Stine Jacobsen

COPENHAGEN, (Reuters) – Toymaker Lego announced Wednesday that it will build a new Vietnamese factory to meet the rapidly increasing demand for its coloured plastic blocks among Asian children.

According to the privately owned Danish firm, it plans to invest $1 billion more in this project. It will also be its second Asian manufacturing plant. In 2016, it had opened one in China. Lego’s region has experienced double-digit growth since 2019.

According to Lego’s Chief Operating Officer Carsten Rasmussen to Reuters, the demand for its Chinese plants is on pace to exceed supply in the short and medium term.

“The growth in China and Asia has been phenomenal, and we can see over time that more capacity will be needed,” he stated. He pointed to the growing middle class as well as high birth rates in the region in comparison to mature European markets and North American ones.

Lego has been putting production closer to markets for ten years, a strategy that has allowed it to reduce costs while protecting itself from external influences.

Rasmussen explained that it reduces the time we take to get to customers, makes us faster at responding to customer demand and is also more resilient.

He said that recent disruptions in global supply chains had not accelerated the decision to construct in Vietnam.

The factory will be Lego’s first carbon-neutral facility. It plans to offset the energy consumed by solar power generated from nearby farms and panels on the roof.

Lego makes bricks still from petroleum-based plastic. However, the company has promised to switch these out with products made of sustainable materials before the end of the decade.

Rasmussen indicated that Lego will begin production on the new factory in 2024. The facility could be used by as many as 4,500 people.

Lego (an abbreviation for “leg Godt”), which in Danish means “play well”, is expanding its production in Mexico, Hungary, and China, and adding machinery to its Danish and Czech plants.