Terrence Curtin: Well, when we work here, Joe, we work with our customers on the programs that they’re coming out with and then on the next generation, I would tell you, we do work with our customers on their understanding of that market outlook. But honestly, we’re focused on nailing the solution with our customers on what the technical requirements they have. So, I would tell you that’s what we focus on, that’s the way we invest as we work with our customers. So, from that viewpoint, I think that’s always been our mindset and it’s one of the nice things about our model that we get the benefit of working with our customers as they understand the opportunity and the ramps that they expect to hit and how do we need to support that.
Operator: Your next question is from the line of Asiya Merchant with Citigroup.
Asiya Merchant: Just if you could drill down a little bit on pricing, I think comments in the past have talked about maybe normalization of pricing. And especially as we look at auto production moving towards at least this year being a little bit more weighted towards Asia versus North America and Western Europe, how do you guys think about pricing and the margin impact from pricing normalizing, say, as we go into fiscal ’25?
Terrence Curtin: No, sure. I think when you look at pricing, first off and you see it in the margin this year, we recovered finally the inflation that we had during the mega wave of inflation and we caught up on that and our approach always was, was we’re recovering cost with our customers. When you still look at this year, nothing has changed with what we told you before. We expect pricing to be neutral this year at the TE level. So, yes, we are doing targeted price increases where we have to, where we continue to have material inflation on certain metals. Certainly, we’re doing things to make sure where we can be competitive. And I don’t think you assume that margins go down on a different pricing environment. So, I think you sit there as we look forward, a big element of where pricing goes is going to be around where the material environment is, where’s copper, gold, resin trading, the input costs that were the things that we recovered and they will be the bigger driver of where pricing goes from here.
Operator: Your next question is from the line of Saree Boroditsky with Jefferies.
Saree Boroditsky: You talked a lot about maybe a line of sight to the end of industrial equipment destocking by year end. Could you just talk through the underlying demand environment there? And then how do you think about the tailwind from destocking then as we get into 2025?
Terrence Curtin: Sure. Thanks, Saree, and welcome to the call. First off being the demand environment is cloudy because we have had both with and in our industrial equipment business, just to take a step back and remind everybody, about 50% of our revenue goes through our channel partners and 50% goes directly to the OEMs. So, it is an area where channel partners play a bigger role. I would say when we look at the end demand environment, there are pockets where you continue to see strength that won’t surprise you, certainly in the process side. But there’s other areas that right now it is still foggy because we have customers that are working off buffer stock that they built up when they were worried about being able to get component supply as well as our channel partners are doing the same.
So, right now, we’re in the middle of that destock period. But what we are seeing is we’re seeing order patterns start to move sideways. They aren’t decelerating. We’re seeing that both direct and with our channel partners. And we’re also seeing certain regions where we see that work off. So I think what you’re going to have probably for the next couple of quarters, we’re still going to have those impacts as that works off. And then as we get into ’25, you’ll actually see that business get back more in line. We are in a little bit above the underlying market of factory automation.
Operator: Your next question is from the line of Steven Fox with Fox Advisors.
Steven Fox: I was wondering if you could talk a little bit about how TE Connectivity’s products into help on the cost front for your customers. I mean, Tesla, obviously is talking a lot about that lately. And on the alternative, does it create any kind of competitive risk as some of your customers realize that they really need to get some of the prices down in the next couple of years.
Terrence Curtin: Well, I do think there’s an element that one of the things that we do that even starts before the product is how we work with our customers when they are trying to sit down and do value engineer of how do you get a sub application to a lower cost point. That’s very important, Steve, as we move through generations in every part of TE. And that’s us not on where does our product cost come in? How do you assemble a car, how do you put the car together? How does that make sure it has the quality? And any time you get into somebody looking at a next generation and that could be a battery pack that could be the connectivity on the motor. It could even be a next-generation inlet. So all of those are things that create opportunities where our stickiness and global position play really well.
And that we have such a strong position in China, I would tell you, certainly, you have a cost point that is always a better cost point and how our global teams bring that to other OEMs around the world due to our strong position is something that we get excited about. Because I know I say this on this call, probably every other call, Automotive is a scale business. And one of the things that is very important is how does EV scale, how do you bring our technology to do it that helps at scale. And that’s the opportunity that we’ve always been excited about with and having some of the consumer choices that are being made will also allow our customers to get focused to make sure they’re making where their platforms go. So net-net, that’s what our engineers like to do.
