威世科技 (VSH) 2025 Q4 法說會逐字稿

Good day and thank you for standing by. Welcome to the Vishay Intertechnology fourth quarter 2025 earnings call. (Operator Instructions)

Please be advised today's conference is being recorded. I would now like to turn the call over to your speaker today, Peter Henrici. Please go ahead.

Thank you, Kevin. Good morning and welcome to Vishay Intertechnology's fourth quarter and year 2025 earnings call. I am joined today by Joel Smejkal, our President and Chief Executive Officer; and by Dave McConnell, our Chief Financial Officer.

This morning, we reported results for our fourth quarter and year 2025. A copy of our earnings release is available in the Investor Relations section of our website at ir.vishay.com. This call is being broadcast live over the web and can be accessed through our website. In addition, today's call is being recorded and will be available via replay on our website.

During the call, we will be referring to a slide presentation which we also posted at ir.vishay.com. You should be aware that in today's conference call, we will be making certain forward-looking statements that discuss future events and performance. These statements are subject to risks and uncertainty that could cause actual results to differ from the forward-looking statements. For a discussion of factors that could cause results to differ, please see today's press release and we shares Form 10-K and Form 10-Q filing with the Securities and Exchange Commission.

We are including information in our press release and on the conference call on various GAAP and non-GAAP measures. We have included full GAAP to non-GAAP reconciliation in our press release as well as in the presentation posted on ir.fichet.com, which we believe you will find useful when comparing our GAAP and non-GAAP results. We use non-GAAP measures because we believe they provide useful information about the operating performance of our businesses and should be considered by investors in conjunction with GAAP measures.

Now, I turn the call over to President and Chief Executive Officer, Joel Smejkal.

Thank you, Peter. Good morning, everyone. I'll start my remarks with the review of the fourth quarter revenue and business performance, and then turn the call over to Dave, who will take you through a review of the fourth quarter financial results and our guidance for the first quarter of 2026. Then I'll update you on the strategic levers we're pulling under our five-year strategic plan. After that, we'll be happy to answer any of your questions.

For the fourth quarter, we generated revenue of $801 million, slightly above the midpoint of our guidance of $790 million and 1.3% higher than the third quarter. A growing broad-based business in industrial power and AI-related power applications drove this sequential increase.

Revenue in all channels grew, led by distribution. Once again, Asia dominated the revenue growth. We executed well, still in an environment of shortages and escalations by putting our expanded capacity to work to get backlog out the door, while generally maintaining competitive lead times.

We met urgent supply needs of automotive OEMs and Tier 1s toward the end of last year, exercising our capacity readiness. Our work under Vishay 3.0 is becoming visible in our revenue generation.

Orders for the fourth quarter are at a three-year high across all main product technologies, except capacitors which reached their three-year high already in Q2 of 25. Orders from the channels of OEM, distribution, and EMS are also at three-year highs. Prior to Vishay 3.0, EMS customers ordered much less from Vishay because of our long lead times. Now, we have an EMS business as a consistent and growing customer to support our accelerated growth.

Overall, our order growth was broad-based in each region, each channel, each of our technologies, and each of our growth and markets, automotive, industrial power, aerospace defense, AI computing, and healthcare. These markets represent about 95% of our core business.

After gradually building backlog each quarter over the first nine months of 2025, fourth quarter backlog grew nearly 14%, with both semis and passives contributing to the increase. In the Americas, industrial and automotive customers drove semi-orders, and aerospace defense customers drove passive orders. In Europe, we're seeing broad recovery of industrial and market segments. In Asia, strong AI-related demand, once again drove order growth.

As a result, we ended the quarter with a book-to-bill of 1.2, up from the previously shared book to bill run rate at the end of October of 1.15. For semis, booked to bill at quarter end was 1.27; and for passives, it was 1.13. Backlog at quarter end is $1.3 billion or 4.9 months. Improving market demand conditions, inventory replenishments, and our market share gains are putting us in a good position to grow.

Positioning Vishay for greater growth and then achieving greater growth is our strategic plan. With many supporting initiatives from the beginning of Vishay 3.0, we are making it possible through our heavy investment over the past three years to expand capacity for our high growth, high product, high profit products.

Our initiatives to expand and more fully in leverage the breadth of our portfolio of semiconductors and passives. And all of our work we put into strengthening customer engagement, re-engaging with previously underserved and inactive customers, and developing new customer relationships. Customers are responding to the positive impacts of Vishay 3.0 with deeper technical engagements, greater collaboration, and their willingness to scale long-term with us.

Let's turn to revenue -- review of revenue for the quarter, starting with the revenue by end of market on slide 3. Automotive revenue decreased 3.4% versus the third quarter, mostly related to lower pull rates during the end of December holiday weeks in the Americas and Europe. Asia automotive revenue grew in a seasonably strong quarter.

Orders for the quarter grew in each region. One of the key drivers of this increase is that we have the capacity to interest customers to use Vishay as a new supplier to mitigate the shutdown risk they were facing. It also opened the door to several new opportunities with OEMs and Tier 1s to supply more vehicle platforms and to become a more meaningful supplier mid to long-term.

New model year production ramp ups in customer forecast was another driver of strong bookings during the quarter. Design activity in automotive continues on projects related to electronic content increasing, including traction inverters, onboard chargers, (inaudible), power steering, and infotainment. Industrial power revenue increased 3.2%, driven in part by increasing shipments of our high voltage DC power capacitors to many smart grid infrastructure projects, but also multi-product inventory replenishment in the channel and strengthening market demand for building security power requirements and new industrial programs ramping up.

During the quarter, we won another smart grid infrastructure project in the Americas, which will go into production in the first half of 2026. We're continuing discussions with many customers about industrial smart grid projects that extend through the year 2032.

In other industrial power segments, bookings were strong in each region. Demand for industrial power management. Demand for industrial automation is beginning to recover. Also, customers are beginning to place orders with longer visibility due to market stretching lead times with diodes and (inaudible).

In the Americas, Vishay 3.0 is gaining previously lost and underserved customers who designed us into the bill of materials years ago. And now, we are gaining orders to drive their further volumes. Design supporting AI infrastructure are moving to mass production. These are all positive indications that for Vishay, industrial is back.

Our design activity remains focused on power supplies for industrial servers, power monitoring and control systems, next generation AI power structures, smart meters, and humanoid robots. In addition, many customers are launching new versions of their core product lines.

The aerospace defense and markets revenue was slightly down, 1.2%, reflecting the impact of the US government shutdown on billings and some projects with delayed timing in Europe. Orders increased with strong demand, particularly for capacitors, as funding is approved for military programs and in anticipation of production ramps forecasted in 2026. Design activity in the Americas and Europe remains focused on low Earth orbit satellites, drones, missile defense systems, as well as munitions.

Revenue and healthcare was flat compared to the third quarter, with shipments tied to program -- customer program milestones, sales will fluctuate. And for this quarter, revenue declined in the Americas and Asia. Europe, on the other hand, had its strongest quarter in three years on demand for hearing aids, implantables, and diagnostic equipment, bookings increased.

In the Americas, we are supplying new programs which are ramping up in Q1 and winning new business for capacitors to complement our custom magnetics business as we continue to fully leverage the breadth of Vishay's portfolio. In addition to continuing design activity on drug delivery systems, defibrillation, and advanced patient monitoring, we are now seeing opportunities emerge in the wearable space and are working with customers on heart rate and oxygen monitoring applications.

Lastly, in the other category, revenue grew 10.6% versus the third quarter, primarily as customers ramp up production for new products to support AI power management applications. Order intake grew because of the increased production of AI servers and extended component lead times across the industry.

A number of customers are actively adding Vishay to the bill of materials in AI related applications for both semiconductors and passives. In addition to the continued design activity and power conversion and power management, including multi-phase DC-to-DC converter modules and chipset multi-phase power. AI optical modules, we are also working with customers on 800-volt power management applications. Let's start to slide 4 for channel revenue.

We'll review the channel revenue here. This quarter, each of our channels, OEM, EMS, and distribution grew quarter over quarter, led by distribution. OEM revenue increased 1.1% on a seasonally strong period for automotive customers in Asia and some volume gains in Europe from aerospace defense and industrial customers, which was partially offset by a year-end slowdown in bullet in billings.

EMS revenue increased 1.4%, reflecting gains in Asia related to AI power and inventory replenishment. While in the Americas and Europe, year-end holiday shutdowns closed receiving docks and reduced inventory at the end of December. Distribution revenue increased 1.4%, primarily in Asia due to strong automotive and AI demand, in addition to some inventory replenishment.

Order intake was strong in each region. In the Americas and Europe, industrial and aerospace defense customers continue to drive most of the ordering as they prepare for new production starts in Q1. In Asia, bookings are accelerating as distributors replenish backlogs in anticipation of stronger AI demand forecast for 2026, ordering for pre-lunar New Year in February, and in response to extended lead times for diodes and (inaudible) in both Asia and the Americas.

Distribution inventory dropped to 22 weeks from 23 weeks last quarter. POS increased 3%, mainly to year-end demand in Asia. In the Americas, industrial and aerospace defense demand drove an increase in POS following the strongest POS quarter in three years and continued booking records in January. POS in Europe is steady. Based on customer input, our strategy to cross sell technologies throughout the channel is delivering results. Turning to our geographical mix on slide 5.

Revenue growth for the quarter came entirely from Asia, which grew 3.6%. While the Americas and Europe was essentially flat compared to Q3 due to the year-end holiday slowdown while somewhat offset by improved industrial demand.

Before turning the call over to Dave, I would like to take a moment to thank the Vishay employees and our reps for their contributions to Vishay's success and accomplish accomplishments in 2025. Their commitment to putting the customer first, re-engaging customers, embracing a business-minded approach, and increasing our production output and expanding our operations is helping to raise Vishay's level of performance and making Vishay 3.0 a reality.

Now, we'll turn the call over to Dave for a review of our fourth quarter financial results.

Thanks, Joel, and good morning, everyone. Let's start a review of the fourth quarter results with the highlights on slide 6.

Fourth quarter revenue was $801 million, exceeding the midpoint of our guidance and increasing 1% sequentially. The improvement was driven by a 2% increase in volume, partially offset by a modest decline in average selling prices. Compared to the fourth quarter of 2024, revenue increased 12%, driven by an 11% increase in volume, favorable foreign currency mainly from the euro provided an additional 3% benefit partially offset by a 1% decline in average selling prices which includes higher faders.

Moving on to the next slide, presenting the income statement highlights. Gross profit was $157 million, resulting in a gross margin of 19.6%, modestly above both the midpoint of our guidance and the third quarter. Margin performance was driven primarily by higher volumes, which helped offset continued pressure from elevated metals and material costs. The negative impact from our Newport fab was approximately 130 basis points.

Depreciation expense was $54 million in flat versus quarter three. SG&A expenses were $142 million compared to $135 million for the third quarter and to $138 million the midpoint of our guidance. SG&A was higher primarily reflecting higher compensation costs, higher R&D spending, and legal costs and fees related to accounts receivable securitization transactions, which I will discuss as part of our cash flow review in a moment.

GAAP operating margin was 1.8% compared to 2.4% in the third quarter and a negative 7.9% in the fourth quarter of 2024, which included a goodwill impairment charge. EBITDA for the quarter was $70 million for an EBITDA margin of 8.8%, down from 9.6% in the third quarter.

Our GAAP effective tax rate remains unmeaningful at these low levels of pre-tax income or loss as relatively small items such as foreign currency and repatriation taxes have a disproportionate impact on the effective tax rate. We had guided that our Q4 tax expense was going to be between $4 million and $8 million somewhat independent of the earnings level and our Q4 tax expense was in that range. GAAP earnings per share was $0.01 compared to a loss of $0.06 per share in the third quarter, and a loss per share of $0.49 in the fourth quarter of 24.

Moving on to slide 8, provides a summary table detailing revenue, gross margin, and book-to-bill ratios across our reportable segments for quick reference. In the fourth quarter, Newport's results continued to be reported under MOSFET's business segment, reducing that segment's gross margin by approximately 600 basis points, an improvement from the 720 basis points impact seen in Q3. All reporting segments delivered revenue growth quarter over quarter except resistors, which was impacted by continued delays in US aerospace and defense spending.

Turning to slide 9. In the fourth quarter, our cash conversion cycle improved to 125 days, down from 130 days in Q3, in part due to our continued discipline working capital management. But in addition, during the quarter, we securitized certain non-US accounts receivable as a means of providing efficient funding to support our immediate 12-inch wafer fab equipment purchase needs, which contributed to our DSO improvement from 53 days in Q3 to 48 days in Q4. Inventory decreased to $759 million and inventory days outstanding improved to 107 days.

Continuing to slide 10, you can see we generated $149 million in operating cash for the fourth quarter which included $62 million from the securitization of the accounts receivable. We continue to deploy cash for capacity expansion projects.

Total CapEx for the quarter was $95 million, including $75 million designated for capacity expansion projects. For the full year CapEx was $273 million compared to our guidance of between $300 million and $350 million as delivery of some equipment related to our new 12-inch fab in Germany was delayed to Q1. For the year, capital intensity was 8.9%, which is a decrease from the 10.9% in the prior year.

Free cash flow for the quarter was $55 million, reflecting the high capital expenditures partially offset by the securitization of the accounts receivable compared to a negative $24 million in the third quarter. Stockholder returns for the fourth quarter consisted of our $13.6 million dollar quarterly dividend. We did not repurchase any shares in the quarter.

At the end of the quarter, our global cash and short-term investment balance was $515 million, and we remain in a net borrowing position in the US with $219 million outstanding on our revolver. As discussed in the past, dividends, any share repurchases required debt service, and our Newport investments are funded through available US liquidity sources. We have $254 million accessible on our revolving credit facilities at the current EBITDA levels. We expect to continue to draw on our revolver to fund our US cash needs.

Okay, moving over to slide 11 in our guidance. For the first quarter of 2026, revenues are expected to be between $800 million and $830 million. We expect Asia revenue to be lower than Q4 due to the impact of the Lunar New Year, with the Americas and Europe regions making up the difference. We also expect to see sequential revenue increases in each of our five key growth segments: automotive electronic content, industrial power, health care, aerospace and defense, and AI computing.

Gross margin is expected to be in the range of 19.9% plus or minus 50 basis points, including tariff impacts and expected continuing higher input costs. The Newport Dragon is expected to be between 50 to 75 basis points, and we still expect to exit quarter one with Newport gross profit neutral and accretive thereafter.

Appreciation expense is expected to be approximately $55 million for the first quarter and $218 million for the full year '26. SG&A expenses are expected to be $153 million plus or minus $2 million. The increase versus Q4 is primarily due to the accrual of assumed incentive and stock compensation for 2026, versus the lower level of incentive and stock comp in 2025, and a full quarter of fees on the receivable securitization.

We're also continuing to invest in R&D and customer facing activities. We expect to hold at the Q1 level of SG&A expenses for each quarter of 2026.

Our GAAP effective tax rate is not meaningful at the low levels of pre-tax income or loss. We expect tax expense to be between $2.04 million dollars in quarter one, assuming a similar mix amongst tax jurisdictions.

Finally, our stockholder return policy calls for us to return at least 70% of our free cash flow to stockholders in the form of dividends and stock repurchases. For 2026, we once again expect negative free cash flow due to our capacity expansion plans.

Now I'll turn the call back to Joel.

All right. Thank you, Dave. Let's turn to slide 12 for an update on the strategic levers we're pulling as we execute our five-year strategic plan to drive faster revenue growth, raise our profitability, and enhance capital returns.

For CapEx, we expect to spend between $400 million and $440 million during 2026. A bit more than half of the 2026 plan is allocated for investments at our 12-inch fab, including a carryover from 2025 related to equipment delays. Nearly all of the CapEx at our 12-inch fab will be spent during the first half of the year and will represent the peak of our five-year capacity expansion plan.

In the second half of the year, CapEx is expected to be coming down from the first half. To put the 2026 CapEx into perspective, the average of our 2025 spend at the midpoint of our 2026 plan comes to about $350 million, in line with our annual CapEx spend since we began to invest in capacity expansions in 2023.

At our Newport facility, we continue to ramp up wafer production in the fourth quarter and automotive customers continue to audit the site. We have 4 audits planned for Q1, including 2 new customers.

We're also continuing to ramp up production at our Taiwan and (inaudible) in Italy facilities and getting more products qualified there. We have released well over 100 automotive part numbers for production, completed site audits with automotive customers and scheduled others for the first half of 2026.

We continue to execute our subcontractor initiative, which is freeing up capacity for our high growth products and also broadening our product portfolio to increase our share of the customers' bill of materials. During the quarter, we qualified additional diodes, inductors, and capacitor products. Since we began this initiative two years ago, we have qualified over 10,000 part numbers, adding many diodes, resistors, capacitors, and inductors to our portfolio.

Turning to innovation in our silicon carbide strategy, as planned, we released 8 Gen 2 1,200-volt planner MOSFETs for industrial use. More importantly, we now have released our first Trench MOSFET, the silicon carbide Gen 3, 1,200-volt for industrial and for automotive applications. This is a great technology advancement for Vishay, positioning us to design in 800-volt automotive and AI applications.

In terms of solution selling, we released three new reference designs in Q4, 2 eFuse designs. One is a 40-amp bidirectional, and the second is a 20-amp unidirectional, and also an isolated current sensor for high voltage applications. These reference designs continue our promotion of Vishay products, populating 80% or more of the components on a circuit board in a power application.

Let's turn to slide 13. Looking ahead at 2026, we are laser focused on maintaining capacity readiness to fulfill rising demands, growing shared existing customers, re-engaging lost customers and attracting new customers, driving innovation and delivering new products and solutions, and expanding production in low-cost countries to support our regional competitiveness.

Demand for the power requirements in the five growth segments is expected to remain directionally positive. Customer program visibility is improving as shippable backlog is developing at later quarters for each of our key markets. Customers are also ramping up production of new projects.

With these developments in business momentum, our factories are being loaded at a greater rate than the last quarter, and much more so than in recent years. A solid book-to-bill of 1.2 and a faster rate of backlog development supports our view that revenue will increase each quarter this year.

Customers are looking to secure supply while dealing with some extended lead times. We have made tremendous efforts over the past three years to position Vishay to be ready with capacity to assure our customers of reliable supply as they scale production and also to supply more part numbers to them.

In summary, 2026 is our year to take off. We are pushing our factories to maintain competitive lead times and to win our customers' trust, positioning us to outperform the market and keeping us on our path to accelerate revenue growth, elevate profitability and enhance our return on capital.

Kevin, we are now ready to open up for questions.

(Operator Instructions) Peter Peng, JPMorgan.

Hey, guys. Thanks for taking my question. I think last quarter, you -- when you were engaging with your customers, you guys were hearing expectations of mid to high single-digits for the industry. Just given that, looks like your book to bill has been doing pretty well, bookings are increasing. I guess, what's that you know versus 90 days ago?

Hi, Peter. Thanks for the question. The view is still mid- to high- single digits. If we would, divide it up by market segment. We've got the five market drivers we speak about industrial power we see as mid- to high- single-digit growth.

Automotive, a lot of electronic content. Car count seems to be flattish, but we'll say automotive is flat to mid-single digit for Vishay because of semis as well as passives. Aerospace defense, we're saying mid- to high- single-digit because we think they'll be much more consistent purchasing, and program runs in '26. AI, mid- to high-single digit. And healthcare, we're saying mid-single digits. So we're still in that market of mid- to high-single digit and we are pushing to outperform the rate of growth of the market.

Got it. And then I'll follow (inaudible) Just on the gross margins. I know you guys are kind of facing some higher material costs and FX pressures, and have you tried to rework that into your annual negotiations? And then what's the right way to think about your gross margins kind of going forward as we progress through the year?

I'll take the first one and Dave will take the second one. Yeah, we had a lot of annual contractual negotiations that happen October through December. The resulting price decrease is much less than what was historical. We still have a price decrease because we were able to gain volume b positioning Vishay for greater shares. So in the contractual agreements, less than historical ASP decline.

We also went out in October and started increasing prices due to metals. We were one of the first to do it. Initially got some pushback, but then it was realized across the industry that it's inevitable for everyone. So we raised prices on quite a few products in the fourth quarter. That starts to become effective in early Q1, depending on some contractual terms.

And now, we look at the metals today and we continue to polish this. And in some product lines, we will come back with a second price increase. So metals is important item that we evaluate every day. We've made the adjustments and we see our ASP decline lower than historical for 2026.

Dave, you want to take the second part?

Yeah, sure. So Peter, just to give you some -- our thought process on the on the guidance of the (inaudible) on the margin.

So as Joel mentioned, obviously the annual contracts all hit in the first quarter, right? So we have a ASP push against our volume increase; basically, cancel each other out. As you pull my commentary, you'll see the Newport drag is lessened and what's going to lessen in the first quarter. So we get some benny from that and then the metals is fighting is the fourth component that's fighting against that. So when you add those four, we'll get to the (inaudible)

How that progresses through the rest of the year. Obviously, the ASP declines are mostly front loaded with the annual contracts. Wage increases and such are already built into the first quarter. The book, as Joe said, we booked a bill 1.2. So with volume efficiencies, we should be generating -- we would see improvement in the margin as we move through the year and the Newport -- and as well as the Newport fab continues to ramp up.

Got it. Thank you.

Neil Young, Needham & Company.

Hey, guys. This is (inaudible) on for Neil Young. Thanks for letting us ask a question. To start off, I know you guys mentioned auto orders have increased as your guys' capacity has increased, but I was wondering what the company is seeing in the overall, automotive demand environment.

We've seen a gain of share for Vishay through the negotiations in the quarter, in particular gaining MOSFET share and diode share because of the geopolitical issue that happened in the fourth quarter. We've seen increasing volumes going into 2026 with the large contractual customers.

If we look at automotive overall, automotive, we see technology development in four areas: battery management continues to be one, infotainment in the car is two, electrification is three, and ADOS is four. So we're seeing these four technology applications really driving a lot of design activity.

Car count, people say car count generally flat. But we're excited about platform changes with customers as well as those four applications continuing to need the Vishay semis as well as passives. So we see automotive is mid flat to mid-single digit depending on program starts.

Got it. Thank you. And then my follow-up is more of a broad-based question. But have customer conversations changed given the recent increases in pricing for memory?

For memory, yes, it's always a discussion of where will the memory supply land? When you look at the segments that we serve, AI -- memory and AI for sure, memory in consumer products. Consumer is quite small for us. Automotive has some memory. not as much of a consumer as AI and computes. So people are watching it closely.

When I was at CES, memory, where's the memory going to be delivered to was a concern. We look at the applications we're in industrial power, the automotive, aerospace defense. The memory of those is lower in consumption than computer. It is going to be dependent on where the memory lands for sure, but we, at this point, are not forecasting a negative impact to revenue. Because of the segments we're serving, we believe they will get the small amount of memory that they need.

Great, thank you.

Ruplu Bhattacharya, Bank of America.

Hi. Thanks for taking my questions. Can you talk a little bit more about the automotive segment? Are you seeing any share gains against the Nexperia?

And Joel, can you talk about your content in different types of vehicles and gas cars versus EVs. and how do you see that content trending over the next couple of years?

Automotive, those four drivers that I mentioned, electrification, infotainment, battery management, and ADOS, those are really nice development applications for us. Gaining share, we have done quite well to support the shortages that were in the marketplace in December. We were able to engage the OEMs as well as Tier 1s. We were given opportunities to cross part numbers. We crossed as many as we could with the equal equivalent match up, and then we went through our wafer stock and any inventory that we might have found or expedited production to keep the automotive customer satisfied.

But what also developed with that is the customer really became closer to Vishay. They learned a lot more about us. Because we were there to support a crisis, but then they wanted to learn more about future engagement. So we are gaining share. We continue to be to be looked at differently from the automotive OEMs than in the past, positively, differently.

And the Tier 1s gave us opportunities on part numbers and programs that we previously had no share. So we see it as positive, definitely positive for the development and how Vishay responded. The feedback from customers was, Vishay, we road tested you, you were able to give us product, and we see that Vishay 3.0 is real. So let's talk about future engagement.

Real clue regarding the different power trains, whether it's ice or if it is a hybrid or EV, our content is pretty similar across all three. EV has the greatest content for sure because of redundant systems required, so there's more content there.

Silicon carbide, as we weren't a player in silicon carbide on EV yet. But now, the release of our Trench product this month, brings those samples to customer engineers to be able to now qualify Vishay into these next generation automotive programs. So we're pretty excited about that, and I think we'll see our automotive content grow because we now are participating in the in the 400-volt, 800-volt systems of EV that will be in the future.

Okay. Thanks for the details there. Can I just ask, so you talked about share gains, how much is that benefiting revenues in the March quarter?

It is starting small and we will see the ramping up beyond the March quarter. Some automotive have to qualify the site. They -- we did the part number cross on paper and then they need to qualify the site. So I mentioned there's audits coming in Q1. Once those audits get done, the PCNs get approved, then we'll see the continued ramp up in later quarters.

Okay. Can I ask for some more details on CapEx spend and on OpEx? What are the areas of spend that you're going to have this year?

And in the past, you've kind of put off or delayed the CapEx spending. With the spend that you're going to have this year, would you be caught up in terms of how you see demand and with CapEx and your manufacturing capacity be sufficient for future demand? So can you talk about like areas of investment and how you see your overall CapEx plan for the next couple of years?

Okay, the carryover that we talked about, we had intended to spend some of the money in 2025 on the equipment for the 12-inch fab that's carried over into 2026, so that puts us in the range of [400 to 440], around $230 million or so is for that.

Aside from that, there are capacitor projects, the large DC power capacitor that we talked about for the smart grid, we're expanding production there because of the projects that we're speaking about out to the year 2032.

Tantalum polymer is another high order rate product. And the tantalum polymer is used in AI, automotive, industrial, used in multi-market segments, so there will be expansion there.

Our inductor product, the power inductors, we have the La Laguna facility. The inductors was the cornerstone of that site, and they'll be expanding further in Mexico because customers are looking for regional supply as well as non-tariff supply.

So in the passive side, it's very targeted and selective. There is all -- there's also small spending on semiconductor projects where there may be a tooling requirement for a few million dollars here and there. But I think we come over the peak of our CapEx spending in the middle of '26, and we start to return to a more normal type of spending where we don't have a project that is $100 million, $200 million. Those projects would be behind us.

Yeah, we're the days of the 9% and 10% capital intensity will be done. Yes, we'll be back down to more normal levels. Obviously, we'll have a higher revenue base, so the absolute dollar of CapEx may be higher, but we'll be back to the 5 and 6s.

Great. Can I ask you one last question, Dave? Just in terms of capital allocation and buybacks, how are you guys thinking about that? And Joel, is this time for any M&A, either on the passive side or on the active side? Thank you for taking my questions.

So in the capital allocation, we have our return policy -- shareholder return policy, which is 70% free cash flow. And we're predicting because of the 12-inch fab expenditures, our free cash will be negative for the year or down to zero then you can ballpark it. So we're -- but we're going to maintain the dividend. So I think that's the answer from the capital allocation side.

I'll let Joe answer from the M&A side.

(inaudible) M&A is always on the table where you look across passives. And we look across semis with select technology. So it's on the table. We continue to look at it. Nothing to share at this point about a specific technology but getting over the peak of this capital spending allows Vishay to then get into M&A at a deeper rate, as well as continued restructuring of our footprint. We've got manufacturing locations that we still have as the next step to do an optimization and restructuring so M&A for lighter spending plus optimization of our footprint.

Okay. All right. Thank you for all the details. Appreciate it.

Thanks for the questions.

And I'm not showing any further questions at this time. I'll turn the call back to Joel for any further remarks.

Thank you, Kevin. Thank you, everyone, for joining our call in the fourth quarter. We have made tremendous efforts over the last three years to have the capacity ready to assure our customers of reliable supply, and I think it's really coming together now with the amount of interaction we have with customers, plus the book-to-bill.

The book-to-bill in Q4 of 1.2. This is really building our momentum and setting this for a really successful year of the Vishay 3.0 takeoff. We look forward to talking to you again in May, where we will report the first quarter results. Thank you very much. Have a great day.

Ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day.