AI-enabled teddies could tell children bedtime stories, says toymaker

Teddy bears kitted out with generative AI could end up chatting with children and telling them personalised bedtime stories as the costs of artificial intelligence fall, according to one of the world’s biggest toymakers.

The technology behind the ChatGPT chatbot could be available in toys as soon as 2028 and used to teach or even instil values such as not telling lies, said Allan Wong, the chair and chief executive of VTech Holdings, which owns US-based LeapFrog and already develops electronic learning products.

Wong said Hong Kong-listed VTech was “watching very closely” the potential to use generative AI in products while acknowledging that he found some of the possibilities “a little scary”.

Smart toys could use “AI to generate stories customised for the kid rather than reading from a book,” he told the Financial Times.

“You can incorporate not only the kid’s name, but the kid’s daily activities. [It] knows you go to which school . . . who your friends are. It can actually be telling a story and talking almost like a good friend,” he said.

“The kids . . . can actually talk to the toy, and the toy can actually give [them] a response,” he explained. “So [there are] many, many possibilities.”

But with generative AI, he said: “I think we should be aware of the dangers, on privacy, security, what kinds of things to teach and what not to teach.”

Regulators in many parts of the world are stepping up scrutiny of the risks inherent in powerful generative AI technology, including copyright and surveillance concerns and what guidelines need to be established for its use.

Wong acknowledged that generative AI was currently “not mature” to apply to toys. He said it would take time to sort out privacy issues as well as waiting for costs of the technology to fall.

The specialist chips used by ChatGPT, which are made by Nvidia and have propelled the US company’s stock market valuation past $1tn, were still far too expensive for toys, Wong said.

“I think we will have to wait another about five years when the price comes down to a certain level, then we can adapt a subset of those AI chips for toy use. But it’s coming.”

The global market for smart toys is projected to be worth about $14bn this year, rising to $43bn by 2032, according to data from Mordor Intelligence.

China, which has more than 61mn children under the age of five compared to about 21mn in North America based on UN figures, would be an increasingly important market despite declining birth rates, Wong said.

But Chinese consumers’ adaptation of “western-type” educational toys was “slower than I had expected”, he said.

VTech, which has a market capitalisation of about $1.6bn and is also one of the world’s biggest cordless phone manufacturers, was an early adopter of a “China plus one” production strategy with production plants acquired in Malaysia in 2018 and 2020. Wong acknowledged that the move came after some of their “buyers preferred their products to be manufactured outside China for political reasons”. The company also manufactures in Mexico.

He said the company had no plans to further shift its production lines out of China, where it has about 75 per cent of its manufacturing capacity.

“I don’t see the US will decouple from China because the supply chain in China is just too important,” he said. “China is still, overall, the most cost effective manufacturing location.”