Volker Flath's workshops are a hive of Christmas activity.
One German manufacturer recently won a legal battle on toy imports
In one corner, he turns out Christmas trees that are each just a few centimetres tall, while nearby a colleague works on a noisy lathe producing parts for a Christmas pyramid.
Elsewhere, an employee sits furiously painting hundreds of Santa Claus figures in minute detail.
It is like this every year for the woodcarvers of Seiffen, a village of just 2,000 people, which has around 100 producers of wooden toys and ornaments.
"We've got three generations working in our business," says Mr Flath.
"My father still works here, I do, and my son is an apprentice. The training period lasts three years."
Seiffen has been home to the woodcarving industry since the tin mines were exhausted in the 18th Century.
Now though, the tradition is coming under threat from cheap Chinese imitations.
"It's a problem.
"These imitations cause huge losses to the toy-makers, and the customers now don't know what they're buying," says Mr Flath.
"I can only say: be careful! Check what you buy has a certificate of authenticity, and buy it from a specialist shop.
"There are ways to tell the difference."
The problem has been taken head-on by one of the region's largest manufacturers, KWO.
It has recently won a seven-year legal battle to prevent the import of just one particular product.
Seiffen's economy relies on its wooden toy industry
Sitting in an Aladdin's Cave of elaborate music boxes, pyramids and "smokers" - ornaments of men smoking pipes, in which incense can be burned - export manager Lennart Brauser-Jung says he is expecting more litigation, from Germany and abroad.
"The German importer is no longer allowed to import and sell this product, an imitation Smoker, to Germany.
"But we think it's still being produced in China and sold to other countries like the United States," he says.
"The imitations look very similar but they're not as good as the original.
"For example, they use different paints, the body has stains on it, and on parts of the figurine you can see glue."
Chinese products now account for more than half of all German toy imports, so it is no surprise the woodcarvers of Seiffen should also fall prey to them.
The German government has just launched a campaign warning of safety problems with many of the toys.
Klaus Piepel, from the German charity Misereor, recently visited Chinese workers in Shenzhen - and says they work under sweatshop conditions.
"The factories are mostly staffed by migrant labourers who get 50-60 euros (£35-£42) a month.
"They work 14-hour days, seven days a week, without breaks," he says.
"Traditional handcrafted wooden toys are also being reproduced in this way, and at such a low cost that the German manufacturers can't compete."
But the issue is especially important for Seiffen, and the Erzgebirge mountain region where it lies.
The local unemployment rate is 20%.
So the industry and the tourists it attracts are a crucial boost for the economy.
Also, the small family-run businesses often lack the resources of large toy-makers to fight the competition, on the market or in court.
It is a cruel irony that the local toy industry was first successful because of its low prices.
The former miners turned their hands to making first utensils, then toys and ornaments.
And soon they were exporting to the whole of Europe.
Their success seemed in no doubt for generations.
"We remained a family business even under the communists, like many in Seiffen," says Volker Flath.
"They needed us for getting hard currency from the West."
As we spoke, a light snow was falling outside.
Tourists were drinking mulled wine on the village's chocolate box main street, illuminated by multi-coloured Christmas lights.
In the evening, a mouth-organ choir held a concert at the village's unique, octagonal Baroque church, another tourist attraction.
Even here, there are hand-carved wooden toys on the walls.
The whole region lives from traditions that it is now fighting to preserve.