Why Japan is Essential to Electrical Parts Heavyweight Molex, the Fruits of a Long Term Commitment

November 2008 -- Most people aren't aware of it, but parts maker Molex plays an essential role in our everyday lives. Most everyone owns a product that uses one of Molex's more than 100,000 electrical interconnect products, such as the connector at the bottom of a cell phone or in a flat screen TV.

Just as Molex is essential to us, Japan is essential to Molex. Beginning with exports to Matsushita in 1967--a relationship that is still going strong--Molex has evolved over the years with the Japanese consumer electronics industry, making smaller and smaller parts and opening manufacturing facilities in lower-cost regions in Asia. Today, Molex's Yamato technical center is the global headquarters for its global Micro Products Division, known for developing the smallest connectors in the world, and working cooperatively with its customers to develop new interface standards like HDMI* and IEEE 1394. Using technology initially developed in Japan for a marketplace including customers like Sony and Matsushita, Molex also supplies electrical interconnectors to Nokia, Motorola and Samsung among others. If you're deep within the electronics world, you may already know all of this.

For those looking to enter the Japanese market for themselves, Molex Director of Marketing Communications Sam Cremin shared insights from Molex's experience in Japan. Cremin has been with Molex for 28 years and worked in Japan for four years. He spoke with JETRO about the key benefits Molex has gained from its Japan operations and also the key points to keep in mind when doing business in Japan.

JETRO: What has Molex gained from working in Japan all these years, and what role does Molex's Japan business play in the overall company?

JETRO: Speaking of a spread across Asia, what role did Molex's Japan operations play in its expansion within the Asia region?

Molex: We localized production of our Japan designs to launch most of our start-up operations in the 1980s, including Korea, Malaysia, and Thailand. Our Japanese customers there wanted local sourcing options. Our Japanese multi-national customers and the broad popularity of our Japan-designed products accelerated our push into Asia. In 2001, our Japan operations opened a facility in Dalian, China. It started as a manual assembly operation and now includes fully automated connector production. Molex Japan's move into China preceded a company-wide organization change rolled out in 2006, when Molex changed its global organization from geographic-based divisions to five product-based divisions based on core competencies. Each of these divisions has manufacturing in low-cost markets like China. But we still have the most precise of our microproducts manufactured in Japan.

Business in Japan

JETRO: What are some important things to know about conducting business in Japan?

Molex: You need to be able to work with the customer in their native language, and be very sensitive to both their company culture and the broader culture of Japan overall. You need to listen before offering solutions and above all be considerate of the Japanese perspective. Often you will find incredible insights there. Definitely, the meetings take longer. And it appears to the average American that the Japanese are slow to decide on starting a project. But once the decision is made and approved you see that their whole process is efficient and often faster than ours. Their teams are incredibly loyal to the project, the company and the customer.

JETRO: One challenge that companies find in taking their business to Japan is finding good, qualified people, especially those with technical knowledge in their field and sufficient language abilities in both Japanese and English. How does Molex find qualified people for its Japan operations?

Molex: It is something that we work hard on every year. In Japan there is an annual recruitment cycle. We advertise actively to all of the major universities in an effort to bring in the best possible "freshman class"? each year. We have achieved a scale and reputation where we can attract senior managers as well.

JETRO: What are some key things to keep in mind when servicing clientele in Japan?

Molex: The importance of extreme service and full company commitment. If and when there is a service or quality concern, you do every single thing you can to solve the problem. For Molex, it has also been critical to custom fit every element of our service offering to the design cycles of our core customers.

Results and Outlook

JETRO: What are some of the major accomplishments Molex has had in Japan?

Molex: Our revenue has grown dramatically over the years. Last year, our domestic revenue to Japanese customers was around $500 million. But, when you factor in exports from our Japanese factories and sales from the other Micro Division factories, our total revenue is up over $1 billion. The degree to which we have built a seamless sales system between Japan and the rest of our organization is something we are proud of. The way Japan has contributed to our global product portfolio is also major. In Japan, we developed a number of products that needed to be localized offshore to be commercially effective. Today, decades later, these connectors still sell around $100 million/year. Also a important is that we have repeatedly proven our ability to win business for leading micro products in Japan, the world's most competitive market for innovative precision designs.

Lastly, I would mention the way Molex in Japan has adopted strong environmental policies. Molex in Japan helped to usher in our global environmental policies and practices. All of our Japan plants (and now some of our international plants) are recognized as Sony Green partners. Our Micro Products Division was the first division to have all of its facilities approved to ISO 14001, a standard for environmental practices. Also, our Dalian factory, which is managed by Japan, was our first location to reach OHSAS 18001, the benchmark for employee health and safety management systems as well as strong environmental stewardship.

JETRO: What is it about Japan that brought about the global environmental policies and practices?

Molex: Well, I think Japan is especially environmentally conscious because they're such a densely populated country. Their manufacturers create products for global markets, so they have to conform to all standards. The fact that their portable electronic products have shorter lifecycles makes them especially susceptible to changes in increasingly stringent definitions of what is a hazardous material.

For example, in 2006 when the EU RoHS Directive was passed restricting lead and five other substances, we had to act quickly. The goal of this legislation was to minimize exposure to potentially hazardous materials while minimizing the landfill impact of the disposed products. Molex's biggest challenge was to rapidly test and prove new materials to replace the tin-lead compound that had been used in soldering for years.

JETRO: What do Japanese companies consider when looking to work with a foreign company in environmental issues?

Molex: Conformance to all global standards in materials selection is foremost. The rules here are changing all the time. In a highly competitive market, global citizenship is a differentiator in vendor selection. Customers recognize that global citizenship of their vendors reflects positively on them.

JETRO: What does Molex see for the future of the company in Japan?

Molex: Greater global outreach and Japan's help to get us even closer to leading companies in the portable electronics field no matter if they are Japanese or not. Inside Japan, we have recently expanded our Shizuoka factory to manufacture connectors for the Japan auto makers. We also see a more direct role for Japan in our corporate leadership. The President of the Molex Micro Division sits on our global leadership team. Japan's technical leaders work on our best practices teams. We also expect to see some new acquisitions and partnerships in Japan. We hope that our bank connections in Japan will continue to help us with financing acquisitions not only in Japan but globally. When Molex acquired the Woodhead Industries, a US-based company, we used a low interest loan from a Japanese bank to finance a portion of the deal.

* HDMI is a trademark of HDM Licensing, LCC. Molex recently won a technical EMMY for its support in developing the designs for the HDMI connector interface.

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