DuPont de Nemours, Inc. (NYSE:DD) Credit Suisse’s 10th Annual Global Industrials Conference December 1, 2022 8:45 AM ET
Company Representatives
Ed Breen – Executive Chairman, Chief Executive Officer
Lori Koch – Chief Financial Officer
Conference Call Participants
John Roberts – Credit Suisse
John Roberts
Welcome back. Welcome to the 10th Annual Credit Suisse Industrial’s Conference. I’m John Roberts. I’ll be hosting DuPont here in this session.
With us is Ed Breen. Ed has a long career with Motorola, Tyco and now DuPont, very well known to the investment community.
Lori Koch is here as well. As Chief Financial Officer, Lori’s probably been the busiest Chief Financial Officer in the industry over the past couple of years with all the transformation that’s been going on at DuPont.
After my initial questions during the fireside here, we’ll take questions as well from the audience. So it will be like a Zoom meeting. Press your raise your hand button here and I’ll call you in the audience here to ask a question.
Ed, do you have any opening comments that you’d like to make about DuPont before we begin the Q&A.
Ed Breen
Yes. No sure, I’ll make a few comments and maybe just punctuate. We’ve kind of gotten to the, either the finish line or the beginning line. We’re pretty much done with the portfolio transformation, that journey that we’ve been on for the last five years. So the big act, the big deal we just did was the sale of the M&M business to Celanese; got $11 billion for that. About $10.4 billion net of tax and other issues and all that.
So, you know we announced about a month ago when we did earnings that we’re paying down our debt that’s due in November of 2023, $2.5 billion. We are pay off our CP balance by the end of the year, which is $1.3 billion, and you know we also announced an ASR for $3.25 billion and then another give or take $2 billion share repurchase that we’re committed to on the tail end of that.
So I think you know that was the portfolio of transformation. We really wanted to get to a premier multi-industrial company focused on five core segments, where we have a lot of intellectual property, a lot of R&D around it and a lot of great, what we think is great secular growth, so electronics, protection, water, next generation auto, and industrial technology. So that’s where we’re focused. We have the portfolio we want.
Where we sit now, even doing the share repurchase, we’ll have about $6 billion or $7 billion of available cash, you know in putting our debt level, $2.75 billion is where we’re targeted. We’d have $6 billion or $7 billion and we either look over the next year an additional share repurchase or some M&A activity to tuck into one of those five pillars that we like.
Question-and-Answer Session
Q – John Roberts
Okay, so let’s start actually with that capital deployment statements that you just made then. So by my math it’s at least 16% of the outstanding stock that you’ll be buying back here. And as you indicated, you’re going to have at least another $6 billion, maybe more of available balance sheet liquidity that’s here. How do you think about the timing on the deployment of that rest of the $6 billion? You mentioned some tuck-ins and so forth. If something bigger were to come along, do you think you would pivot to that and – or if you don’t, how long do you think it will take you to deploy the rest of the $6 billion?
Ed Breen
Yes. So by the way, just going back to the share repurchase, you know we did the ASR for the $3.25 billion. So that kind of will take eight to nine months to consummate that. We can buy shares on top of that if we want with the other couple of billion dollars. So we’ll just see how we feel as things go along, how the stock is doing, you know how the marketplace is doing. But we – at a minimum we would do the tail-end of that other repurchase when we get on this ASR, so that’s that part of it.
We’re not in any rush to do an M&A deal. I just want to make that clear. We’re looking at things more in the tuck-in sides, like the Laird acquisition we did for a couple billion dollars. I wouldn’t discount if something larger came along that really fit and made financial sense. Would we look at it, of course we would, but I don’t see anything honestly that we would do for the next six months.
You know I think maybe by the second half of 2023 there are some things we’re interested in. They got to be actionable; they got to make financial sense to us. So my – you know I don’t want to put a timeframe on when we spend or $6 billion or $7 billion, but we’ll be very judicious about it and we’re obviously in no rush.
And by the way, we’re probably heading into a global recession here. So who knows what markets look like in another couple of quarters, and I think we sit in a very attractive spot with the balance sheet we have right now.
John Roberts
You’ve called the Celanese transaction, the last contemplated large-scale divestiture. So all of the larger businesses are keepers that’s here. What are the common threads that tie together this new portfolio that DuPont has. Tell us how it’s consistent?
Ed Breen
Yeah, there’s one more piece that will – that’s in discontinued ops that we will divest, which is the Delrin business, which is give or take $180 billion of EBITDA just to give you a kind of a ballpark for that business, so that we will sell over the next year in the portfolio.
But look, what we like about where we’ve gotten to is, we’ve created what I consider a very premier multi industrial company. We are in secular end markets that are growing nice. Half our – a little more than half our portfolio will outgrow GDP, and the other half will grow at either GDP or industrial production. So it’s a very nice steady revenue growing company as we move forward.
What we like about it is great secular areas. It has a lot of sustainability play to it. It has very high intellectual property; very intense usually R&D around it and one of the cores of DuPont in all these businesses I like, it’s very high in application engineering. So we’d live with our customers and do design and work, which is very different than a lot of my past life by the way. It’s a real sticky customer relationship that we have.
So once we’re designed into an application, whether it’s in a car, it’s in a cell phone, it’s in a desalination plan, you know we’re in it, and you know it’s a long, steady relationship. So to give you an example, in the semiconductor space where we have a core, a lot of core technologies; it’s a couple billion dollar business for us. The top 10 semiconductor players are all key customers of ours and we have teams that live with them and do the design and work on their next generation chips.
John Roberts
Right. You mentioned the – you still have the remaining plastics business to sell. You also had the automotive adhesives, multi-base and Tedlar businesses. They got tucked into the corporate segment as part of this transaction. Core, non-core, how do you see those businesses fitting into the portfolio?
Ed Breen
Yeah, so definitely core. It’s in corporate, but Lori actually manages them. So she’s not just the CFO, she actually manages some of our businesses. So yeah, she’s been rather busy. We’re going to – we will end up talking that they are definitely core and a big part of that billion dollars of revenue that sits in corporate, we were waiting for the Rogers deal to close. So then we could reposition how we present the company. Obviously Rogers did not happen. We didn’t get approval on that.
So anyway, the most of that is the adhesives business. It’s a great space to be in. our adhesives product line is going into all the EV applications in the battery. So we’re getting a lot of wins there. Last quarter, I think it grew almost 10%.
Lori Koch
Right, the adhesive volume.
Ed Breen
On a volume basis.
Lori Koch
Yes, on a volumes and it had mid-teens pricing. So that segment was piling up against close to a 30% growth.
Ed Breen
Yeah 30%, but the volume itself was like you know 9%, 10%, so. And by the way, I see that over the next five, 10 years you know. It’s just a great space to be in. So anyway, at the end of the day, probably around the beginning of the year, we’ll report that in one of the segments, either E&I or W&P, but mostly likely E&I, because that’s where it fits.
John Roberts
Okay. And then maybe just to close back off some of the capital allocation comments. You still have a target of 2.7x net debt to EBITDA is where you eventually want to be and is there a time frame that you think you’ll get back to that?
Lori Koch
I think it all depends on when we can do a deal that we view has really high returns and complete the share repurchase. So we end this year actually at about 1.15x, because we won’t have completed the full share repurchase authorization. We obviously wouldn’t have done material M&A. So the 2.75x would be after you get a good deal on the table that you would then take back. That $2.5 billion debt that we took out, it would see you taking that back out to finance and acquisition, but no immediate time frame on that.
John Roberts
I want to go through some of the individual businesses here, because a lot of them have pluses and minus, business parts that are stronger, parts that have got some headwinds going on right now. Let’s start with the E&I or industrial – Electronics & Industrial area. Volume was up 4% last quarter. So what are the areas growing faster than that 4% growth you had in the last quarter? And what are the areas that are weaker in masking some of that growth?
Lori Koch
Yes, so semi would have been at the top end of that. So semi volumes were up in the high single digit range and we continued to see really strong opportunity there as we move forward. So we had signaled potentially in Q4 that semi could see some weakness with what’s going on in this semi space. But longer term there’s material opportunity for us there to be in the high single digit range.
And actually this year, even with a little bit weaker fourth quarter, we still will deliver volume growth in the 8% range, and that’s opposite MSI is the key metric that we follow for that business. We’re not proving privy to the price fluctuations that happen in the semi value chain. It’s more around the consumables that are used to produce the chips and so MSI is the metric that we look to judge our performance against. And MSI this year is believed to be in the 5% range growth and will be in the 8% range, and so there’s that 200 to 300 basis points of that performance, really based on our position in the portfolio.
Industrial solutions also performed above that segment average of 4% as well. So we continue to see really nice volumes underneath that segment with bio-pharma applications. There are some – a parts business that sells into aerospace that’s still seeing a nice recovery from the pandemic levels.
The business that underperformed and we saw about negative 5% growth was Interconnect and that’s where we’ve been telegraphing the weakness in the PCB space. So for the past probably four or five months we have seen weakness in PCBs. We feel like the weakness has bottomed. So we’ve met the trough and we expect that business to be down roughly in the same 5% range in the fourth quarter, but no signs yet of a recovery.
But the good thing about the PCB space is generally, it’s not a lot of inventory being held. So when you have to work through a down demand cycle, you don’t have to also work through a destock. So that business generally runs cashless, the PCB provider. So whenever the demand starts to come back, I think a lot of the demand was softened because of what’s going on in China with the lockdown situation. So potentially if there is some resolution there, then you should ideally start to see some demand coming back in that space.
Ed Breen
And that business should in the normal time been growing like this quarter plus 5% and it’s negative 5% and this is the second – almost six months now that we’ve seen that downturn. So we are probably getting somewhere, you would think near the end of that pending what’s going on in China.
John Roberts
Is there a real-time read on what’s going on in China right now? We’re obviously seeing new stories day-by-day in terms of additional lockdowns.
Ed Breen
Yes, so all of our facilities are running full out. There is a couple where we are in a closed loop system, where they are living there at the facility, but everything we have is running. There’s a few hiccups here and there on the supply chain because of what’s going on, but nothing that is alarming to us at this point in time.
John Roberts
And so I’ll switch over now to the W&P segment, Water & Protection. Volume growth was 2% last quarter. What are the areas that are significantly above that, and what are the areas that are offsetting some of that growth?
Lori Koch
Yes, so it was 2% as reported. It would have been about 5% without the headwind from the Tyvek garments and so as we went through COVID in ’20 and 2021, we were primarily producing garments on the asset and so you were just gunning out garments and not doing the normal changeovers into other applications like medical packaging.
Now that the garment demand has waned, you can go back and tap into the demand that’s very strong in medical packaging. But you have to change over your lines and so you lose some productivity off of the assets. So that headwind and that dynamic created about a 3% headwind for us in the quarter. So really the volume was up 5% if you were to take out that noise.
So the strength that we saw was within the medical packaging space that I had mentioned. We can’t keep up with the demand there, so we’re continuing to look to see how we can get more off of the asset lines to keep up with the demand. Aerospace continues to recover and we do have a sizable aerospace portion within W&P and the largest grower in W&P this past quarter was water, and so we saw about 10% volume growth in water. We expect water to be up in the mid-single digits.
It’s a great business for us. The majority of the revenue is recurring and so it gives us a lot of certainty as we look into next year, and there is a significant backlog in water of about six months. And so if there is some, some type of demand deceleration in that space, you have a significant amount of backlog to work through to be able to ride it out, so.
And Shelter, the last piece of W&P saw low single digit volume growth and so that’s the one area. Shelter is about $1.8 billion of revenue. Its 40-40-20, so its 40% residential, 40% commercial and 20% do it yourself. That residential piece we are expecting to soften. We weren’t materially seeing it yet, but we know that that most likely is the case with the way that the housing market is going now in the U.S. It’s primarily obviously a U.S. business and it sells a lot into the big box retailers who have been signaling that they had more inventory levels than normal, so.
John Roberts
Why do you think it hasn’t softened, that’s there – what’s holding it up?
Lori Koch
I think a lot of it, we always kind of refer to the opportunity in the U.S. residential space as more like a smile. So the opportunity that we sell into is in the bottom of the U.S. and I still think there is fair amount of housing demand as people migrate south from the north and so there probably is still some pent-up demand and some housing shortages that go on there that’s able to continue us to see growth.
We saw the 1% growth in the third quarter from a volume perspective. That was down from where the first half was. So there was some sequential deceleration. And normally 4Q is seasonally weaker, because the housing market does slow down a little bit, just from a seasonal perspective.
John Roberts
And then when do we begin camping easier on the garment side?
Lori Koch
Next year, yeah, next year. Q4 headwinds should be less than the 3% overall that we saw in 3Q, but there still will be a headwind in 4Q.
John Roberts
Positive comps in the first quarter next year?
Lori Koch
Should be.
John Roberts
Great, thank you. I didn’t want to start the conversation with PFAS, but I need to work it in somewhere here in the conversation. So why don’t you give us an update here at of where we are in the middle of the talk and then we’ll come back to some of the more fundamentals on the business after PFAS.
Ed Breen
Well, thanks for sticking it in the middle by the way. It definitely comes up in every meeting, so. Yeah, look we’re – you’ve heard me say this now. We’ve been in negotiations to settle the water district cases, which is the bulk of the legal liability outstanding, and the good news is we have a sharing agreement that we signed around a year, a year and a half ago and now between Chemours, Corteva and also we know how we’re between three companies, how we’re going to pay any settlement that occurs.
I can’t get into much detail, but we’re in active conversations with the plaintiffs. By the way, I think this has been public knowledge. The judge has clearly told all the parties involved to start, you know negotiate. Let’s get this thing settled before we get to trial.
They appointed a mediator recently. I think that’s public knowledge, which mediators are usually a good thing to help parties come together and you know our goal is to get it settled. You know we’re diligently working on it.
And by the way, I would just – I think many of you know this. To me that’s one of the biggest things we’ve got to get done over the next kind of period of time here, because it’s – we’ve got the portfolio where we want it. I think the only negative right now, when DuPont is getting that settled. That’s a huge deal for us, and we will get it settled.
John Roberts
Lori, you mentioned six months of backlog in the water business. Talk about in general your visibility of into your order books and how far out you can see. And so, you know Ed made the comment, there’s a recession somewhere out there. How far ahead can DuPont see in terms of business outlook?
Lori Koch
Yeah, overall it’s about 45 to 60 days that we can see it. It’s shorter in E&I than it is in W&P. So E&I has some areas that there’s not, there’s not that length of visibility, but overall it’s 45 to 60 days, assuming that people aren’t cancelling orders obviously.
So there is significant backlog in the water business six months, there’s a fair amount of backlog within our Corteva parts business combined. That’s about a $300 million $400 million revenue business that primarily sells into semi-CapEx and so there is some downturn in that space and it’s on the equipment size. So when all of these new fabs that need to be built to be able to continue to meet up, keep up with demand, there’s opportunity for us to sell a part. So that has a significant backlog.
And then the adhesive space that Ed had mentioned sitting in corporate today will find its permanent home as the other piece of the portfolio that has the backlog, not the six months, but has some, would be able to study if there was some type of downturn. But overall it’s 45 to 60 days.
Our order book still remains strong. So we look at it every weekend. Ed and I get a file on Saturdays to be able to see it, and minus the seasonality that typically happens as you head into the fourth quarter, there hasn’t been material moves and so we’re just reading all the news out there and planning appropriately to make sure that we’re ready and not caught flat footed, but.
John Roberts
And is DuPont pulling its inventories down. So balance sheets get mark-to-market one day a quarter. So 12/31 tends to be the most important balance sheet date of the year. So do you think we’ve got some extra weakness here as we get into December, just as not you and then maybe your customers downstream look to just tighten up the balance sheets for the 12/31 mark-to-market?
Ed Breen
Well, I think you have that going on, but I think in general – by the way, the supply chains are nothing like four years ago when it was fine, it’s still not good. But it’s not nearly as bad as it was the last couple of years. So I think people are getting more comfortable drawing down their inventory in general, which is what we’re attempting to do right now.
In fact, I think we announced on the earnings call we’re doing some I&E this quarter. It’s costing us a little bit of profit, but help us pull down some production rates in a couple of areas and hopefully help on our inventory level.
I think most people – everyone’s inventory has been elevated because of what’s going on. And by the way, half of that’s usually just the price inflation that’s in your inventory, but the other half is just more volume in your inventory. So I definitely think that is going on right now.
John Roberts
Ed, I think on the call you expressed some optimism that raw material cost my ease in 2023, and I think of raws and energy together. Maybe you might want to talk about them separately, but what’s the outlook that DuPont has for 2023 for raw materials? And is that based on whether oil is up or down since the number of the raws are petroleum based?
Lori Koch
Yes, so right now we’re not forecasting overall any material easing as we head into 2023. We don’t see material escalation. So we feel like that is behind us and so that $800 million that we saw year-over-year, 2022, 2021, we don’t see materially resolving in 2023. But we don’t see incremental headwinds right, now. So we don’t have a lot of petroleum based raws anymore now that the M&M transaction is complete. So that’s where a lot of that sat. There is some but it’s not nearly as material as it was with M&M in the portfolio.
So the biggest piece that we continue to keep a watch on is the energy cost and so that was, if you look at the $800 million, about 25% of it was energy cost escalation. A lot of that was energy cost for natural gas in Europe, and so that’s where we continue to watch to see how that how that changes, because we did see a little bit of deceleration on the raw material side, but it was muted by an escalation again this past quarter and then on the natural gas and oil side. So that’s where we’ll continue to look.
The one piece that we are optimistic that you will see benefit as you head into 2023 is on the ocean freight rates. And so everybody has seen material reductions, not back to where it was but versus where we were earlier this year in the ocean freight rates and we’re optimistic, and that was 10% to 15% of the $800 million from an escalation perspective, but we’re optimistic. We continue to see some benefit there.
Ed Breen
But just to highlight, we caught the price – we raised prices in sync with the inflation. So every quarter we covered ourselves which I think says something about the portfolio that we could capture. Then pretty much across the whole portfolio, we got it and we didn’t do any real surcharges. We baked it into the price of the product. So it will be interesting. Who knows how next year goes.
We’re not counting on getting a benefit from it, but if there is some deflation in commodities, you know being able to keep some spread between cost and price will be very important to us and we’ve been working with our teams to you know get ready for that, because this is a very different potential recession we’re going into. Nobody ever had 8%, 9% inflation heading into a recession in their career and so it’s a very different dynamic for those that were able to capture price during the last year with the inflation, and then how do we handle that if we do start to deflate.
John Roberts
Even though you raised pricing kept up every quarter, I think in the very beginning when raws first started going up, maybe there was 150 bips of margin compression temporarily. Is that the order of magnitude people should think about if we actually do see a break downward in raw materials? So, that’s not your base case, but to the extent let’s say oil prices drop and starts to flow through the raw material supply chain, it’s that order of magnitude of 100, 150 bips you might temporarily pick up on margin.
Lori Koch
Yeah, if they both move at the same pace, yes. So like if at all, like when we were seeing the headwind we were getting price offset costs and so there really wasn’t $1 impact. It was all in the margin as you had mentioned, and it was 150 basis points roughly for the company. It was actually closer to 270 basis points for W&P, because that’s where we saw the bulk of the raw material escalation.
So it’s kind of hard to answer what that looks like, because we really don’t know what spread we’re going to be able to maintain. And so we do have confidence that we will be able to maintain a spread because of the fact that we’ve got really sticky relationships with our customers and in some of the spaces the price increases weren’t even all that much. Like for example, in E&I we had 2% to 3% price increases, so.
We’re not a huge cost component within the overall customers procurement by, so I don’t know that we’re going to be the first place that they come back to get some deceleration.
Q – John Roberts
And then the margins are lower in W&P versus E&I. It’s not just the raw material issues that you’ve had there. Maybe talk a little about the opportunity for margins in the W&P segment and to bring those up over time.
A – Ed Breen
Yes, so W&P is the business where we have the most operational improvement opportunity. E&I, look our margins last quarter were – ex-price costs were 32%. We think kind of best case it’s a 33% EBITDA type business, so we got a little bit more room. We’re working on a bunch of opportunities there, but that runs pretty world class from a margin standpoint.
W&P, we think we should be able to execute that business around 27% to 28% EBITDA margin. So ex-price costs were a couple of hundred basis points away from that on a consistent basis. So you know once in a while we hit it, but we haven’t been consistently there, so.
Most of that is operational improvement plans that we’re working on our facility John. These are very big assets you know when you’re spending in making Tyvek or Nomex and a couple percent of time is a big deal on those assets. So we’re working on a lot of digital tool implementation at those facilities to get improvements there.
So this year for instance in W&P, one of the areas we’ve had great success is we’ve increased the output of our water assets. We have a big facility in the Midwest [inaudible] and we’ve really been able to get additional uptime out of those assets. And so we’re sold out on that reverse osmosis asset, but we still had nice, almost 10% growth in the business, again getting more often than existing assets. So that’s what we’re working on; Tyvek, Nomex, Kevlar and then we have our new line A coming up in Tyvek at the end of 2023 in Luxembourg, which will give us 20% more capacity. But in the meantime we’re really working those operational improvements and that’s really where we’ll get that margin lift.
Q – John Roberts
Okay. And you mentioned the large expansion in Tyvek side. Talk a little bit about CapEx maybe beyond that, because that’s really where the capital intensive areas that you’ve spent and the rest of the side I think is a lot lower capital intensity.
A – Lori Koch
Yes. So we target overall the portfolio should be in the 45% CapEx as a percent of sales range. So this year we’ll be in the 5.5% range as we execute the completion of a couple of the capacity expansions. So we wrapped up the K4 expansion in the E&I business earlier this year. We’ll look to wrap up the Tyvek line aid expansion at the end of 2023 and then there’s nothing foreseeable on the horizon with any significant capacity expansion requirements.
John Roberts
More like 4% things. So we get we kind of go onto that 4.5… [Cross Talk]
Ed Breen
Yeah, the capped on line that Laurie mentioned was $250 million dollars. So that was a big piece going through and then the Tyvek lines are a little over $400 million. So we just had two and we’re sold out of both those assets. So we just had two big ones that hit at the same time. It pumped us more to 5.5%, 6% for a couple of years, but we don’t have anything big like that then in the foreseeable future.
John Roberts
Okay. We got a little over five minutes left. I want to make sure, if there’s questions from the audience, just raise your hand and I’ll call on you, but I’ll continue to ask questions if I don’t see any.
Tell us a little bit about the sustainability aspect of the portfolio here. It’s actually kind of moved to the background. I think there’s just been so much noise around the economy and the portfolio and so forth, but it was a big push for DuPont. I think maybe it continues this there, but we haven’t heard about it as much recently.
A – Lori Koch
Yeah, there’s two sides. So right, there was the external piece that’s really exciting with our portfolio being exposed to high growth areas that are benefiting from the UN sustainability goal. So you know water being a prime example, and so as we look to get more access to clean water across the globe, that really benefits our business. And then there’s the internal piece about how do we improve our measures and primarily advance our climate goals.
And so earlier this year we had announced that we had joined the science based targets initiatives, which if you join that group, you say that you will be in line with contributing to a certain reduction in the global temperature in it. There’s a lot of math behind that calculation that generally says you’ll be at a 50% reduction by 2030, so that’s where we’re targeting.
A lot of the programs that we have are both capital investments and so we spend roughly $40 million to $50 million dollars on those types of investments annually, with the largest recently being converting to a low global, low GWP agent within our Styrofoam business. And we also execute virtual power purchase agreements that allow us to be able to reduce our carbon emissions through that exercise.
So there’s lots of initiatives from both the internal perspective as far as delivering against our internal goals and externally. There’s a lot of opportunity for us to continue to grow, grow the top line in a significant manner with the sustainability initiatives across our customers.
John Roberts
And you mentioned about half the port – a little more than half the portfolio will grow well above GDP. Maybe give us a few specific examples in terms of content that’s there, whether it’s cell phones as we move from one generation to the next or from 4G to 5G or however you want to frame it. EV is kind of what the content is versus other, but give us some real life examples that people can put in their everyday lives.
A – Lori Koch
Yeah, so the two pieces that you mentioned are prime examples for us. So within the smartphone space in general we’re $2 in every phone. As we optimize and get volume in the 5G enabled phones it gets closer to $4, and so there’s a really nice doubling of opportunity there.
The same doubling effect happens in the auto build space. So in general we’ve got $60 of content opportunity in ICE engines, but it’s $130 of content opportunity on the EV side and a lot of that is within the adhesives business that I had talked about earlier, as well as we’ve got nice e-motor applications in the W&P business. So those are nice content plays.
A lot of the growth comes just from where we’re exposed from and end market perspectives. So semi for example, that I had talked about earlier. So semi is one of our larger businesses. This is a $2 billion business. That end market generally should be growing in the mid-single digit range and then we’ve got a 200 to 300 basis point kicker, because of how we’re exposed more to the advanced nodes and all of the higher end technologies. And so it’s a nice content opportunity, as well as just having premier positions and high growth markets.
Q – John Roberts
I think we have a question Daniel. I’ll repeat it.
Unidentified Analyst
All right. So kind of a bigger, longer term strategic question for you. You know DuPont is in many ways know as the intellectual property and we hear a lot about semis, but you know clearly you know getting – you know doing business in China is not getting any easier. I’m just curious, how historically have you acted to protect your IP when you’re doing businesses in jurisdictions like this, and you know how is your view of that potentially changing? And I suppose I’m thinking, you know a lot of what you do goes into you know some quite high tech and strategic sort of businesses and you know the world would appear to maybe be changing and just how you’re thinking about that and how you’re planning please. Thank you.
A – Ed Breen
Yeah, so – be careful how I say this, but a lot of our high end technology is more embedded in the U.S. So most of them are high – what I call our high end, real intellectual property stuff is done. The facilities mostly in Delaware, where our biggest scientific communities headquarters and what’s called the experimental station. So I think just from a production standpoint, that’s a good thing.
And it just so happens that in some countries, I’ll say it that way, they don’t have the high tech for instance, semiconductor chips, they are not there. So what you sell into is more the bread and butter chips that go into a cell phone, a refrigerator, that type of thing. In fact, a lot of the high end semiconductor stuff is just going to get built now over the next ten years and it’s not all going to be in Taiwan anymore. A lot of that will be in the U.S. where the chips at, the incentives and all that.
So we do our design and we’re – just to use semi as an example, all our design and work is done with the customer at their key, their scientific location with our scientists. We do the design and work there, so it doesn’t matter where the fab is. So I think we’re intellectual property wise, we’re pretty well protected.
By the way, another area people have been trying to copy us for years is Tyvek, and a lot of the intellectual property at Tyvek is actually in the manufacturing process. Nobody’s been able to really replicate that and we’ve been able to keep that for since the 1960s.
John Roberts
Just a minute and a half here left Ed. Help us think about the white space. As you look at bolt-ons and tuck-ins and so forth, what’s the addressable market or how much – how concentrated is the electronic materials area that you’re in, how concentrated is water that’s there; 2x the opportunity, 3x the opportunity that DuPont currently serves.
Ed Breen
Yeah, so – by the way, I hate to use the example, but it’s what we’ve talked about. You know if we had closed the Rogers deal, the addressable market for us significantly expanded and it almost yeah, went up to 50%, 60%. By the way then we brought Laird into the portfolio, the markets that they brought us into took us up by like another 20% for the total TAM that we can plan in. So we like opportunities like that.
In electronics, there just happens to be – we are industrial technology. They kind of co-mingle, but there’s a lot of technology plays there that are very interesting to us. There also is — even though the water space I would say is a more consolidated market, there’s still some really interesting areas there that would be very neat for DuPont to add onto.
John Roberts
Look forward to hearing about the add-on over the next couple of years. Thank you, DuPont. Thank you for all of you for attending here today. We’ve got Chris Mecray and Ed Barna here from Investor Relations if anyone has any questions. Enjoy the rest of your meetings. Thank you.
Ed Breen
Thank you. That was fun.
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