63 Lincoln Highway
Malvern, Pennsylvania 19355-2110
Telephone: (610) 644-1300
Fax: (610) 296-0657
Sales: $1.1 billion (1996)
Stock Exchanges: New York
SICs: 3600 Electronic & Other Electrical Equipment
You are likely to find Vishay components in almost any type of electronic product manufactured by U.S. and European companies.
Vishay Intertechnology, Inc. is the leading producer of passive electronic components such as resistors, capacitors, and inductors, in the United States and Europe. Its products are essential to the operation of anything using an electric circuit and can be found in computers, automobiles, satellites, telephones, household appliances, and televisions, as well as medical, military, and aerospace equipment. Vishay has over 50 plants around the world. Felix Zandman, the chairman and CEO of Vishay, and his co-founder's widow, Luella Slaner, control a majority of the company's voting stock.
Founding Family Background
Felix Zandman was born in Poland in the late 1920s, into a family that originally came from the village of Vishay in Lithuania. He survived the Holocaust and, in 1946, went to France. While he knew no French, he dutifully memorized 30 words a day while earning degrees in mathematics and engineering and his doctorate in physics. While a student he developed a new technology that significantly changed how structures were tested for stress.
Up until then, scientists had used a plastic model of a bridge or building or engine part or airplane wing to figure out mathematically how the metal would act under stress. Zandman, however, developed a transparent plastic coating he could apply directly to a structure along with instruments that could measure the results of the stress optically. When viewed through a polariscope, the coating produced patterns that showed a picture of the actual distribution of stress and could help improve the structure's safety.
The response of the French engineering community was very positive, and Zandman decided he might parlay his new process, eventually known as Photostress, into a new business. However, the airplane manufacturer he worked for, although excited about the process, was not supportive of his entrepreneurial dreams.
In 1956, Zandman came to the United States and went to work at the Budd Company, a major Philadelphia manufacturer. Budd had just added strain gauges (electronic measuring devices) to its existing line of railroad cars and automobile chassis, and it soon bought the Photostress process. Although he did not speak English when he arrived, Zandman again memorized 30 words a day in order to learn the language.
While at Budd, Zandman developed a new kind of resistor, the part of an electrical circuit that adjusts and regulates voltage and current, that was not effected by temperature. For resistors used in high precision instruments, such as aircraft guidance systems, temperature change could be disastrous. Again, Zandman saw the potential for a new business if he could translate his concept into reality. But Budd was not interested in funding the project, the marketing people believing there was not a sufficient market for the technology.
1962--80: Company Formation and Innovations
In 1962, Zandman turned to his cousin, Alfred P. Slaner, who loaned him $200,000. Zandman put in $4,000 of his own savings, and the new company was born, with the partners each owning 50 percent. They chose the name Vishay, where their great-grandparents had lived, in memory of their family and of those who had died in the Holocaust. In his autobiography, Never the Last Journey, Zandman recalled Vishay's first days: "We signed the lease [in Malvern] on February 22, 1962, and the next day we started work.... We built our laboratory at night, nailing wallboard and painting and doing everything on a shoestring. I bought furniture and equipment, and a month later we were ready to go."
The company introduced Micro-Measurements® strain gauges, developed by James E. Starr and produced in Romulus, Michigan, which it marketed primarily to the automotive industry. Thinner than a postage stamp, Vishay's gauges could be bonded to any structure easily to change the resistance value when the structure was subjected to stress. And like its resistor, the strain gauge was impervious to temperature. In addition to the millions used to improve structural integrity, the gauges were also used as weight sensors in electronic scales. Zandman had also acquired the rights to his Photostress process and the company included the plastic coatings and instruments among its products.
But Vishay's early prominence was based on its Bulk Metal resistor, which the company created in about six months. Analysts would later remark that introducing a flat, 0.33 watt resistor into a market of round ceramic resistors rated at one-eighth, one-fourth, or one-half watt was a marketing coup. Actually, according to Zandman's book, it was an accident: "Since we were not working with wires but with foils, we didn't have to wind anything. Ours would be flat. The cheapest material we could use to bond our foil to was not ceramic, but glass. So we used glass as our substrate. Then we needed a case to put the resistor in. I found on the market a small, inexpensive flat case that was made for capacitors. We cut the piece of glass to the size of the case; then we attached the leads. When I measured the power of our now cut-down and encased resistor, I found it was 0.33 watt."
Orders poured in, particularly from the defense industry. Using the Vishay resistor, jet fighter pilots didn't have to wait long for their navigational electronics to warm up. The accuracy of weapon guidance systems was no longer limited to plus or minus six-tenths of a mile. And not only U.S. companies wanted the resistor. Orders came in from France, Japan, Germany, and the United Kingdom.
To meet the demand, Vishay began licensing its resistor, beginning with manufacturer Sfernice, the largest resistor manufacturer in France. In 1969, Vishay opened its own manufacturing plant in Israel, and in 1972, Zandman took the company public. However, the company issued only 20 percent of the outstanding shares, leaving the rest in the hands of Zandman and Slaner.
1981--90: Growth Through Acquisition
By the early 1980's, Vishay was a world leader in the development of resistors and strain gauges, with 65 percent of its sales in its first 20 years made to defense and aerospace contractors. The company had sales of over $45 million a year, with a cash balance of $35 million. But Vishay stock, which sold originally at $8 a share was selling at less than $3. Zandman began considering alternatives to his strategy of internal growth in order to produce a better rate of return. He decided on a course of acquisitions, determining that there was no reason the company couldn't produce "garden-variety" resistors as well as its ultraprecise components. His timing was right as consolidations were beginning to occur within the passive electronic components industry.
Early in 1983, Vishay bought Mann Components, an English resistor manufacturer with sales of about $2 million. The next year the company acquired Geka, a French competitor, and two small American companies, Angstrohm Precision and Elliot Industries. Sales for 1984 were a record $48.5 million, helped by an expansion in research and development, cost-cutting, and product improvement. Even with the acquisitions, debt was still zero and the cash surplus had not dropped.
During 1984, Dale Electronics came on the market, and Vishay began its first major acquisition spree, growing its core resistor business. Dale, a subsidiary of the Lionel Company, was the largest wire-wound resistor maker in the world outside Japan. Lionel had bought Dale years ago to produce the transformers it needed for its model trains, and had left Dale alone to grow into a giant. With annual sales of around $120 million, Dale was more than twice the size of Vishay. Although companies such as Du Pont, Emerson, and Dynamics Corporation of America were interested, Vishay bought 50 percent of the company in 1985, acquiring the rest of the shares in 1988. In making the purchase, Vishay formed a subsidiary, Dale Holdings, Inc., which owned all the common stock of Dale Electronics.
Electronic companies all over the world were up for sale. Leveraged buyouts and takeovers were rampant. But Vishay was not interested in buying a company just to strip it and sell it. In selecting companies to buy, Zandman followed a five-point strategy, according to Electronic Business: 1) concentrate only on businesses in which Vishay had demonstrated expertise; 2) focus on profitability while attending to long-term goals; 3) produce and sell in all key markets; 4) provide quality products; and 5) grow through research and development, market penetration, and acquisition.
In 1987, Vishay bought Draloric Electronic, the largest manufacturer of fixed resistors in Germany. Vishay reduced the numbers of managers in both Dale and Draloric and moved some production to Israel, where it opened a second facility. It also purchased the resistor and power capacitor business of Corning Glass. Vishay maintained the brand names of most of its new purchases since they were already so well known and respected.
In 1988 it bought Sfernice, the major French resistor manufacturer with which Vishay had initiated a licensing agreement, with sales of $100 million. As with its other acquisitions, Vishay transferred the Sfernice foil resistor business to Israel and restructured the company. In his book, Zandman pointed out that despite moving certain production lines to Israel, employment at Dale's operations in Nebraska and South Dakota still rose. He explained that the jobs first lost in the United States were those responsible for making older, uncompetitive products. By moving these jobs overseas, these product lines became competitive moneymakers that enabled the company to squeeze out the competition, increase resources, and, in turn, open new product lines in the United States.
During this period, Vishay created a special "Class B" of stock in addition to its ordinary common stock. Class B could not be traded but carried with it ten votes per share. All current stockholders could convert their stock to Class B, but to sell it would have to convert it back. Once Zandman and Slaner had converted their shares to Class B, it was unlikely that they could lose control of the company. By the end of 1989, Vishay had sales of $416 million.
1990--95: The Inductor and Capacitor Markets
In 1990, Vishay began moving into the inductor market with the purchase of Nytronic Inductors, a U.S. company with sales of $10 million. The company continued efforts in that field the following year, acquiring several small inductor manufacturers in Mexico (West-Cap Arizona and Jeffers Electronics) and France (Aztronic Measurements Group).
By the early 1990s, Vishay was no longer so dependent on sales to aerospace and defense contractors, which were down to 16 percent. Meanwhile, sales to the computer industry represented 28 percent, telecommunications 12 percent, with the rest to the automotive, instrumentation, and industrial markets.
With the acquisitions of Draloric, Dale, and Sfernice, the company held about one-third of the American resistor market and 40 percent of the European market. Zandman decided the company needed to move into fields other than resistors and inductors if it was to continue its rapid growth. The market he selected was capacitors, components that store and release electrical energy. The first capacitor acquisition, in 1992, was Sprague Technologies, a part of American Annuity Group.
Sprague had been one of the largest capacitor manufacturers in the United States. The founder of the company, R.C. Sprague, invented the ceramic capacitor in 1926, then went on to invent almost everything that had to do with capacitor technology. Capacitors made radio tuners, telephone receivers, and television receivers possible by allowing the filtering of wave frequencies. In addition to capacitors, Sprague began producing resistors, then transistors. But in the mid-1960s, after the founder retired and his son took over, the company invested heavily in semiconductors. The competition from other companies, both American and Japanese, was too much, and the company lost hundreds of millions of dollars. Sprague was sold to General Cable, which was then bought by Penn Central Railroad, which made Sprague a separate entity controlled by a major shareholder. During these transitions, the company dropped its production of every passive component except capacitors.
While Vishay was negotiating for Sprague, it also began looking for a purchase in Germany to strengthen Draloric's position in the European market. The company settled on Roederstein GmbH, Europe's largest component manufacturer. A huge operation, with sales of over $300 million and plants in Portugal and the United States as well as Germany, Roederstein was rumored to be close to bankrupt.
Initially Vishay planned to acquire Resista, the Roederstein division that made metal film resistors in competition with Draloric and commercial thick film chip resistors to compete with the Japanese. But in the end, Vishay bought the entire company. They eliminated entire layers of Roederstein's management, closed an obsolete plant, moved some production to Israel, and restructured the company with Draloric. Within nine months Roederstein was profitable again.
In 1993, the market for small specialty tantalum capacitors started growing, and Vishay bought the tantalum capacitor division of North American Philips Corporation. In 1994, Vishay purchased Vitramon, which made multilayer ceramic chip capacitors, from Thomas & Betts for $184 million.
As Vishay continued to acquire companies, its sales continued to increase, as did its earnings. By eliminating or restructuring duplicative sales, distribution, and administrative expenses, it took advantage of economies of scale and kept costs down even as it expanded. This occurred despite a period (1991--93) of general recession in the industrialized countries and a worldwide slowdown in the electronic components industry.
Wanting to increase its internal sales, the company targeted its 30 biggest customers for special attention. Vishay promised 100 percent on-time delivery worldwide and maintained manufacturing capacity for these clients, including AT&T, Hewlett Packard, Bosch, and Siemens.
1995 and Onward
The passive components industry experienced a growth spurt in 1994 and 1995. To meet the anticipated demand, the company expanded its offshore capacity, spending over $165 million in 1995 on plant and equipment, including new facilities in Israel and the Czech Republic. At the same time, it had to maintain high production levels in the United States, Germany, and France, high-cost countries.
During this time, the company made a move into Asia, buying 49 percent of Nikkohm, a Japanese passive components maker. That year Vishay introduced a resistor chip that helped extend the life of lithium batteries used in laptop computers and other portable electronics.
The worldwide demand for passive components dropped significantly in 1996, as companies, particularly in the telecommunications and computer industries, found themselves with an oversupply of components, especially capacitors. An economic slowdown in Germany and France combined with a strong U.S. dollar also contributed to Vishay's first decline in annual sales, to $1.1 billion. The company announced a major restructuring, consolidating Vishay Electronic Components operations in the United States, Europe, and Asia into one entity and bringing its sales and marketing activities into a single, worldwide organization. This resulted in laying off about 11 percent of the work force, half in the United States and half in Europe. Vishay was moving towards its goal of having 50 percent of its work force in low-cost countries. At the end of 1996, one-third of the company's work force were located in Israel, Mexico, and the Czech Republic, compared to one-quarter at the beginning of the year. Vishay also announced the appointment of Dr. Gerald Paul, the president of Vishay Electronic Components, Europe, as chief operating officer and executive vice-president.
In May 1996, in a joint venture with the Eisenberg Group of companies, Vishay signed an agreement with the China National Non-Ferrous Metals Industry Corp., a Chinese government agency, to mine and refine tantalum ore and eventually produce tantalum capacitors for the Chinese market. Analysts expected this to provide Vishay with significant cost savings in the purchase of tantalum powder and wire in the long term.
In 1997, after months of exploring a purchase in the $14 billion discrete semiconductor (integrated circuits) market, Vishay acquired 65 percent of the Taiwan-based Lite-On Power Semiconductor Corporation (LPSC) for $130 million. LPSC produced diodes, discrete semiconductor components used to convert electrical currents from AC to DC, and had plants in Taipei, Shanghai, and Lee's Summit, Missouri. LPSC also owned 40 percent of Diodes Inc., a California-based supplier of discrete semiconductor devices. The acquisition followed Zandman's traditional pattern of acquiring a business with similar technologies to expand the company's geographic reach and product scope. In July of that year, the company entered into an technical collaboration with Electro Scientific Industries, Inc. (ESI), an Oregon-based manufacturer of laser systems, semiconductor equipment, and vision products. The initial collaboration was expected to be on automated machine visual inspection for multilayer ceramic capacitors.
During this time, the passive components market began to recover. That, along with the restructuring, the movement of more production to low-cost countries, and the LPSC acquisition led various investment firms to encourage the purchase of shares in Vishay.
As companies produced smaller and more compact products, such as notebook computers and pagers, they needed more, and smaller, components to complete the electronic circuitry. A digital cellular telephone, for example, may have as many as 437 resistors, capacitors, and inductors on its circuit board. An average Pentium mincroprocessor board had 252 total passive components, compared to 124 on the board of an average 486-based machine. The average automobile had more than 2,000 tantalum capacitors and multilayer ceramic chip capacitors. One of the answers to where to put all these components was to mount them on both sides of a circuit board. Vishay was a leader in the development and production of these surface mounted devices (SMDs), which, in 1996, accounted for about half the fixed resistor market. The need for Vishay's products was not about to diminish.
Principal Divisions: Vishay Dale; Vishay Sprague; Vishay Vitramon; Vishay Draloric; Vishay Roederstein; Vishay Nicolitch; Vishay Sfernice; Vishay Thin Film; Vishay Foil Resistors; Vishay Measurements Group; Vishay Ltd. (England); Vishay Israel, Ltd.
Jorgensen, Barbara, "The Minnow That Swallowed the Whale," Electronic Business, January 7, 1991, p. 39.
------, "Vishay Gets Bigger, Concentrates on Big Customers," Electronic Business Buyer, September 1993, p. 106.
Levine, Bernard, "Vishay to Enter Ceramic Cap Market Via Vitramon," Electronic News, July 18, 1994, p. 2.
Troxell, Thomas N., Jr., "Profits from Stress: Vishay's Instruments Find and Measure It on Aircraft, Other Equipment," Barron's, July 8, 1985, p. 39.
"Vishay Inks Tantalum Pact With PRC," Electronic News, May 13, 1996, p. 8.
"Vishay to Revamp Manufacturing, Take Charge," Electronic News, June 24, 1996, p. 12.
Zandman, Felix, and David Chanoff, Never The Last Journey, New York: Schocken Books Inc., 1995.
Zipser, Andy, "High-Voltage Performer: Acquisitions Spark Vishay Intertechnology," Barron's, August 26, 1991, p. 18.
Source: International Directory of Company Histories, Vol. 21. St. James Press, 1998.