Q3 2023 Vishay Intertechnology Inc Earnings Call
Okay.
Good day and thank you for standing by welcome to the Vishay Intertechnology Q3, 2023 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session. Please press star one.
One on your telephone and wait for your name to be announced to withdraw. Your question. Please press star. One again, please be advised that today's conference is being recorded I would now like turn the conference over to your speaker today, Peter <unk> Investor Relations.
Thank you Josh.
Good morning, and a wildcard to reshape inter technologies third quarter 2023 earnings conference call.
I'm joined today by Joe Smith.
Our president and Chief Executive Officer, and Laura Campbell, our Chief Financial Officer.
Okay.
This morning, we reported results for our third quarter a.
A copy of our earnings release available on the Investor.
Irrigation section of our website.
I R Chop Vishay com.
This call is being broadcast live over the weekend.
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 won't be.
A slide presentation, which we also posted at IR Vishay stockpile.
You should be aware that in today's conference call, we will be making certain forward.
And can cause future events and performance.
These statements are subject to the.
Certainties that could cause actual results to differ from forward looking statements.
For a discussion of factors that could cause results to differ please see today's press release entry.
Foreign 10-K, and Form 10-Q filings.
The Securities and Exchange Commission.
We are sort of information in our press release and on this conference call.
GAAP and non-GAAP measures.
We have included a full GAAP to non-GAAP restructuring gifts in our press release as well as in the presentation posted on our IR.
He shaved off problems, which.
Which we believe you will find useful when comparing our GAAP and non-GAAP results.
Yeah.
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'll turn the call over to President and Chief Executive Officer, Joe Smith.
Thank you Peter good morning, everyone.
I'll start my remarks on slide three with a review of the demand trends for the third quarter and then Lori will take you through the highlights of our financial results.
After that I'll come back to give you a progress report on our near term initiatives, we're implementing to improve all customer facing aspects of our business as we set the stage for faster top line growth and margin expansion.
And we'd be happy to answer any of your questions.
Today for the third quarter, we are reporting revenue of $853 $7 million, which is within our guidance range of $840 million to $880 million.
As expected revenue declined both quarter over quarter and year over year due to inventory adjustments by our distribution and EMS partners in response to soften demand among industrial customers and also our contracting lead times.
Looking at our revenue mix first by end market.
Automotive, which accounted for 37% of total revenue.
It was 2% higher than the second quarter and grew 10% versus the third quarter last year.
Our sales supporting the further electronic content of internal combustion engine vehicles continues to be strong.
Design activities related to increasing electronic content in evs hybrids and internal combustion engines are accelerating.
Industrial representing 35% of total revenue declined 9% versus the second quarter and 18% from last year.
Macroeconomic uncertainties and higher interest rates curbed demand in all regions and.
And in China, the economic recovery has yet to find solid footing.
As a result channel and end customer inventories are at a higher level.
Which will take longer to burn off.
Nevertheless design activity in the areas of industrial automation smart grid infrastructure.
The charging infrastructure.
Other applications has not slowed down.
In addition, a shipment of our largest capacitors to support an electrical grid project was pushed out to the fourth quarter.
In aerospace and defense.
Revenue was slightly below the second quarter, but grew 19% versus the third quarter last year on continued strong demand from commercial aviation and from weapons system contractors in the U S and Europe.
Defense orders have been increasing at a faster rate now since the war in Israel began last month.
Yes.
Revenue from medical customers came in 14% below second quarter.
2% of third quarter last year due to the timing of orders and product mix.
Here, we billed the customer forecasted demand and have increased our inventories base.
Based on strong demand signals from our medical diagnostic equipment and implantable devices customers.
However towards the end of the quarter. Some shipments were held up as customers face supply chain issues.
Weekly polls now have resumed in Q4.
Consistent with weak demand trends during the first half of the year revenue from the other end market segments declined 5% versus the second quarter and 26% versus last year, mostly on volume declines.
In terms of channel sales increases in OEM revenue, both quarter over quarter and year over year were overshadowed by the declines in distribution sales and to a lesser extent declines in EMS sales.
During the quarter.
Distribution revenue fell 10% compared to the second quarter and was 18% lower than the third quarter last year as a result of both inventory adjustments.
And pauses and buying through the channel primarily by industrial and EMS accounts.
Distribution inventory at quarter end was 24 weeks versus 21 weeks last quarter.
Increases in all regions more so in the Americas.
During the quarter, we intentionally increased distribution inventory as part of our strategy to expand our participation in this higher margin channel.
I'll come back to this topic after Lori reviews, our third quarter results.
Pos.
Increased 7%, reflecting a weakened industrial demand in all regions.
OEM revenue grew 4% quarter over quarter, and 11% year over year, driven by strength in demand from automotive customers in each region.
EMS revenue declined 6% quarter over quarter, and 14% year over year, reflecting inventory adjustments by EMS customers as lead times are now mostly inside of 10 weeks and demand from their customers softened in all regions.
Before turning the call over to Laurie for a review of our financial results I want to comment on the situation in Israel.
Yes.
As you likely know Vishay has three manufacturing locations and one office in Israel, and 'twenty 400 employees.
In the face of daily challenges and the emotional taught toil toll from the October seven attacks.
Each of these sites continues to operate normally.
And ships parts without interruption.
In fact for over 50 years Vishay has shipped product from Israel to all regions of the world without interruption.
We're in communication with those customers, who have expressed concern about our ability to deliver products from Israel.
<unk> is classified as an essential business that Israel.
We're able to operate with a high attendance typically greater than 90%.
I have the utmost admiration for our employees in Israel for their fortitude and their resilience.
We are extremely grateful for their steadfast dedication in this difficult time.
Globally as well I would like to thank all of our employees for their continued contribution to transforming <unk> into a business minded organization.
We will now go to Laura for the financial results.
Thank you.
Good morning, everyone.
I'll start looking to use our third quarter results on slide four.
Revenue for the third quarter were $853 7 million.
Compared to the second quarter revenue decreased one 3%.
Reflecting a three 2% decrease in volume.
8% reduction in pricing.
Pricing was essentially flat with our OEM automotive and industrial customers under contract and impacted somewhat price pressure on high inventory products, primarily in Asia, so through distribution channels.
EMS to industrial end markets.
Hi, reportable business segment revenues of MOSFET diodes uphill inductors.
Essentially stable the decrease is mainly attributable to buy distressed and passengers.
Compared to the third quarter last year revenues were down seven 7%, reflecting a volume decrease of 10, 2%.
Primarily related to last year's.
In MOSFET volume alloy in the Shanghai shutdown the quarter too.
Particularly and partially offset by <unk>.
9% increases in pricing.
<unk>.
At quarter end book to Bill for consolidated V shape.
Six three.
Backlog at quarter end with five five months.
Compared to $6 four months at the end of the prior quarter.
As lead times continue coming down.
All product segments.
Yes.
We returned a total of $31 $1 million to shareholders.
Thank you Jim.
A dividend of $13 9 million.
Stock repurchases of $17 3 million.
The next slide presents.
Hello.
Gross profit was 200.
$6 million.
For a margin of 28.
8% compared to 28, 9% for the second quarter and in line with our guidance.
Compared to the second quarter gross margin decreased primarily due to lower volume.
SG&A expenses were $122 $5 million.
Zero to $1 million.
In this quarter.
Slightly lower than our guidance due to foreign currency effects.
Yeah.
<unk> income decreased $19 5 million.
Since the second quarter and lower gross profit.
Operating income decreased $68 million versus the prior year.
Due to lower volume related gross profit and higher SG&A expenses, primarily reflecting annual salary increases general inflation and equity incentive compensation.
Operating margin was 13, 5% compared to 15, 1% for the second quarter and 19, 8% third quarter 2022.
Adjusted.
$159 6 million and adjusted EBITDA margin of 13, 7%.
Our normalized effective tax rates were 26, 9% and 28.0% for the quarter.
I think year to date periods, respectively.
Our GAAP effective tax rates were 31, 7% and 29, 3%.
And year to date periods, respectively.
And the non deductibility of most of the loss on early extinguishment of debt.
For 2023, we expect a normalized effective tax rate approximately 28, 5% for the full year and approximately $29 five percentage for the fourth quarter.
GAAP EPS was <unk> 47 per share and adjusted EPS was <unk> 60 per share compared to 68 cents per share for the second quarter.
For your convenience we have included in the body of the presentation. The chart depicting revenue gross margin and book to Bill ratios for each of our reportable segments.
Turning to slide seven we present cash conversion cycle metrics.
Dsos were 48 days two days higher than the second quarter and Dps for one day higher is 33 days.
Inventory was $643 5 million at quarter end down compared to $667 million as at the end of Q2.
Inventory is R&D were 96 days compared to 94 days for the second quarter.
Bringing the cash conversion cycle.
Two 111 days.
On slide eight you can see the cash flow from operations was $122 3 million for the third quarter was highest in the sector, which included the annual installment the transition tax.
Total capex was $66 8 million for the quarter and $38 $1 million for the total.
<unk> invested in capacity expansion.
On a trailing 12 month basis.
Opex was nine 7% of revenue compared to seven 8%.
The same period last year, primarily due to our enhanced capacity expansion program related to our growth initiatives.
Free cash flow for the quarter was 55.
$5 million.
Compared to $36 3 million.
For the second quarter.
Which included the annual installment the transition tax.
Stockholder returns for the second quarter amounted to $31 $1 million.
15 of $13 9 million.
For our quarterly dividend $17 3 million for share repurchases.
We repurchased zero point.
6 million shares at an average price of $27 38 per share during the quarter.
Total liquidity.
Quiddity at quarter end was $1 9 billion, including cash and short term investments of $1 2 billion and our undrawn $750 million revolving credit facility.
As mentioned in past earnings calls, we use the revolver from time to time.
To meet these short term financing needs.
Turning to slide nine which presents a summary of our debt related transactions in Q3.
You wanted to get ahead of the.
Due date of the existing converts in a rising rate environment.
Use the proceeds primarily to repay.
A significant portion of existing converts effectively refinancing them for an additional five years at the same coupon rate.
One of the benefits of these transactions for Vishay is that we are enhancing our U S liquidity position to support growth initiatives.
Yes.
Yes.
Turning to slide 10 for our guidance.
For the first quarter of 2023 revenues are expected to be between $770 million to $810 million.
Gross profit margin is expected to be in the range of 25, 5% plus or minus 50 basis points and we still expect full year gross profit to be in range of 29% plus or minus 50 basis points.
SG&A expenses are expected to be $125 million, plus or minus $2 million for the quarter and $490 million.
Plus or minus $2 million for the full year at current exchange rates.
For 2023, we expect a normalized effective tax rate of approximately 28, 5%.
With a <unk> rate of approximately 29, 5%.
Finally, we remain committed to distributing at least 70% of our free cash flow to shareholders and inform of dividends and stock repurchases in accordance with our shareholder return policy.
I'll now turn the call back to Joe.
Yes.
Thank you Laurie.
Let's turn to slide 11 for a review of our key near term initiatives.
As you May recall on my first call as CEO of Vishay last February.
I laid out the broad outline of our three year plan to expand capacity to support our highest growth and highest return product lines.
And to position vishay to be ready for the next phase of the Mega trends in E mobility sustainability and connectivity.
2023, as a staging gear for this plan in all elements of the plan are for growth.
Throughout the organization.
Okay.
Great.
Our plan was to invest approximately $385 million in 2023.
For the first nine months of the year we spent.
$84 million or $113 million of which was spent on expansion projects.
As Lori just reported we have adjusted our planned capex for this year to $350 million due to some delays in installing equipment related to construction projects.
We intend to carry over the remaining $35 million into 2024.
Yeah.
During the third quarter. In addition to continuing our advanced work on Fabs located in Soho Taipei and.
And our backend semiconductor Capex campus improve <unk> to.
To meet the growing demand of our automotive and industrial customers. We opened our two new facilities in Mexico.
At the La Laguna campus, where initially we will focus on mass production for power inductors.
The equipment and production lines have been setup.
Qualification of commercial products is underway and we have the ability to ship commercial products by the end of this year.
We will qualify and begin producing automotive grade products in 2024.
The warrant facility is dedicated to increasing output of our representatives.
And so meeting the growing demand for these products in all market segments, but with the fastest growing demand in automotive and industrial applications.
We completed qualification.
Package sizes and expect shipments from this facility in the fourth quarter.
For MOSFET to meet the increasing demand of our automotive and industrial customers, we have four initiatives underway.
First construction of the new 12 inch MOSFET fab in Germany is on schedule for completion in 2026.
Second we recognized that we need to bridge capacity before 2026.
And expand our MOSFET capacity much sooner.
For this reason during the quarter, we signed a long term supply agreement with Korean based key foundry to supply wafers for multi power MOSFET products.
Qualification of commercial MOSFET is underway with mass production of these products in 2024.
Third as mentioned last quarter, we expanded our supply agreements with two of our existing foundry partners to gain more wafer capacity.
Fourth.
We are moving ahead with the next step towards commercialization of Silicon carbide MOSFET.
As announced this morning, we have entered into a definitive purchase and sale agreement with NEC spirit.
To acquire its Newport wafer fab located in South Wales for $177 million in cash.
Newport was put on the market in November 2022, when the UK government ordered Chinese operated and Xperia to divest its stake in the fab due to national security concerns.
Vishay will acquire a 100% interest in the legal entity, which owns and operates this facility.
Okay.
With Newport, we will add an automotive qualified eight inch semiconductor fab staffed by highly skilled and dedicated employees that is located in the heart of a compound semiconductor cluster in South Wales.
We plan to make Newport, the hull for Max power, and our Silicon carbide and Gan technology developments.
Leveraging relationships with the local scientists and the universities.
For our customers will have the entire silicon carbide again manufacturing process under one roof.
Closing is estimated to take place in the first quarter of 2024 after securing the UK government's approval.
One other closing conditions unique to this transaction.
With respect to developing our silicon carbide capabilities, we met our plan to provide samples of 1200 volt planner technology MOSFET to customers in the third quarter and are on track.
<unk> into production in the fourth quarter.
We're continuing to advance the development of 200 volt trench technology and samples will be available in the second quarter of 2024.
700 volt planner development is moving forward with samples also available in the second quarter of 2024.
And the 650 volt planner technology will also have samples available in the second quarter of 2024.
Both die and finished packages will be available in each voltage.
We are introducing our silicon carbide technology roadmaps to many automotive Oems and tier one automotive design companies.
We have peaked our interest in the technology differentiation of our MOSFET structure.
Sure Eric.
We'll be evaluating samples for EV hybrid.
Automotive programs.
For our subcontractor initiatives. We also continue to engage in developing partnerships with subcontractors to outsource some commodity products and create incremental capacity for our higher growth and higher return products.
We have quantified one subcontractor predict belt chip resistors and have shipped product in the third quarter.
These products are both commercially and automotive quality.
For inductors, we bring on additional capacity to support a widening of our product platform.
We are progressing in our qualification of 23, new products by the end of the year and expect to have volume available mid 2024, which will help build our distributor business.
Each passed that business unit is evaluating subcontractors.
Each semiconductor business unit adds semiconductor capacity to support their front end capacities.
In terms of enhancing channel management, we are focused on maximizing the profitability of each channel.
During the third quarter, we continued to work on expanding participation with our distributors and regaining their trust in a more reliable vishay.
Due to our capacity constraints since 2017, we have been playing in a narrow band of partners, where we can only support a portion of the distributors total skus.
We underserved market.
With capacity investments from last year last year and incremental capacity being qualified through sub contracting a boundary agreements.
And our new facilities in Mexico ramping up we're in a far better position now to engage with distributors to identify the broader part number mix by technology and widen our presence on the shelf.
We are committed to ensuring that we are reliable supplier to our distributors as the industry moves past the current inventory correction.
We also continue to develop our promotion of Vishay solutions selling.
This quarter, we continue our strategy to build automotive reference designs for engineers to evaluate our broad portfolio of discrete semiconductors and passives.
And most power applications, we can populate 80% of the components on the circuit Board.
In addition to the high voltage intelligent battery sensor, we made available for testing last quarter, We released a 48 volt E fuse circuit breaker in the third quarter.
We plan to reduce a bi directional 48 volt 12 volt DC to DC converter during the fourth quarter.
Also at electronic to India in the third quarter, we showcased a few solutions, including the 48 volt E fuse circuit breaker.
And the onboard charger and traction in Burger for lower speed EV market, which we are developing with a tier one supplier.
Let's go to slide 12.
Yeah.
This is a review of the goals, we set for ourselves in 2023.
In terms of expanding external capacity, we are progressing well to qualify and have signed agreements with a number of subcontractors by the end of the year.
Our evaluation where to build Vishay is next manufacturing facility in Europe.
It was on hold on hold scares me a bit pending the acquisition of Newport.
Yes.
We're adding incremental capacity to support growth in our 30 key product lines and developing go to marks its strategies for each of them.
We have shipped samples of 1200 volt planner technology MOSFET and are on track with the development of the 650 volt and 1700 volt planner technology.
Finally, we remain committed to holding an analyst day in 2024.
We will provide an update on the timing of this analyst day following the closing of the Newport transaction.
Our customers keep telling us they want more product from Boucher and.
And we are working hard to meet and exceed their expectations of the new vishay.
Our final note.
I want to share with you we are planning to attend the Needham annual growth conference on January 18.
And we look forward to meeting you there.
With that I'll turn the call back over to the operator to start the Q&A session.
Yes.
Thank you to ask a question during this session. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
One moment for questions.
Okay.
Our first question comes from Joshua Buchalter with TD Cowen you May proceed.
Hi, Good morning, everyone listens, Sam on behalf of Josh first and foremost we wish the best for Israel colleagues, we hope everyone and their families are safe.
For my question Congratulations on the announcement of the New Court Fab transaction could you give us some details on the historical capacity, the fab or what kind of output Shay can drive from it going forward.
Is it exclusively compound semi focus for auto markets.
Sam Thank.
Thank you nice to speak with you.
At this point, we're not able to share the historical details of the fab until we get through the closing process.
What's in the press release is what we are able to share at the moment.
Capacities and those things will be able to get into much more detail afterwards to close which we foresee in February.
Understood. Thank you for that color.
And then as my follow up Laurie I think you mentioned you had a comment about pricing, but my signal cut out.
So historically price erosion and competition has been limited to the commodity product lines that you have are these pricing pressures still contained two commodity skus in the quarter or are you seeing it expand to impact other parts of your commodity portfolio that arent anchored to long term contracts for example.
The remainder of the commodity.
Thank you.
One moment for questions.
Our next question comes from Roucou Bhattacharya with Bank of America You May proceed.
Hi, Thank you for taking my questions in mind.
Hi, and my prayers are with the families.
Israel as well.
With respect to the Newport wafer fab that you are acquiring.
Can you give us some more details like how many employees are you taking on and how does this change your annual Capex and Opex spend.
Is this part of the prior announced $1 2 billion over three years or is this is this in addition to that.
It is in addition to that $1 2 billion.
It's been part of our strategy since the Max power acquisition last October.
To bring in house, the capability of Silicon carbide.
As we've met with a number of automotive customers. This is a very important requirement that they are engaging suppliers that have the in house capability of the process.
So we like our technology for Max power, we need to find a home for it and we see that this.
<unk> fab Newport.
Is a great home for this with the universities that surround it theres quite a technology group at three universities that develop wide band gap technology. So we see this as quite a benefit for us going forward.
The details of the fab the employee count the capacities or.
We're just not able to share at this moment it isn't working fab. It is in silicon technology today. It is at eight inch fab. That's that's about as far as I can go with.
Describing the fab, but were quite excited quite excited in vishay about what this is going to do to accelerate our silicon carbide products.
Okay. Thank you for the details there.
The press release said that you are intentionally increasing inventory with distribution partners as you broaden participation in this higher margin channel. So I was just looking for some more details on that are you specifically excuse.
Excuse me partnering with new distributors or are you now selling more product lines through distribution or are you increasing the inventory of existing products had distribution. So if you can give us some details on what exactly this entails and then in terms of implementing go to market strategies.
You think this is more or less done.
Or do you think you'll be done by the end of 'twenty three or will this carryover into 2004 as well.
Okay.
With the distributors it was always a large part of our business about 55% of <unk> annual sales.
The distributors are asking more from Boucher as I travel and meet with distributors in all regions. They say Joel we need more product from Boucher now what does that product. We've had the standard part numbers I say, we provided them over the last five years through the last two up cycles that they put on the shelf we had limited capacity.
So we werent able to really support a broader SKU mix, we had limited capacity, which was allocated to automotive or other large direct customers. The distributors had to find other suppliers to take care of the customer base in the market.
Part of our strategy was to re engage all business channels distribution is one of them.
So we are broadening our skus, we're adding part numbers each of the business units is traveling to the distributors in all regions, having product mix discussion.
To understand the part number demand that we were not supporting.
So when I say the tension or this is by design.
We are raising our inventory dollar at the distributor because we're adding part counts.
One of the distributors that we have been working with we've added 8000 part numbers this year.
That we were not participating in.
And we have more work to do with that distributor. That's just one example.
Vishay can be a much much broader supplier.
We have the technology, we have the <unk> position with the customer the distributors see this print position, but we didn't have the capacity or the part numbers in their system.
To support that demand so that explains.
Why do we say it was intentional it's part of our growth strategy.
And we expect to be.
Be it even bigger contributor to our distributors customers.
Okay. Thanks for that detail, yes, okay. That's helpful.
And maybe for my last question if I can ask one of the near term initiators that you have as to fill gaps in technology and market coverage. So just any details there like what what would you like to add in terms of technology, and which markets and would that be through internal investment or is this something that you would consider M&A.
Thank you okay. Okay.
Filling gaps in technology that silicon carbide, we had a gap that technology was in development with many of our competitors for a decade. So Max power is that first filling up the technology gap Gan Gan as a technology that we need or in development of Gan, we're talking to universities.
To help us create this technology for Vishay, we're also looking outside for M&A and Gan.
Circuit protection is another.
Technology, we don't have in vishay.
So we look to broaden our portfolio by including Circuit protection.
As we sit with customers as we said with engineers and with the distributors and the EMS. They they point Boucher directions. They say vishay look this way look to support this technology. So we appreciate those comments and M&A will be a part of this for sure as well as our own internal R&D.
Okay. Thanks for all the details nice to talk to you.
Thank you.
One moment for questions.
And as a reminder to ask a question. Please press star one on your telephone and our next question comes from Matt Sheerin with Stifel. You May proceed.
Yes. Thank you good morning.
Good morning, just a couple of near term modeling questions. So youre guiding gross margin down and it looks like that incremental margin is $50, 55% in.
Youre also.
Modeling or guiding opex up a little bit.
So just trying to figure out.
Bottoming here in terms of margins it looked like your operating margin will be below 10% for the first time in several quarters.
How should we think about.
As the cycle bottoms here, where margins maybe bottom and are there any other cost cutting.
Initiatives in terms of opex or other costs.
You may take out in order to.
Keep margins at higher levels.
Are we at a bottom.
Are we at a bottom.
We look at the discussions we're having with our channel partners are automotive customers. Each segment has kind of a different move to it.
On the top top line when we look at revenue, we're seeing the aerospace defense moving up we're seeing automotive flat to continuing to move up so positive on the top side that we can see some of those positive markets offset other markets, which are flat to sideways the margins.
The margins, we are working diligently to make sure that we can establish what.
What we say as a track record for Vishay shoe company.
We believe that the margins.
Okay.
We work with cost cutting we work on right sizing factories, we look at our cost or spending on opex and decide if we needed in the current quarter. If we can push it out a quarter. So were quite diligent here Laurie do you have any comments you'd like to make.
No I think that pretty much covered it.
Okay great.
Yes, I'm just trying to figure out where yes go ahead sorry.
Alright, if I may add so if you if you look at the book to Bill we this cost.
<unk>.
High incremental margin down.
Is partially related to a negative product mix.
And that the semiconductors, we are sort of the semiconductors, whether it be Boeing.
Going down further.
In Q.
Q4 than the assets.
So that would drive the margins down and increase it.
The incremental negative margin.
Okay and is that.
<unk> heard the MOSFET business as well I know I saw the book to Bill was very low, but I know you.
Do you have.
Strong demand from auto customers.
The MOSFET business will be down again as well.
I would say sideways, Matt the automotive pulls the schedule agreements, we see continued to represent the demand we were an allocation with auto mass.
For our product.
We've come off of allocation for auto loss in the third quarter and now we're engaging customers and distributors, which we couldnt currently support with our capacities.
So we're working to engage more customers to not say automotive products for MOSFET or down.
Actually broadened our customer base and be able to support more.
MOSFET as Peter said is one of those higher margin products, but the inventory in the channel.
Is high for semiconductors, and we have opportunities through adding part numbers, which would give us a greater play for the auto mass.
Okay. Thank you.
Thank you.
One moment for questions.
And our next question comes from Joshua Buchalter with TD Cowen You May proceed.
Hi, everyone. Sam again, I just wanted to follow up on the distribution comments from earlier I know your visibility is never 2020, but could you give us an update on how much work there has to do with restocking the channel with new and old products to target levels. If you have any given that just the inventory was 24 weeks now versus I think 21 weeks last quarter.
<unk>.
Yes.
There's quite a bit of work to do we have 16 divisions had boucher business units and at this 0.4 of them had meetings with the distributors in the regions. There is meetings going on this week now in Europe for one of the divisions. So we are roughly a third maybe maybe 30% of.
<unk> <unk> here with the distributors.
Through re engagement.
We are showing the distributors of <unk>. So we've got quite a bit of work here yet to do which is going to span into the early part of 2024.
Got it. Thank you that's all I have.
Okay. Thanks.
Thank you I would now like to turn the call over to Joe Smith for any closing remarks.
Thank you. Thank you everyone for joining our call today at Vishay, we remain committed to making the necessary investments in capacity custom.
Customer facing resources.
And our innovation to make sure Vishay is ready to take full advantage of the next phase of market growth for the Mega trends, we talk about E mobility sustainability and connectivity.
We're moving forward with speed and conviction across the organization.
I look forward to talking to you again in early February.
When we report our fourth quarter results. Thank you very much.
Thank you. This concludes today's conference call. We thank you for your participation you may now disconnect.
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