Molex’s Position and Globalization Strategy in the Connector Industry
When the frontrunners engage in a fierce clash, the third contender often finds itself trailing far behind, breathlessly striving to catch up with the third-largest enterprise.
In comparison to the top two, Molex still faces a considerable gap in scale; however, its vitality is by no means diminished. As a connector company, it acts as the nervous system of industry, acutely attuned to the shifts in the industrial landscape.
Molex recognized the trend of globalization early on, which has endowed it with a distinctly international character. The establishment of its international division in 1967 has allowed the company to derive two-thirds of its annual sales revenue from overseas markets.
Molex’s Growth and Acquisition by Koch Industries
As a supplier to IT giants like Intel and Motorola, Molex invested in the world’s largest factory in Chengdu as early as 2005.
In the fiscal year 2013, Molex reported revenues of $3.6 billion. In December of that year, Koch Industries, through its Koch Connector division, acquired Molex for $7.2 billion.
Over the preceding decade, Koch had invested approximately $60 billion in acquisition capital, showcasing an astonishing appetite for growth.
The Diversified Empire of Koch Industries
Who is Koch? According to Forbes, Koch Industries broke Cargill’s 12-year reign at the top of the list of private companies in the United States in 2020.
In the fiscal year 2019, Koch Industries generated approximately $115 billion in revenue, with its operations being highly diversified, encompassing steel, chemicals, food processing, fertilizers, and electronic components.
Unlike other capital firms engaged in buying and selling, Koch operates as a dual-driven industrial capital company, where capital serves industrial purposes, and industry provides cash flow. It has never had to worry about cash flow and stands as the largest privately-held company in the U.S., employing a strategy akin to Huawei’s decision to remain unlisted.
Koch’s Strategic Expansion and Molex’s Market Position
This low-profile industrial family business ranks third among the world’s top 25 wealthiest families. The acquisition appears to be a casual decision by a giant, akin to an elephant unconsciously sipping water.
Molex sells products in the automotive, military, and Apple smartphone sectors. Although it is a leader in the rapidly growing connector market, it still does not hold the top two positions.
In a highly concentrated market, being third can be an awkward and precarious position. Koch seems intent on further diversifying into traditional holdings in energy, chemicals, and paper, and Molex has likely entered Koch’s line of sight as a desirable target.
Molex’s Strategic Entry into Optical Communications with Oplink Acquisition
In a swift turn of events, just a year later, Molex acquired Oplink, a company with $200 million in annual sales, for a mere $45 million, marking its entry into the optical communication sector.
This acquisition signifies that Molex is not just a connector company; it appears that capital-driven acquisitions are often perceived as a straightforward linear thought process, where sales revenue doubles the acquisition price, making acquisitions seem simple.
Enhancing Vehicle Connectivity: Molex’s Acquisition of Laird’s CVS Division
In 2018, Molex acquired Laird’s vehicle connectivity division, CVS, a significant player in wireless antennas with multiple factories in China.
This acquisition substantially enhances Molex’s ecosystem for vehicle connectivity technology, bringing it closer to original equipment manufacturers (OEMs). This strategic move clearly outlines Molex’s determination to strengthen its engagement with OEMs and firmly penetrate the automotive electronics sector.
Molex has a grand strategy in play: to establish a 10Gbps automotive-grade Ethernet platform, which is where the true value of the industrial Internet lies.
Capital-Driven Transactions and the Dynamics of Private Equity
Of course, one must never forget the greedy eyes of capital that watch silently.
Molex acquired this valuable asset from a U.S. private equity firm, which had previously purchased Laird in March 2018 and swiftly announced the separation of CVS for sale to Molex shortly thereafter.
This cycle of acquisition and divestiture illustrates the dynamics of capital-driven transactions, where private equity firms enhance brand value and reorganize businesses to make them more appealing for subsequent buyers.
Future-Oriented Acquisitions: Molex’s Purchase of Keyssa for Advanced Wireless Connectivity
Consequently, Laird’s other connector businesses need not rush, as by the end of 2021, Laird Connectivity’s antenna division was again sold to TE. Connectors must be future-oriented, embodying an irresistible allure.
At the end of 2021, Molex acquired Keyssa, a wireless connector company, further solidifying its position in the increasingly competitive high-speed board-to-board market. Keyssa’s chip-to-chip connectivity enhances the capabilities of Molex’s micro-connectors, simplifying internal communication within mobile devices, where the volume of data transmission between displays, cameras, and memory is substantial.
The Shift to Contactless Connections: Enhancing Data Transmission and Manufacturing Efficiency
The advantages of contactless connections are unparalleled, as Molex moves toward a new generation of point-to-point, high-capacity data transmission methods that reduce reliance on mechanical connectors.
This technology is also crucial for digital workshops, which seek to eliminate cumbersome wired connections. Moreover, this wireless technology simplifies manufacturing processes and significantly alleviates the production burdens of pairing and reliability.