Operator: Next question comes from Asiya Merchant from Citigroup. You may go ahead.
Asiya Merchant: Great. Hopefully, you can hear me clearly, and I don’t have an echo, I will try. On IT Datacom market, if you guys on share some insight? Looks like this market is ramping up quite nicely for you guys. If you could elaborate a little bit on how you think about your wins in the AI segment and how you’re able to ramp that into revenues going forward, especially given constraints on supply on the GPU side, how do you guys think you can ramp for AI for the remainder of the year? Thank you.
Adam Norwitt: Yes. Well, thank you very much, and welcome to our call. I look forward to getting to meet you in person. We’re really excited about the progress that the company has made in AI. And I just want to reflect on one aspect, which is that AI is not new to us. While the world over the course of the last year has sort of woken up to AI with the advent a year ago, November of ChatGPT and the sort of revolution of generative AI. Our team has been working on the interconnect architecture surrounding AI for a long, long time. And so it is only now that maybe there is this acceleration almost, you could call it even a kind of revolution or a goldrush around AI, but we’ve been building the capability, building the product capability, building the manufacturing capability and capacity to support that for a long time.
And I think this year, one of the ways that we were able to maybe even get a disproportionate share of some of the more urgent demand was that we were very quick to flex our capacity in favor of customers who needed products and when they needed it. And I think our team has always showed the ability to have that agility in reacting to upticks of demand. And I think that this AI is no different. I’m really proud of our team and how they’ve done that. Looking forward, it’s still too early to say, what does that, look like over the long-term. But there’s no question in my mind that AI seems like something that is not such a small deal. It seems like something where there are real economics behind it, where large companies are making significant investments into AI and where ultimately our architecture, our interconnect architecture is a very critical component together with the chips that you alluded to.
Now relative to shortages of chips, that’s — I mean, we hope that there are significant investments in chip manufacturing, because in our industrial business, we do supply a lot of interconnect products that go into the industry for semiconductor manufacturing. I don’t think that we’ve necessarily seen that as a governor on our output or on our customers’ demand right now. But we’ll see. It’s not something that would directly impact except that maybe customers, if they couldn’t get enough chips, they would moderate their overall construction. But we haven’t seen that yet. And I think our team is just doing a fabulous job dealing with the surge in demand that we saw this year. And it came at a time when overall IT demand was down. But in fact, some of the products were very different products.
So it wasn’t just that we were able to reallocate capacity from IT products that were not being consumed as much into these. There was a lot of new stuff that we had to do. And I think we did a really great job executing on that.
Operator: Our next caller comes from Luke Junk with Baird. You may go ahead.
Luke Junk: Great. Thanks for taking the question. Adam, just hoping you could comment on pricing dynamics into 2024, especially in which parts of the portfolio might look at as more normal with respect to price downs this year versus areas of the business that could be a laggard in that respect? And then the related question would just be, how you’re feeling about delivering productivity of your supply chain and your operations to offset any price downs you might face this year. Thanks Adam.
Craig Lampo: Hi Luke, its Craig. I’ll take that one for Adam. I think as we think about pricing, 2023, certainly, we talked about the fact that we didn’t necessarily — we saw pricing coming back to normal. I mean, 2022 we talked a lot about pricing adjustments we are making to try to catch-up to inflation — inflationary increases on costs that we saw. And I think that as we came into 2023, sequentially, we did a great job on the profitability, but that wasn’t necessarily the pricing dynamics. That was more really just operational execution. And I think the pricing in 2023 and as we look into 2024 is, certainly a more normalized and that the price and cost environment is more balanced. I wouldn’t say that the cost environment necessarily has decrease at all.
I think there is certainly an elevated level of cost, but they’re just not increasing at the pace that we saw a year ago. So from that perspective, I think the pricing environment is in more of a normal situation. And as we move into 2024, I don’t necessarily think we’re going to get necessarily the benefit of price. And historically, that’s not something that we would see anyways. And typically, if you have a normal cost environment and normal price environment, I think you’ll see kind of typical kind of margins and margin increases from a profitability perspective, we talk about 25% as being a typical target that we have in a normal environment. And I think as we move into 2024, I would expect that to be the case kind of sequentially as we move into it.
So really happy with where we actually ended the year here at record operating levels. So we’re really well positioned, I think, as we move into 2024. I mean if you look at our — our margin improvements, I think that that’s something that I’m really proud of the team to be able to actually execute so well during the year to get to these profitability levels. So, as we move into 2024, I expect that overall environment to be the same, and I certainly expect the team to be able to execute at a similar level.
Operator: Next question comes from Wamsi Mohan from Bank of America. You may go ahead.
Wamsi Mohan: Yes. Thank you. Adam, you called out the weakness in 2023 in the communication-related markets, but you did exceed your expectations in the fourth quarter. Do you see a greater than normal organic growth rate over the next two years in these markets given the historically easier compares here? And if you could also just talk about the environment in China, that would be really helpful? Thank you.
