 13th Financial Times (FT) included an article entitled ‚ÄúToy Sellers Pay Price for Reliance on China.‚Ä̬†China accounts for 80 percent of global toy exports.¬†The China supply has become problematic due to supply chain disruptions and huge increases in freight costs.¬†The disruptions at the Los Angeles Port where 40 percent of Chinese imports arrive, have been well published.¬†Historically, Hong Kong was a leading¬†toy manufacturing location,¬†but political turmoil has made that¬†jurisdiction a high risk.¬†The FT article focused on the French, ‚ÄúMade in France,‚ÄĚ toy movement and the industry has grown from 8 percent of the French market in 2014 to 15 percent today.¬†

Lego, the world’s¬†largest toymaker,¬†has just announced that they will be investing $1 billion in a new Vietnamese plant. The stated purpose is to address growing Asian demand and to establish a more resilient global supply chain.¬†This is the sixth manufacturing¬†plant for Lego, which includes three in Europe, and one each in China and¬†Mexico.¬†

A major market for toys is the branded¬†toys related to media offerings including, Sesame Street,¬†Squid Games and Scholastic’s series, such as Clifford the Big Red Dog.¬†

‚ÄčThe Research & Development Tax Credit

The now permanent Research and Development (R&D) Tax Credit is available for companies developing new or improved products, processes and/or software. 

3D printing can help boost a company’s R&D Tax Credits. Wages for technical employees creating, testing, and revising 3D printed prototypes can be included as a percentage of eligible time spent for the R&D Tax Credit. Similarly, when used as a method of improving a process, time spent integrating 3D printing hardware and software counts as an eligible activity. Lastly, when used for modeling and preproduction, the costs of filaments consumed during the development process may also be recovered.

Whether it is used for creating and testing prototypes or for final production, 3D printing is a great indicator that R&D Credit eligible activities are taking place. Companies implementing this technology at any point should consider taking advantage of R&D Tax Credits.

Conclusion

The global toy industry is completely restructuring at both the retail and design/manufacturing levels. The 3D printing industry has a timely opportunity to capitalize on these changes and insert itself into the change process. 

By Charles Goulding

Charles Goulding is the Founder and President of R&D Tax Savers, a New York-based firm dedicated to providing clients with quality R&D tax credits available to them. 3D printing carries business implications for companies working in the industry, for which R&D tax credits may be applicable.

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