Light & Wonder (L&W), a global leader in gaming equipment supply, is actively adjusting its supply chain strategy to cope with potential changes in U.S. tariff policies. During a recent earnings call, executives revealed plans to shift some production to Mexico to take advantage of the favorable policies under the United States-Mexico-Canada Agreement (USMCA), thereby reducing the cost pressures of tariffs.
Supply Chain Strategy Shifts to Mexico
L&W CEO Matt Wilson stated that the company is "dynamically adjusting its supply chain" to deal with policy uncertainty. He specifically mentioned that transporting and manufacturing products through Mexico could effectively circumvent potential import tariffs imposed by the U.S.
In February this year, former U.S. President Trump proposed the idea of imposing tariffs on imported goods, which once caused market turmoil. Although the policy was postponed for 90 days in April, businesses still had to prepare for the worst-case scenario. As a major supplier in the U.S. gaming equipment market, L&W could face significant impacts on its profitability if subjected to high tariffs.
Proactive Stockpiling + Localized Production to Mitigate Risks
In addition to exploring the Mexican supply chain, L&W has also implemented several measures to reduce the impact of tariffs:
Proactive Stockpiling: Increasing inventory reserves to ensure supply for the next few quarters is unaffected by policy changes.
Localized Production: Gradually relocating some manufacturing processes back to the U.S., reducing dependence on overseas supply chains.
L&W CFO Oliver Chow noted that tariff policies "change daily," and the company must remain flexible. He admitted that if tariffs are implemented long-term, overall industry costs might rise, but businesses could still mitigate pressure by partially passing on costs.
Specificity of the Gaming Industry Supply Chain
Wilson emphasized that gaming equipment manufacturing relies on specific suppliers, and the supply chain has limited elasticity. "There are not many manufacturers that can provide key components for slot machines, making the industry particularly sensitive to tariff policies."
Despite this, L&W remains optimistic about the market outlook. In the first quarter of 2024, the company's North American market equipment installations grew by 9% year-over-year to 34,501 units, with total revenue increasing by 2% to $774 million, and net profit stabilizing at $82 million.
Postponing the Australian Listing Plan
Beyond supply chain adjustments, L&W also announced the postponement of its listing plan on the Australian Securities Exchange (ASX). Although it had previously discussed the possibility of listing with institutions like Goldman Sachs, considering the current global economic uncertainty, the company decided to slow down.
Wilson stated, "In such a volatile environment, we need to evaluate each strategic step more cautiously."
Outlook: Industry Resilience Remains, But Vigilance Against Policy Risks is Necessary
Despite facing tariff challenges, L&W remains positive about the long-term growth potential of the gaming industry. Chow pointed out that Gross Gaming Revenue (GGR) remains a key indicator of industry health, and the company will continue to monitor market dynamics to avoid overreacting.
As global trade policy uncertainty continues, L&W's supply chain adjustment strategy may serve as a reference case for the industry to cope with tariff risks. Whether the company can maintain growth in a complex environment still depends on its ability to flexibly respond to policy changes.
