The company that produces the popular Lego building blocks has decided to outsource production to electronics contract manufacturer Flextronics International over the next three years.But in a twist, the Lego Group intends to continue to make products “characterized by high technical requirements” at home, the Billund, Denmark company said Tuesday.The Lego Group will avoid outsourcing highly technical work to Flextronics, despite it being one of the world’s largest manufacturers of highly technical products. It produces a wide range of goods including Xbox 360 game consoles, PCs and mobile phones. More than half of its revenue comes from telecommunications products.Making plastic building blocks appears to be a new line of work for Flextronics. A spokeswoman declined to comment on the deal, but said the company has long produced a range of plastic parts and mechanical enclosures, indicating that making Lego does not represent a sudden shift into non-IT products. Flextronics, which is headquartered in Singapore, is in a pitched battle against Taiwanese rival Hon Hai Precision Industry for the lead in the global contract electronics manufacturing business. Flextronics used to be number one, but Hon Hai took over the top spot a few years ago and has since extended its lead.In this most recent deal, Flextronics will take over production of Lego products in North America and a portion of the Lego Group’s Eastern Europe manufacturing. The Lego Group plans to lay off 300 employees at its U.S. subsidiary in Enfield, Conn., as its North America production moves to a Flextronics plant in Mexico over the next three years. Up to 900 employees in Denmark could lose their jobs as some production in Billund moves to Flextronics factories in Eastern Europe.By the time its three-year outsourcing plan is finished, the Lego Group expects its head count to total 3,000 employees. The company’s website indicates it currently employs 5,600 people worldwide.Flextronics will also take over a Lego Group facility in Kladno, the Czech Republic, on Aug. 1.The Lego Group intends to continue to manufacture more specialized products such as Lego Technic and Bionicle products on its own in Billund because they require more technical expertise, it said.The company decided to outsource most of its production to reduce costs by as much as 1 billion Danish krone (US$169 million) and ensure its facilities were close to its major end markets, it said. The Lego Group, a family-owned business, has struggled financially over the past few years. In 2004, it lost 1.69 billion krone before taxes, while its pre-tax profit totaled 702 million krone last year.“The traditional toy market is characterized by low or no growth, as a result of the severe pressure from electronic products, and intense competition at [the] retail level,” the Lego Group said in a statement. -Dan Nystedt, IDG News Service (Taipei Bureau)Check out our CIO News Alerts and Tech Informer pages for more updated news coverage. Related content BrandPost Are tech layoffs inevitable, or can your company avoid them? Despite tech industry layoffs, one ITSM company remains committed to growth and expansion of internal teams. The company’s successful endeavor is largely credited to one difference between TOPdesk and other tech organizations. By TOPdesk Mar 30, 2023 6 mins IT Leadership Analysis CIOs must evolve to stave off existential threat to their role With LOB leaders learning tech faster than CIOs gain business-savvy, IT leaders must strengthen advisory skills, build relationships, and embrace strategic transformation before losing out to business counterparts. By Yashvendra Singh Mar 30, 2023 10 mins Roles Opinion 5 ways AI will transform CRM Recent announcements by Microsoft and Salesforce on how they’re ramping up integration of AI tools into their software offerings mark the start of a revolution in the CRM marketplace. By Martin De Saulles Mar 30, 2023 4 mins Channel Sales CRM Systems Artificial Intelligence Interview From CIO to CX SVP, Cisco’s Jacqueline Guichelaar takes a road less travelled By David Binning Mar 29, 2023 7 mins Careers IT Leadership Podcasts Videos Resources Events SUBSCRIBE TO OUR NEWSLETTER From our editors straight to your inbox Get started by entering your email address below. Please enter a valid email address Subscribe