In a move that simply begs for wild metaphor-slinging, Lego announced yesterday that it is outsourcing toy-brick production to Singapore-based Flextronics, one of the world's largest contract manufacturers. This will entail layoffs of workers in the U.S. and Denmark, as production is moved to Flextronics facilities in the Czech Republic and Mexico.
The move has been coming for a long time. Lego has been bruised by a long-running battle with multiple foes: on one front there are the cheap copycats like Megablocks, but on the other, there is a dire struggle with the video games that have monopolized the attention of today's younger generation. My own son has done his best to single-handedly keep Lego profitable, but even his devotion couldn't slow the tide. And I know he's dying for a Gameboy.
But anyone who has ever played with Lego blocks should have been ready for this. Lego bricks represent the ultimate in supply-chain flexibility. Lego is all about modular construction, which happens to be just how the global economy works. For transnational corporations, labor and capital are the bricks, slotted constantly into ever-changing cross-national production chains that can be taken apart and rebuilt at a moment's notice.
You could make a good case that no company better epitomizes the fundamental nature of modular toy-brick globalization than Flextronics. You may not recognize the brand, but if you've ever played with an XBox, or held a Palm Pilot or, going waaaay back, dialed up the Net on a Hayes modem, you've dealt with one of many products that the company assembles (and, increasingly, designs) for its clients. But Flextronics, though currently based in Singapore, is not your typical Asian contract manufacturer.
Flextronics got its start in 1969 as a "board stuffer" in Newark, Calif., a working-class Silicon Valley suburb. A husband-and-wife team, the McKenzies, hand-soldered circuit boards for bigger manufacturers like Sony and Motorola, when the demand for their products overstripped factory capacity. In 1980, the McKenzies sold out to a group of investors who took the company public and quickly expanded manufacturing overseas. But the recession of the 1990s hit Flextronics hard, and it ended up going private again, shutting down its U.S. operations and reincorporating in Singapore.
Since the Asian economic crisis of the late 1990s, Flextronics, once again a public company, has been on a roll, buying up factories all over the world, setting up integrated industrial parks in strategic locations where it groups together component suppliers and its primary assembly lines, and, of course, investing heavily in China. But its management team is still heavily staffed by Americans, and it has reestablished itself in San Jose.
So what is it? An American company? An Asian company? An agglomeration of multicolored toy bricks that owes no allegiance to anyone but its own shareholders? An SRI report published in 2001 called it the "face of globalization." That seems undeniable. Which makes it all the more worth noting that it started out in Silicon Valley, handling overflow production for other manufacturers. An original outsourcer -- Flextronics is everywhere and nowhere.
And even though Lego's management says production of its Mindstorm LegoRobots and Bionicle line of alien robot toys will still be manufactured in Denmark, so too is Lego now well on its way to rootless transnationalism, a brand blowing on the wind of globalization.