Vishay Intertechnology Annual Report 2018

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FY2018 Annual Report · Vishay Intertechnology

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Vishay Intertechnology, Inc. 2018 ANNUAL REPORT

ANNUAL
REPORT 2018

VISHAY INTERTECHNOLOGY, INC.

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

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

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

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.

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

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.

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

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.

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

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.

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

Vishay Intertechnology, Inc. 2018 ANNUAL REPORT