Vishay Intertechnology
Annual Report 2018

Plain-text annual report

www.vishay.com Vishay Intertechnology, Inc. 2018 ANNUAL REPORT ANNUAL REPORT 2018 VISHAY INTERTECHNOLOGY, INC. 1 2018 SALES T N E M G E S Y B S E L A S T E K R A M D N E Y B S E L A S 34% RESISTORS / INDUCTORS 15% CAPACITORS 18% MOSFETS 23% DIODES 10% OPTOELECTRONICS 28% AUTOMOTIVE 38% INDUSTRIAL 7% 7% 6% 5% 5% 4% COMPUTING TELECOMMUNICATIONS CONSUMER POWER SUPPLIES MILITARY / AEROSPACE MEDICAL N O I G E R Y B S E L A S L E N N A H C Y B S E L A S 25% AMERICAS 39% ASIA 36% EUROPE 36% OEM 7% EMS 57% DISTRIBUTION Vishay Intertechnology, Inc. 2018 ANNUAL REPORT FROM THE EXECUTIVES Executive Chairman of the Board MARC ZANDMAN Chief Executive Officer DR. GERALD PAUL I am pleased to say that 2018 was a very good year for Vishay. Vishay continues to be a financially successful, solid, and predictable Company that is well positioned for continued long-term growth. Our proven ability to sell innovative products to growing and demand-driven market segments drives our strong cash flow generation and strong balance sheet. In May 2018 Vishay increased its quarterly dividend by 26% compared to the previous quarter’s dividend. This significant increase proved once again that the Company is committed to returning capital to our stockholders and showed confidence in the strength of our ongoing cash flows. Vishay continues to grow through organic growth as well as acquisitions. We often target high-margin niche businesses that meet our criteria such as our 2018 acquisition, UltraSource. We continue to explore opportunistic acquisitions that fit the Company’s business model and support our Growth Plan. In November 2018 Vishay announced the appointment of Michael J. Cody to its Board of Directors. Mr. Cody had a distinguished career at Raytheon Company, where he served as Vice President of Corporate Development from 2009 to 2017. Michael brings to the Board extensive knowledge and experience in technology and defense businesses, as well as mergers and acquisitions. We are committed to a deliberate refreshment of the Board. I remain very optimistic about Vishay, which has successfully navigated the sometimes calm and sometimes turbulent waters of the electronics industry since the Company’s founding in 1962. As I take stock of all that the Company has achieved and will achieve, I look forward to continued success for Vishay. I am grateful to all members of the Vishay family for their hard work and dedication and to our customers, vendors, strategic business partners, and shareholders for their unflagging support. I am happy to report that 2018 was a record year for Vishay in terms of revenue and the second highest ever in terms of profitability. As in the previous year, very high demand—in some cases extremely high demand—in all regions and in virtually all of our market segments drove this performance. Driven by increased sales volume, Vishay demonstrated the ability to leverage its business model. During 2018 we continued to be an excellent generator of “free cash” (the amount of cash generated from operations in excess of capital expenditures and net proceeds from the sale of assets). We generated $84 million in “free cash” during 2018 despite having paid cash taxes of $157 million related to the cash repatriation of $724 million after taxes. The year 2018 proved that Vishay’s strategy of focusing on the automotive and industrial end markets, while not neglecting our other end markets, clearly has paid off. By keeping our fixed cost controls in place while further improving efficiencies, we were able to benefit from strong market conditions to the fullest extent possible. During 2018 Vishay again offset the negative impact of inflation on the contributive margin through cost reduction and innovation. Having substantially increased manufacturing capacities for our critical product lines, we feel prepared to face future challenges associated with our demand-driven and growing market segments. In 2018 we reacted quickly to the opportunities created by U.S. tax reform. In the course of the year, we repatriated cash to the U.S. and further simplified Vishay’s balance sheet by refinancing some of our debt. We reduced the principal amount of outstanding convertible debentures due 2040, 2041, and 2042 from $575 million to $37 million. Because of U.S. tax reform, these debt instruments had become less tax-efficient. Benefits included a lower effective tax rate for 2018, the avoidance of future effective tax rate increases due to the repurchased converts, and reduced equity dilution risks. Regardless of how long the unusually strong market conditions that we enjoyed during 2018 last, we strongly believe in the long-term growth of our business. We are well positioned to benefit from growth in virtually all of our market segments. I thank all of Vishay’s employees, customers, vendors, strategic business partners, and stockholders for their continued faith in Vishay. Vishay Intertechnology, Inc. 2018 ANNUAL REPORT 1 THE COMPANY OUR HISTORY Dr. Felix Zandman, with a loan from his cousin Alfred P. Slaner, founded Vishay in 1962 to develop and manufacture Bulk Metal® foil resistors. The Company was named after Dr. Zandman’s ancestral village in Lithuania, in memory of family members who perished in the Holocaust. When Dr. Zandman passed away in 2011, he left a lasting legacy. His high standards, ethics, and values are embedded in Vishay’s culture. They positively influence the business practices implemented by Vishay personnel across the globe every day. During the 1960s and 1970s, Vishay became known as the world’s leading manufacturer of foil resistors, PhotoStress® products, and strain gages. These products later became part of Vishay Precision Group (NYSE: VPG), which was spun off as an independent, publicly traded company in 2010. A GLOBAL INDUSTRY LEADER Vishay passive components and semiconductors are used by virtually all major manufacturers of electronic products worldwide, in the industrial, power supply, automotive, military, aerospace, medical, computing, telecommunications, and consumer markets. They are found inside products and systems used every day, from automobiles to airplanes to power grids to phones to pacemakers. In addition, Vishay has demonstrated an ability to customize components to meet specific customer needs. The world in which we live is built around innovative electronic technology. Macroeconomic growth drivers such as connectivity, mobility, and sustainability generate the need for components manufactured by Vishay. Vishay’s international footprint includes manufacturing plants in the Americas, Asia, Europe, and Israel, as well as sales offices worldwide. Vishay’s technology innovations, acquisition strategy, focus on cost control, “one-stop shop” service to customers, and custom design capabilities have made it a global industry leader. ACQUISITIONS Vishay has made a number of strategic acquisitions over the years. These include Dale® Electronics, Draloric® Electronic, Sfernice, Sprague® Electric, Roederstein®, Vitramon®, BCcomponents® (including Beyschlag®), the Semiconductor Business Group of TEMIC® (Telefunken and Siliconix®), the infrared component business of Infineon Technologies, General Semiconductor®, selected product lines from International Rectifier®, Huntington Electric, HiRel Systems, MCB Industrie, Holy Stone Polytech, Capella Microsystems, and UltraSource®. Vishay continues to explore opportunities for targeted acquisitions that fit its business model. 2 Vishay Intertechnology, Inc. 2018 ANNUAL REPORT PASSIVE COMPONENTS Passive components do not require an energy source to perform or control their intended functions and are not themselves sources of energy. They are used to store or dissipate electrical energy, limit or resist electrical current, and help in filtering, attenuating, energy storage, surge suppression, measurement, sensing, timing, and tuning applications. Passive components are the main building blocks of electronic circuits. RESISTORS Resistors limit or regulate the flow of electrical current. They are used in almost all electronic equipment. Vishay manufactures a wide variety of resistive products, including single (discrete) resistors based on film, wirewound, Power Metal Strip®, and other technologies, as well as resistor networks and arrays, in which multiple resistors are combined in a single package. Vishay also manufactures battery management shunts, chip fuses, pyrotechnic initiators / igniters, variable resistors (including potentiometers), and non-linear resistors (including thermistors, which are used for current protection and temperature sensing). Vishay’s resistor portfolio includes components with ultra high precision, very high stability, and high power. SEMICONDUCTORS CAPACITORS Capacitors store potential energy in an electric field and discharge it when needed. They are used in many electronic circuits to block direct current (DC) and allow alternating current (AC) to pass. Applications include power conversion, DC linking, frequency conversion, bypass, decoupling, and filtering, and serving as backup energy sources. Types of capacitors manufactured by Vishay include tantalum (solid, wet, and polymer), ceramic (both multilayer chip and disc), film, power, heavy current, and aluminum electrolytic capacitors, as well as hybrid energy storage capacitors and supercapacitors. INDUCTORS AND TRANSFORMERS Inductors store energy in a magnetic field. They can be used to change AC phase, resist AC current, filter out unwanted electrical signals, and perform other functions. In AC electronic equipment, they are used to block AC and allow DC to pass. Vishay innovations include IHLP® power inductors, which outperform competing devices. Transformers are made up of at least two inductors on a common core of magnetic material. They increase or decrease AC voltage or AC currents. Transformers are essential components in AC electrical energy transmission and distribution. Semiconductors use silicon, germanium, gallium arsenide, gallium nitride, silicon carbide, and other semiconductor materials to perform functions including switching, amplifying, rectifying, and transmitting electrical signals. They can be either discrete components, sensors, or integrated circuits with up to several billion devices on a single chip. Semiconductors are sometimes referred to as active components because they require power to function, can control electron flow, and are able to inject power into a circuit. DIODES AND RECTIFIERS Diodes, used in electronics with a unidirectional flow of current, are employed in a wide range of electronic systems to route, regulate, and block radio frequency (RF), analog, and power signals and also to protect systems from surges or electrostatic discharge (ESD) damage, as well as provide electromagnetic interference (EMI) filtering. Rectifiers, which are composed of one or more diodes, are used to convert AC to DC, a unidirectional current required for operation of many power electronic systems. They are often found in DC power supplies and high-voltage power transmission systems. Everyday uses include changing the AC voltage from a wall outlet to a specific DC voltage for phone chargers. MOSFETs Metal-oxide-semiconductor field-effect transistors (MOSFETs), frequently used to amplify or switch electronic signals by varying current, function as solid-state switches to control power. Unlike bipolar transistors, they need almost no input current to control load current. MOSFETs enable power conversion into levels required by other components. They are used as load switches to turn off specific functions or power supplies in devices such as smartphones when they are not in use, thereby extending battery life. Vishay offers low voltage TrenchFET® power MOSFETs, medium voltage power MOSFETs, high voltage planar MOSFETs, high voltage superjunction MOSFETs, and automotive grade MOSFETs. OPTOELECTRONICS Optoelectronic components emit light, detect light, or do both. They can convert light into electricity or electrical signals, convert electricity or electrical signals into light, and perform other functions. Vishay is one of the world’s largest manufacturers of infrared (IR) components. Its optoelectronics portfolio includes IR emitters; IR receivers; photo detectors; optical sensors; IR data transceiver modules for wireless, two-way data transfer; optocouplers and solid-state relays for circuit isolation; light emitting diodes (LEDs) for light sources; liquid crystal displays (LCDs); plasma displays; 7-segment displays; IR touch panels; and custom products. INTEGRATED CIRCUITS (ICs) Integrated circuits (ICs) combine the functions of multiple semiconductors and passive components on a single chip. With their small size and low cost, they are used in most electronic devices and equipment. IC products from Vishay are focused on analog signal switching and routing, power conversion, power management, and integrated smart power solutions. They are used in end products such as tablets, notebooks, and desktop computers; game consoles; smartphones; industrial testing equipment; fixed telecommunications systems; automotive electronics; and other products and systems. Vishay Intertechnology, Inc. 2018 ANNUAL REPORT 3 DIVERSE MARKETS AUTOMOTIVE Components manufactured by Vishay are used in a broad range of automotive systems including engine control and injector systems; fuel pump control; exhaust emission control; steering, braking, and active safety control; transmission; stop / start; lighting; airbag control; heating / ventilation / air conditioning; infotainment; C2X connected car communications; autonomous and advanced driver assistance systems; navigation; and battery management. Vishay components are used in systems in electric and hybrid electric vehicles such as traction inverters, integrated electrical machines, DC/DC converters for 48 volt power subsystems (boardnets), battery management, on-board and off-board battery charging, and energy recuperation. Vishay manufactures many components that can withstand high temperatures and peak transients and are ideal for use in under the hood applications and higher voltage environments. INDUSTRIAL Vishay components help manage, store, and convert power; support power backup and energy harvesting solutions; drive and control motors; sense temperature; provide current measurement; and perform other tasks in factory automation, high power furnaces, machine to machine communications, electric power grid and power distribution systems, wind and solar power systems, and smart meters. Components from Vishay are also used in oil and gas exploration equipment; trains; escalators and elevators; heating and air conditioning systems; test and measurement equipment; lighting ballasts; smoke detectors; power tools; welding equipment; 3D printers; manufacturing, collaborative, and logistics robotic systems; and other industrial equipment and systems. Vishay components are well suited for the Industry 4.0 transition and the Internet of Things (IoT), which provides vital links in a wide range of applications. 4 Vishay Intertechnology, Inc. 2018 ANNUAL REPORT Vishay, with its broad and competitive product and technology portfolio, supports customers in virtually every major market sector. Types of components manufactured by Vishay are found inside the electronic products and systems used every day, around the world. MILITARY AND AEROSPACE Vishay manufactures one of the industry’s broadest lines of military-qualified resistors and capacitors, as well as a number of other components that meet the stringent needs of military and aerospace customers for high reliability performance. Components manufactured by Vishay are used in applications in flight, cockpit, and cabin equipment in aircraft; unmanned aerial systems; drones; navigation and weather satellites; radar and sonar units; radio and satellite communications; guidance systems; deep space exploration; and more. For example, Vishay resistors, ceramic and tantalum capacitors, inductors, displays, MOSFETs, and rectifiers are used in cockpit panels. POWER SUPPLIES Adapters, converters, battery chargers, and uninterruptible power supplies (UPS) handle electric current from main power grids and batteries and adjust and control it for use by a wide variety of devices — from small, portable products to large industrial equipment. Power supplies must meet various power quality, efficiency, energy saving, and safety regulations. Their capabilities range from very low (milliwatts) to very high (kilowatts). Vishay components are used in rectification; power factor correction; galvanic insulation; temperature sensing, storage, and transformation; EMI suppression; inrush protection; and other applications in power supplies. Vishay Intertechnology, Inc. 2018 ANNUAL REPORT 5 DIVERSE MARKETS TELECOMMUNICATIONS Vishay passive components and semiconductors are used in portable devices and telecommunications infrastructure. Vishay components for handheld telecommunications devices and wearables support a number of functions including radio frequency modulation, power amplification, transmission, receiving, charge control, DC/DC conversion, load control, sensing, audio signal conditioning, and peripheral connectivity. For example, Vishay components improve efficiency and increase battery life in smartphones. In 4G and 5G systems, high frequency resistors and capacitors are used for signal filtering and impedance matching. Vishay components also are used for EMI filtering, lightning and surge line card protection, and other applications in transmission systems, base stations, and access infrastructure. COMPUTING Vishay components are found in notebooks, tablets, desktop computers, embedded systems, solid- state discs, switches and routers, and network servers. They manage power, filter out unwanted electrical signals, provide ESD protection, enable power backup, and perform other important circuit functions. In portable computing devices, they convert power; monitor power usage; extend battery life; enable short range, two-way, wireless connectivity; and support other functions. They also are found in peripherals including printers, photocopiers, and wireless chargers. Vishay advantages include high surge current capabilities, high power ratings, power efficiency, and long life. 6 Vishay Intertechnology, Inc. 2018 ANNUAL REPORT CONSUMER Types of components manufactured by Vishay are used in lighting and in home appliances and systems including air conditioners, washing machines and dryers, refrigerators and freezers, robotic vacuum cleaners, and lawn mowers. They are used in smart home and home automation systems to control lights, switch appliances, support surveillance and access systems, and monitor and regulate heating and air conditioning equipment. In addition, they are found in entertainment and lifestyle products including TVs, e-book readers, smart speakers and voice-activated assistance systems, game consoles, virtual reality / augmented reality (VR / AR) devices, set-top boxes, smart watches, fitness bands, and more. For example, Vishay components are used in LCD TVs for power conversion, EMI filtering, rectification, power factor correction, analog / digital signal switching, audio amplification, interface protection, infrared receiving, and gesture recognition. MEDICAL High tech medical electronics play an important role in people’s lives. From large equipment such as X-ray machines and MRI systems to smaller devices such as hearing aids and finger pulse rate monitors, medical products and systems use types of components manufactured by Vishay. They are found in nerve stimulators, pacemakers, defibrillators, patient monitoring systems, instrumentation equipment, communications equipment, blood pressure cuffs, blood glucose meters, and more. Vishay is a leading manufacturer of telemetry coils for pacemakers and defibrillators and transformers for defibrillators, as well as capacitors for implantable devices and hearing aids. Vishay Intertechnology, Inc. 2018 ANNUAL REPORT 7 VISHAY’S BLUE CHIP CUSTOMERS AND DISTRIBUTORS Continental® Hella® ABB® Apple® Arrow® Asus® Avnet® BAE Systems® Bosch® Delphi® Delta® Denso® Digi-Key® Ericsson® Flex® Honeywell® Huawei™ Jabil® Keboda® Lite-On® Boston Scientific® Foxconn® Magneti Marelli® BYD® Celestica® Cisco® Future® Medtronic® General Electric® Nexty Harman® Philips® Plexus® Quanta® Rutronik® Samsung® Sanmina® Seagate® Siemens® Sony® Tesla® TTI® LG Electronics® Schneider™ United Technologies® Valeo® Weikeng Wistron® WPG® ZF® Group …and others RECENT INDUSTRY AWARDS Continental 2017 Supplier of the Year Award Delphi Automotive Pinnacle Awards for Supplier Excellence Siemens 2017 SEWC Best Cooperation Supplier Award FLEX 2017 Preferred Supplier Award TTI Supplier Excellence Awards: The Americas, Europe, and Asia Aspencore 2018 China World Electronics Achievement Award 2018 Top 10 Power Product Award ECN IMPACT Award 2017 ACE (Annual Creativity in Electronics) Award SPDEI (French Association of Distributors of Electronic Components) Top Supplier Award EDN Hot 100 Product Award Electronic Products Product of the Year Award Selezione di Elettronica Innovation Award Electronic Products China Top-10 Power Product Award Electronic Design Top 101 Components DRIVING STOCKHOLDER VALUE Vishay is firmly committed to driving stockholder value. It accomplishes this through organic growth that is supplemented by targeted acquisitions, a regular cash dividend program, and opportunistic stock buybacks, while at the same time maintaining a prudent capital structure. Vishay continues to be a reliable generator of “free cash” (the amount of cash generated from operations in excess of capital expenditures and net of proceeds from the sale of assets). Vishay has consistently generated in excess of $200 million in cash from operations in each of the past seventeen years. 8 Vishay Intertechnology, Inc. 2018 ANNUAL REPORT CORPORATE INFORMATION BOARD OF DIRECTORS EXECUTIVE OFFICERS STOCKHOLDER ASSISTANCE MARC ZANDMAN Executive Chairman of the Board Chief Business Development Officer DR. GERALD PAUL President Chief Executive Officer JOHAN VANDOORN Executive Vice President Chief Technical Officer Deputy to the CEO LORI LIPCAMAN Executive Vice President Chief Financial Officer DAVID VALLETTA Executive Vice President Worldwide Sales CLARENCE TSE Executive Vice President Business Head Semiconductors JOEL SMEJKAL Executive Vice President Business Head Passive Components WERNER GEBHARDT Executive Vice President Human Resources CORPORATE OFFICE Vishay Intertechnology, Inc. 63 Lancaster Avenue Malvern, PA 19355-2120 Phone: 610.644.1300 Fax: 610.296.0657 www.vishay.com ANNUAL MEETING May 14, 2019 at 9:30 a.m. Vishay Intertechnology, Inc. Auditorium 63 Lancaster Avenue Malvern, PA 19355-2120 For information about stock transfers, dividend payments, address changes, account consolidation, registration changes, lost stock certificates, and Form 1099, please contact the Company’s Transfer Agent and Registrar. TRANSFER AGENT AND REGISTRAR American Stock Transfer & Trust Company 59 Maiden Lane New York, NY 10038 Phone: 800.937.5449 Fax: 718.921.8331 Email: info@amstock.com For other information or questions, please contact Investor Relations at 610.644.1300. COMMON STOCK Ticker symbol: VSH The common stock is listed and principally traded on the New York Stock Exchange. DUPLICATE MAILINGS If you receive more than one Annual Report and Proxy Statement and wish to help us reduce costs by discontinuing multiple mailings, please contact our Transfer Agent American Stock Transfer & Trust Company. ELECTRONIC PROXY MATERIALS You can receive Vishay Intertechnology’s Annual Report and proxy materials electronically, which will give you immediate access to these materials, and will save the Company printing and mailing costs. If you are a registered holder (you own the stock in your name), and wish to receive your proxy materials electronically, please go to www.icsdelivery.com/vsh. If you are a street holder (you own this stock through a bank or broker), please contact your broker and ask for electronic delivery of Vishay Intertechnology’s proxy materials. MARC ZANDMAN Executive Chairman of the Board Chief Business Development Officer Vishay Intertechnology, Inc. MICHAEL J. CODY Retired Vice President of Corporate Development Raytheon Company DR. ABRAHAM LUDOMIRSKI Founder and Managing Director of Vitalife Fund, a venture capital company specializing in high tech electronic medical devices FRANK D. MAIER Retired Managing Director TEMIC GmbH DR. GERALD PAUL President Chief Executive Officer Vishay Intertechnology, Inc. RONALD M. RUZIC Retired Group President BorgWarner Automotive, Inc. ZIV SHOSHANI President Chief Executive Officer Vishay Precision Group, Inc. TIMOTHY V. TALBERT Retired Senior Vice President Credit and Originations Lease Corporation of America (“LCA”) Retired President LCA Bank Corporation THOMAS C. WERTHEIMER Accounting Consultant, previously partner of PricewaterhouseCoopers LLP RUTA ZANDMAN Private Stockholder Vishay Intertechnology, Inc. RAANAN ZILBERMAN Former President and Chief Executive Officer Caesarstone Ltd. HONORARY EXECUTIVE CHAIRMAN OF THE BOARD Dr. Felix Zandman (Deceased June 4, 2011) Vishay Intertechnology, Inc. 2018 ANNUAL REPORT CORPORATE HEADQUARTERS VISHAY INTERTECHNOLOGY, INC. 63 Lancaster Avenue Malvern, PA 19355-2120 United States 610.644.1300 www.vishay.com © Copyright 2019 Vishay Intertechnology, Inc. ® Registered trademarks of Vishay Intertechnology, Inc., and other parties. All rights reserved. 4 Vishay Intertechnology, Inc. 2018 ANNUAL REPORT 

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