If we look at that, it’s going to last well into 2024 unless something changes. Exactly when, we haven’t been able — we don’t have the visibility to say, is it going to be in this month or that month. But we certainly expect we should be able to work our way throughout the first half.
David Williams : Okay. Great. And then back to — maybe to Matt’s question, is just on the differential in content. If you look across maybe China specifically, as opposed to maybe your domestic customers, how should we think about the difference in content there? And then maybe how that plays out from an EV and an ICE vehicle? How — what is that differential? And is it significantly higher in China versus domestically?
David Heinzmann : Yes. Kind of interesting mix there on content. If you take ICE vehicles, the content on Chinese ICE vehicles is approaching what we would find in the West these days, because the sophistication of the vehicles continues to grow dramatically and large drivers of growth where we’re working are with pretty sophisticated vehicles. So on the low-voltage side, OEMs on the EV side, but it’s a tough environment in China there. So perhaps our content in an EV in China may be a little lower than our content in an EV in Europe.
Operator: [Operator Instructions] We’ll go next now to David Silver at CL King & Associates.
David Silver : Maybe I’ll just start with a question on your CapEx guidance. But if I’m correct here, I think the number you put out for full year now is maybe $20 million, $25 million lower than it was earlier. And I’m just wondering if you could maybe comment on that in terms of maybe — pinpoint where discretionary spending is being reduced. And if you consider this maybe more of a delay rather than suspension or cancellation. So where would the shift be in your CapEx budget? And how do you expect that to progress maybe into 2024?
Meenal Sethna : Sure, David. So yes, compared to, I think, back to the beginning of the year and the forecast we had on CapEx, we have brought that down. I think, a few things. One, to answer one of your questions, this isn’t necessarily a permanent reduction in many — in most cases, it’s just delays. And it’s delays because — when we start out the year, we had a view on what we thought was going to happen to the year. Clearly, it started to move a little bit softer. We talked about volumes maybe coming down a little bit and/or extending a little longer than we thought. So where we have a lot of businesses that we’re anticipating capacity adds during the year, they’ve said, “You know what, I think we can hold off a little bit, given where the volume trends are.” And we’ll look at moving some of that out into 2024.
At the same time, we continue to spend for the growth that we have, the growth that we anticipate, other areas like health and safety, normal maintenance and even sustainability, right? There’s a lot of things that we’re doing around our manufacturing and supply chain footprint around improving the energy usage, the water usage, especially when we think about new equipment. So for us, those investments matter. They’re important to our customers and important to our employees, and they’re important to our profitability as well. So no big shifts other than just a little bit of a delay given the macro environment.
David Silver : Okay. And this is a question that has come up, I guess, with a couple of my other — kind of electronics components-related companies. But the company’s, and I think I heard some parallels in your opening remarks. So here goes. But they did draw a pretty sharp contrast between, on the one hand, continued healthy activity on the new contract wins or the new design front. But then the sluggish — relatively sluggish demand for maybe legacy products in various end markets. And I was just wondering if you could maybe comment on that, and maybe think about it in terms of what you’re hearing, which you mentioned earlier from your distribution channel. In other words, do you interpret the softness in distribution business now as something temporary?
Is it something where customers are becoming more price-related? Is it cyclical? I mean, are customers waiting for the next-generation products and some of that demand might — just might fall off due to obsolescence? But in serving the current softer markets, do you draw a pretty clear distinction between healthy activity at the leading edge versus persistently soft markets this year for serving current end markets? Sorry about the long-winded question.
David Heinzmann : Yes. No. I understand the nature of the question. Our design activity, kind of across the Board continues to be extremely robust. And certainly, in electronics, we have a great deal of design activity in many, many different end markets. So we don’t see any signs of any kind of slowing of activity on designing in new products, designing in new applications. We see that extremely robust right now. So that’s a healthy indicator for kind of the medium term and certainly long term for us. We see that. We’ve talked about the fact that there are pockets of end markets within Electronics that have been down for a while. So think of personal electronics, consumer electronics, so kind of customer-facing things like small appliances, PCs, tablets.
Those markets have clearly been down. We’ve heard from some others that perhaps they’re seeing the bottom of some of that, that some of the kind of advanced semi chip guys who are serving some of those markets are beginning to see that they think that’s bottoming out a bit, which is — certainly, we welcome that, that would be good news to see that kind of bottomed. The bulk of our challenge is the digestion of the inventory and the supply chain. That is the primary story that we’ve just got to work our way through. And as we get through that digestion, and we will naturally, just mathematically, of course, see a return to growth because we’ll balance off between orders in and orders out. And so that in and of itself will start to show growth for us.
And with the healthy design in activity and things like that, then the real growth comes when you start seeing an uptick in demand beyond that. So we still remain pretty bullish.
David Silver : Okay. Great. And then just a quick one. I usually hate to grab a question from the headlines. But it’s hard to ignore, I guess, a couple of high-profile labor negotiations in recent weeks, maybe the last couple of months, and whether it’s the auto workers or the truck drivers, et cetera, has there been any change in your thinking about, kind of your overall labor situation for skilled industrial workers? Or how does that — just that general environment of labor was cost and availability, how does that factor into your thinking about next year?
David Heinzmann : Yes. We don’t have any kind of unusual situations from a labor perspective. We have labor pretty balanced across different regions of the world that we’ve had long-term positions within. We work very hard to be — kind of the favored employer wherever we’re at, and we have a great reputation in those spaces. We invest heavily into the communities where we work. And so we usually have a pretty good balanced kind of relationships there, and I don’t see anything unusual. Obviously, the UAW strike had an impact — a modest impact on our third quarter and has — good news is it seems to have been winding down now, but it will — even that will have a modest impact on our fourth quarter as well. But we don’t see that as an overarching concern.
Operator: We’ll go next now to Joshua Buchalter at TD Cowen.
Joshua Buchalter : Let me echo the congrats and good luck to David. I wanted to ask about inventories as well. So I totally appreciate that trying to time or quantify things in the channel is difficult, but I wanted to ask about your on-book levels. In your prepared remarks, you called out some good progress year-to-date. I was wondering, is there a target level that you’d like it to be? Because I still see it’s over 100 days now and pre-COVID, it used to run sort of in the 80 to 90 days range. I just want to be — curious how you’re thinking about the level you’d like on-books inventories to be and how we should think about that as we contextualize the channel inventory as well.
