Our supply chains have seen improvement over the past 3 months: TE Connectivity CEO

TE Connectivity CEO Terrence Curtin joins Yahoo Finance Live to discuss the company's earnings, supply chain concerns, and impact of inflation.

Video transcript

BRIAN SOZZI: Automotive and electronics supplier TE Connectivity is out with better than expected quarterly earnings. The company's outlook for the current quarter fell short of some analysts' projections. Let's dive in here with TE Connectivity CEO, Terrence Curtin. Terrence, always nice to see you. Sales up 17% in the most recent quarter despite all these supply chain bottlenecks. Where are you seeing the most strength in your segments, and what's driving it?

TERRENCE CURTIN: Hey, Brian. Thanks for having me again. And I think the strength overall is still very broad. So it isn't just one segment. I think what you've seen is continued strong demand in our largest segment around transportation. Certainly, what we do in the cloud has been strong throughout the pandemic. And we see an industrial environment with Capex accelerate improving. So demand wise, continues to stay strong. But like you sort of said a little bit earlier on supply chain, how does our global supply chains really catch up to service what's really good demand pretty much across the board?

JULIE HYMAN: Good morning. It's Julie here, Terrence. Give us a little more color on that, if you would. What exactly are you seeing in your supply chains? Are you starting to see things alleviate a little bit so that you are getting more product in and are able to get it to your customers?

TERRENCE CURTIN: Actually, I think it's a tale of two cities. There's one part is. What are our customers feeling, and then what are we feeling. I would tell you our supply chains got a little bit better over the past 90 days, where we're getting more material in. Still not a full demand level, but getting more in. But there are pockets that are really impacting our customer.

I'm sure you talk a lot about semiconductors, but you when you think about the end product like a car, there's 30,000 parts, and all 30,000 need to be there to make that car come together. And there's still pockets where there shortages that are creating a lot of unevenness from our customer back into us. But one of the things that has been nice over the past 90 days, in our case, our supply chain has gotten a little better. And I hope that continues so that we can make sure we help our customers get to the end demand that's out there in the world, and that's still very good.

BRIAN CHEUNG: Hey, Terrence, Brian Cheung here. Tell us a little bit more about that end demand for our viewers who maybe aren't familiar with your company. Who are you supplying right now, and what does the demand look like? Because it's kind of a tale of two cities right now when you talk about the inability to get product to certain people. That could be because the demand is outsizing the amount of supply that's out there. Or it could be because it's just a lot of demand underlying it, right? So what's the story on that front, based off of your conversations with your suppliers?

TERRENCE CURTIN: When you sit there, there's really two faces that we touch. We touch on products that go to the consumer, like autos, like appliances, where we're in their connectivity and sensors that are in there, as well as the medical devices. And in those cases, all of those areas have come back very hot. The consumer has been hot and has demand. But certainly, there isn't supply. And that's where we're trying to catch up, as well as our supply base.

The other area that's been accelerating more recently has been as people are putting capital into place. That could be around EV factories. It could be around semiconductor capacity. That creates additional stress. And what occurs on both of those demands, we're well above 2019 pre-COVID levels by about 19%, about 10% over '19. And that is creating stress in the overall supply chain as demand has been strong, and consumers, as well as some companies, are feeling that they can't get total supply, but it is an element of a hotter demand environment than we all expected coming out of COVID.

BRIAN SOZZI: Terrence, I imagine you have a good deal of pricing power right now in a lot of the product lines that you do sell. I mean, how much have you had to raise prices, just given the inflation you have seen in your supply chain?

TERRENCE CURTIN: So we started to actually increase prices back in January. So when we started to see some of the inflation around things like metals, things like plastics and resins, we started to increase prices. Now we're getting into other inflationary elements like freight and logistics that every company is dealing with. And we're going to continue to have pricing increase as that's happening to our customers really based upon what we're seeing.

And the inflation is broad-based. It isn't just one category. It's very broad. And with the demand, we expect it's going to continue into '22. And we're going to continue with making sure we're increasing prices to offset that material inflation cost that we can't manage on our own.

BRIAN SOZZI: Terrence, lastly, how are you playing in the EV market?

TERRENCE CURTIN: The EV market is probably the most exciting market when it comes to TE. And one of the things we said on our earnings call this morning is while auto production is still down 10% versus pre-COVID levels, our revenue is up about 10% over the same period. And what we actually plan, that connecting, making that EV architecture work, have all the voltage going around, as well as making it safe, there's a lot of new connections that go in there.

And this year alone, in 2021, about 20% of our revenue in our automotive business was related to electric vehicles, even though electric vehicles only represent about 10% of production. So we're getting bigger market share, more content opportunities.

And what's really exciting to us not only about those opportunities is, you know, EV production went up about 50% last year. And we continue to see that's going to continue globally. And at TE, we service all the major OEMs around the world. And we get to make sure that that adoption happens and partner with the best companies in the world on it. So, really key growth driver for us, as we continue to help make sure electric vehicles are more prominent on the planet.

BRIAN SOZZI: Not yet, I'm not yet a buyer of an EV, but maybe at some point over the next 25 years, maybe. I'm not sold yet. TE Connectivity CEO--

TERRENCE CURTIN: We hope we can convince you on that, Brian.

BRIAN SOZZI: All right, all right. We'll take it offline. Always good to see you, Terrence.