威世科技 (VSH) 2026财年第三季度业绩电话会议：创纪录营收与更高的第四季度利润率指引

核心要点

• 威世科技（Vishay Intertechnology）公布2026财年第三季度营收达创纪录的9.79亿美元，同比增长24%，按调整后基准环比增长6.6%。出货量同比增长20%，平均售价较2025财年第三季度上涨4%。
• 毛利率达到25.5%，较上一季度提升超200个基点。营业利润率上升至9.4%，每股收益升至0.37美元。
• 订单量增长15%后，季度末积压订单达到22亿美元，相当于6.6个月的产能。整体订单出货比为1.29，其中半导体为1.28，被动元件为1.31。
• 在电源管理、智能电网、工业自动化及AI服务器应用需求的支撑下，工业领域营收同比增长43%。航空航天与国防领域营收增长23%，汽车领域增长7%。
• 管理层预计2026财年第四季度营收为9.90亿美元（上下浮动1500万美元），毛利率为26.0%（上下浮动50个基点）。
• 威世科技继续在其“Vishay 3.0”战略下扩大产能。管理层表示，2025年AI相关营收约为1亿美元，公司正推动在2026年接近2亿美元。

核心财务业绩

业务与运营表现

被动元件占本季度销售额的52%，进一步推动营收创下新高。威世科技表示，所有产品技术均对增长作出了贡献。

工业领域仍是最大的增长驱动力。营收环比增长12%，同比增长43%，反映出高压电容器、电源管理、智能电网基础设施、工业自动化和AI服务器电源应用的需求强劲。管理层还提到，用于AI服务器的高分子聚合物电容器需求创下新高。

由于客户加快新车型项目推进以及中国出口增加，汽车领域营收环比增长4%，同比增长7%。管理层预计第四季度（12周）汽车领域营收将大致持平，而长期来看，电子元件需求将继续受益于电动汽车牵引逆变器、高级驾驶辅助系统（ADAS）及电子含量的提升。

航空航天与国防领域营收环比增长4%，同比增长23%。美欧国防承包商用量的增加推动了增长，同时美洲地区的预订使得季度末订单出货比达到1.64。

分销渠道营收环比增长9%，同比增长30%，占总营收增长的76%。分销商终端销售额（POS）环比第二季度增长5%，同比增长26%，而库存维持在18周的水平。电子制造服务（EMS）营收同比增长27%，EMS订单量创历史新高。

本季度该公司向分销商库存新增了超过17000个SKU。管理层表示，更广泛的产品可供应性和更深的渠道库存帮助威世科技触及更多客户并赢得了市场份额。

截至第三季度，威世科技已投资2.53亿美元，主要用于新增产能。在其位于德国的新12英寸晶圆厂中，90%的设备已投入运行，工程晶圆计划于2027年初推出，非汽车类生产目标定于2027年下半年。目前外包代工厂占威世科技晶圆制造的35%。

管理层业绩指引

营收前景包含了年终假期停工的影响。管理层指出，毛利率中值将超出此前设定的在2026年底达到24%单季毛利率的目标200个基点。

由于设备交付和安装周期延长，目前预计2026财年全年资本支出为3.50亿至4.00亿美元，低于此前预期的4.00亿至4.40亿美元计划。由于产能投资以及计划大幅削减应收账款证券化项目，公司预计全年自由现金流将接近盈亏平衡。

风险与关注事项

• 需求旺盛的半导体和被动元件供应依然紧张。部分客户正在下更长期限的订单，能见度最远可达18个月，需要持续监测是否存在重复下单现象。
• 设备交付和安装延误已将2026年的部分资本支出推迟至2027年，尤其是位于德国的12英寸晶圆厂。
• 尽管威世科技及其竞争对手已实施涨价，但通货膨胀成本和金属价格上涨仍然带来压力。
• 由于美国对海外收益征税以及利润回流税的影响，实际税率居高不下。
• 由于威世科技及其竞争对手均依赖外包供应商，半导体封测（后道）产能仍面临挑战。管理层将内部封测产能扩建视为提升利润率的关键举措。

分析师问答环节要点

管理层表示，工业电源、AI、汽车、国防和医疗应用领域的方案导入（design-in）活动十分强劲。更高的电压、电源效率和精度要求正在增加客户系统中威世科技元件的使用数量。

关于周期性复苏与“Vishay 3.0”战略之间的平衡，首席执行官Joel Smejkal表示，大部分增长反映了公司运营方式的结构性变化，包括更广泛的客户群、更高的市场份额、单客户物料清单（BOM）中产品数量增加以及具备竞争力的交付周期。

管理层表示，客户和分销商有意建立库存，但由于产品不断被消耗而面临困难。威世科技的全球分销商库存维持在18周，其中亚洲为12周，欧洲为15周，美洲为35周。

公司正在积极评估收并购（M&A）机会，并已与潜在标的举行了数次会议，计划在第四季度开展进一步讨论。管理层尚未宣布任何交易。

威世科技还在推进半导体封测战略，旨在整合生产、降低外包商成本并支持12英寸晶圆厂未来的产出。管理层表示希望在年底前公布更多细节。

业绩电话会议完整文字实录

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完整财报电话会议逐字稿

管理层陈述

Operator

Good day, and thank you for standing by. Welcome to the Vishay Intertechnology Q3 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Peter Henrici, Head of Investor Relations. Please go ahead.

Peter Henrici

Thank you, Ari. Good morning, and welcome to Vishay Intertechnology's Third Quarter 2026 Earnings Conference 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 third quarter 2026. 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 refer to a slide presentation, which we also posted on ir.vishay.com. You should be aware that during 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 uncertainties 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 Vishay's Form 10-K and Form 10-Q filings with the Securities and Exchange Commission.

We are including information in our press release and on this conference call on various GAAP and non-GAAP measures. We have included a full GAAP to non-GAAP reconciliation in our press release and in the presentation posted on ir.vishay.com, which we believe will be 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.

Joel Smejkal

Thank you, Peter. Thank you, everyone, for joining the Q3 2026 earnings call this morning. I'll start the call with a review of our third quarter performance, and Dave will take you through a detailed review of our financial results for the quarter and our guidance for the fourth quarter of 2026. After that, I'll update you on the strategic levers we are pulling to drive growth and profitability, and then we'd be happy to answer any of your questions.

For the third quarter, we are reporting revenue of $979 million, exceeding the top end of our guidance range of $945 million to $975 million. Revenue grew 7% compared to the adjusted revenue reported for the second quarter and 24% year-over-year. Demand remained robust among industrial, automotive, aerospace, defense and AI customers. At $979 million, we have set a record with the highest quarterly revenue in Vishay's history. All product technologies contributed to this new revenue high during a seasonal Q3. Our passive product lines gave an extra boost. Passives were 52% of quarterly sales. As a hybrid supplier of discrete semis and passive components, Vishay is uniquely positioned to sell more technologies across all market segments.

Bookings remained robust, increased 15% to reach a quarter end backlog of $2.2 billion or 6.6 months. Book-to-bill for Q3 was 1.29 with semiconductors and 1.28 -- book-to-bill was 1.29 overall with semis at 1.28 and passives at 1.31. Q3 bookings for resistors were at record highs, while the other technologies continued with strong bookings. Customers are driven to place larger quantity orders with longer visibility. With the overall market supply tight for high-demand semis and passives, more customers in all regions placed longer-term orders with extended forecast, in some cases, up to 18 months to ensure supply through 2027. End market consumption continues to grow, while the channels of OEM, distribution and EMS want to replenish inventories, this is challenging for them.

In response to these industry dynamics, we continue our focus on execution, serving our customers well and delivering on our promise that Vishay 3.0 is a different company. We're a reliable supplier, positioning with incremental capacity to scale with their growth requirements while maintaining competitive lead times. Customers recognize the capacity readiness business approach, which the Vishay 3.0 transformation has put into place. Customers in all regions give us feedback that we are not on their list as a risk supplier in this cycle. They say in past up cycles, Vishay was first to be on the risk supplier list. Everyone at Vishay today works very hard to support the customers with timely product delivery. They are creative and flexible when customer escalations arise.

As an example, Q3 compared to last year's Q3, customers have increased consumption of Vishay units through our distribution channel by 57%. Under Vishay 2.0, without the incremental capacity and the distributor inventory strategy, customer consumption would have been generally flat. Our strategy to expand part number count and to place deeper inventory on the distributors' shelves, staging inventory ahead of the up cycle under Vishay 3.0 was paramount. With inventory on the shelves of distributors, Vishay POS has grown significantly as parts are available to more customers and that had Vishay on their bill of materials. Previously underserved customers are now not only consuming available inventory, but expanding their product demand with us.

High-growth applications in industrial and AI power management are attracting new customers to our portfolio for passives and semiconductors. In short, we're doing a great job of increasing our customer count and our partner count, shifting more volume to more customers and leveraging more of our product portfolio. We have gained market share and keep expanding capacity to hold these gains and grow further.

Let's turn to Slide 3 to review the Q3 revenue, starting with revenue by end market. While each of our high-growth end markets grew in the third quarter, industrial maintained its dominance. Industrial revenue increased 12% versus Q2 and 43% versus prior year. You may remember that we saw the beginning of the industrial market upturn toward the end of 2024 due to our growing customer applications for high-voltage capacitors. The Americas posted strong growth with new projects supporting power management, smart grid, industrial automation ramping to mass production. We continue to see record demand levels for polymer capacitors associated with AI server applications. In Asia, demand remains strong for power supplies, AI power customers and high-voltage DC with a modest contribution from smart grid projects.

The number of our technologies being designed into power management continues to expand. Customers increasingly design in multiple passive components within their same power architectures, including current sense resistors, power resistors, high-voltage capacitors, inductors and magnetics and protection devices. This is contributing to increased part count on our customer bill of materials for industrial and AI server power. Customers continue to place orders for smart grid projects as we won another smart grid infrastructure program in the Americas. This one is related to Canadian data center builds and EV adoption.

In automotive, revenue grew 4% quarter-over-quarter and 7% versus prior year as customers began ramping new model year programs and China exports grew. Customers placed orders to secure delivery against forecast, including several EMS and OEM customers, which increased order coverage for 2027 programs. Aerospace defense revenue increased 4% versus the quarter and 23% versus last year, reflecting higher consumption levels by defense contractors in the U.S. and Europe as they continue to replenish components supporting funded weapons programs. Bookings growth in the Americas was robust, resulting in a book-to-bill of 1.64 at quarter end. Customers quickly moved their position and their backlogs as Department of Defense finalized contracts with the primes.

Health career revenue increased 1% versus Q2 and 13% versus prior year. In the Americas, customer seasonality dampened demand and bookings, while in Europe and Asia, demand for new portable devices drove volume gains. Our ongoing initiative to expand relationships with long-standing medical customers by leveraging the breadth of our portfolio continues to work. Bookings in Europe reached a new record as a customer added inductors to the bill of materials. In Asia, we expanded business with EMS customers concerned about tightening supply for inductors and resistors. In the other category, revenue was flat quarter-over-quarter, reflecting increases in power supply and telecom, offset by declines in consumer and PCs. Year-over-year, revenue grew 23%. With respect to demand for AI servers and server power, volume grew on higher consumption and market share gains.

Customers continue to add Vishay passive technologies to AI power management solutions with the percent of passive components increasing as industrial and AI topologies move to higher voltages and as AI requirements for higher power density, efficiency, heat dissipation, higher switching frequencies and precision sensing drive more Vishay passive usage. In telecom, customers supporting optical communication network switches, both 800 gigabits and 1.6 terabits drove significant volume increase.

Let's turn to Slide 4 for a review of revenue by channel. Revenue increased in the quarter and in each channel, led by distribution, which increased 9% quarter-over-quarter and 30% year-over-year and accounted for 76% of the total revenue growth. Distribution volume grew on strong demand for industrial, aerospace and AI customers. Distribution inventory was flat at 18 weeks and POS increased 5% quarter-over-quarter and 26% year-over-year with growth in each region. Bookings increased as distribution partners try to take proactive steps to replenish inventory and pull in backlogs, driven by lead time extensions and component price increases, along with demand momentum. OEM revenue was up 3% quarter-over-quarter and 14% year-over-year, reflecting solid demand from industrial, automotive and health care customers.

EMS revenue increased 6% quarter-over-quarter and 27% year-over-year, reflecting ongoing industrial aerospace, defense and automotive program ramps, while programs using more Vishay part numbers continued to fall at EMS. Orders from EMS customers reached an all-time high in the quarter. We see this as a vote of confidence in our Vishay 3.0 approach by offering competitive lead times as EMS customers support increasing demand and try to have some inventory of critical components.

Slide 5 is regions. Turning to our geographical mix on this slide. Asia continued to dominate revenue growth as strong demand for industrial power and AI servers, networks and related infrastructure drove sales growth. Revenue in the Americas grew 6% and 31% year-over-year on record level consumption from industrial and aerospace customers, especially for passives.

Before turning the call over to Dave, I want to thank the Vishay employees and our reps for their hard work as we continue to execute the Vishay 3.0 growth strategy. From all their hard work, we set an all-time high in revenue for Q3. Through their dedication to intensify customer engagements, we are supporting more customers, increasing our part count and product technologies and proving to our customers that we are a reliable supplier. The Vishay 3.0 team is focused on execution, driving revenue growth and gross margin expansion. Dave, I'll hand the call to you.

David McConnell

Thanks, Joel, and good morning, everyone. Let's start the review of the third quarter results with the highlights on Slide 7 -- sorry, Slide 6. Third quarter revenue was $979 million, exceeding our guidance range and increasing sequentially 10.2% on a GAAP basis and 6.6% on an adjusted basis, driven by strong volume growth of 5% and an increase in average selling prices of 2%. Compared to the third quarter of 2025, revenue increased 24%, driven primarily by a 20% increase in volume and a 4% increase in average selling prices.

Moving on to the next slide, presenting the income statement highlights. Gross profit was $249 million, delivering a gross margin of 25.5%, exceeding our guidance and representing an over 200 basis point increase versus the prior quarter. Higher volumes and improved pricing conditions drove margin expansion, helping to offset ongoing inflationary cost pressures. Depreciation expense was $56 million, slightly higher than our guidance due to accelerated depreciation on a transition of manufactured commodity product to buy resale. SG&A expenses were $157 million, an increase versus the second quarter, but in line with our guidance. Operating margin was 9.4% compared to 5.8% on an adjusted basis in the second quarter and 2.4% in the third quarter of 2025. EBITDA for the quarter was $146 million for an EBITDA margin of 14.9%, up from 11.4% in the second quarter.

Our GAAP effective tax rate is improving as profitability increases, but remains elevated as items such as U.S. taxation of foreign earnings and repatriation taxes continue to have a disproportionate impact on the effective tax rate. The Q3 effective tax rate of 32.4% came in below our guidance range as pretax earnings exceeded expectations. Earnings per share was $0.37 with no non-GAAP adjustments compared to $0.19 per share in quarter 2 and adjusted earnings per share of $0.04 in the third quarter of 2025.

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. All reportable segments delivered revenue growth quarter-over-quarter and versus prior year. Turning to Slide 9. In the third quarter, our cash conversion cycle improved to 106 days from 110 days in quarter 2, in part due to increased sales volume and our continued disciplined working capital management. DSO improved from 38 days in quarter 2 to 35 days, primarily due to higher revenues and the application of credits for tariff refunds. Inventory days outstanding improved to 101 days due to increased sales volume. Overall inventory remained relatively flat.

Continuing to Slide 10, you can see we generated $146 million in operating cash for the third quarter. Free cash flow for the quarter was $98 million, reflecting the increased operating income compared to $10 million in the second quarter. We continue to deploy cash for capacity expansion projects. Total CapEx for the quarter was roughly $48 million, slightly lower than expectations due to extended lead times on equipment deliveries and installation, particularly at our new 12-inch wafer fab in Germany. On a trailing 12-month basis, capital intensity was 9.8%, which is a decrease from the 10.8% in the prior year. Stockholder returns for the third quarter consisted of our $15.3 million quarterly dividend. We did not repurchase any shares during the quarter.

At the end of the quarter, our global cash and short-term investment balance was $1.1 billion. We used approximately $300 million of the proceeds from our June public stock offering to repay the outstanding balance on the revolver. Our cash and revolver capacity will be used to support an acceleration of our growth initiatives. At the end of the quarter, the full amount of the revolving credit facilities are accessible at the current EBITDA levels.

Okay. Turning to Slide 11 and the guidance. For the fourth quarter of 2026, revenues are expected to be $990 million, plus or minus $15 million. Our guidance includes the impact of year-end holiday closures. Gross margin is expected to be in the range of 26.0%, plus or minus 50 basis points, exceeding our goal of exiting the year at 24% quarterly gross margin by 200 basis points. Depreciation expense is expected to be approximately $54 million for the fourth quarter. SG&A expenses are expected to be approximately $157 million, plus or minus $3 million. Interest expense is expected to be approximately $6 million for the fourth quarter. Our GAAP effective tax rate remains elevated at these levels of pretax income or loss. We expect the effective tax rate to become more predictable and in the range of our historical average as earnings grow. For the fourth quarter of '26, we expect the effective tax rate to be between 30% and 35%.

CapEx for the full year is now expected to be in the range of $350 million to $400 million due to extended lead times on equipment deliveries and installation. During the fourth quarter, we plan to significantly reduce our accounts receivable securitization program. Due to this and our ongoing capacity expansion plan, we expect free cash for the full year '26 to be close to breakeven. Now I'll turn the call back to Joel.

Joel Smejkal

All right. Thank you, Dave. Let's turn to Slide 12 for a review of the strategic levers Vishay 3.0 is pulling to drive revenue growth, expand gross margins and enhance returns. Starting with capacity expansion. We have invested $253 million through Q3 in our facilities, nearly all of which was spent on incremental capacity. We had planned to spend between $400 million and $440 million in 2026, with about half of that amount earmarked for our 12-inch fab in Germany. Some spending has been pushed into 2027. Nevertheless, at our 12-inch fab in Germany, we continued equipment installation in the third quarter and did start up 90% of the equipment. Some equipment is next for system hookup in Q4 '26. We are preparing to start running engineering wafers in early '27. We are planning to start nonautomotive part number production in the second half of 2027.

At Newport, we successfully completed 3 additional automotive customer audits with high grades of a, wafer output is increasing around 10% per quarter as we receive more customer program approvals, which allow us to transfer wafer loading from Itzehoe to Newport. To support our AI customer demand, we have increased the fab loading at Korean foundries with wafer shipments at the end of Q3 to support Q4 '26 customer deliveries. We plan to further increase fab loading during Q4 and in the first half of 2027. On the passive side, automotive customer qualifications at our La Laguna and Juarez facilities are progressing well. In Japan, we have increased capacity of our polymer tantalum capacitor production with much further expansion of capacity underway in La Laguna.

We continue to qualify subcontractors during the quarter, adding outsourced commercial-grade diodes and resistors to our portfolio. In Q3 '26, we added over 17,000 SKUs with our distributors as available to sell products. In terms of innovation and new product development, we continue to execute on our silicon carbide strategy, releasing MOSFETs and diodes, which range from 650 volts to 1,700 volts. In Newport, we successfully completed the conversion of the silicon carbide manufacturing line to 8-inch engineering wafers. Across the Vishay business units, there are many new projects with all technologies and R&D to support industrial AI power and automotive road maps. The Electronica Components Show is in Germany -- Munich, Germany next week. We will continue to showcase and promote the Vishay solutions and reference designs, which support at least 80% of the products on the board in power applications.

In closing, Vishay reached a record revenue level for the third quarter, propelled by our hybrid footprint of discrete semiconductors and passives, which enabled 30% growth in distribution year-over-year. Vishay 3.0 is delivering results, which provide clear evidence that our growth and margin expansion strategy, our customer engagement focus and our business-minded approach works. We are positioning well to take full advantage of this market up cycle and the long-term demand trends, particularly as increasing power requirements and high voltage drive demand for all technologies. We are pushing hard to supply our customers while maintaining competitive lead times and to drive sequential revenue growth for this 12-week quarter in Q4. Ari, we'll now open up the call for questions.

Operator

[Operator Instructions] Our first question comes from the line of Christopher Glynn of Oppenheimer.

分析师问答

Christopher Glynn

Congrats on the results, nice showcase for 3.0. Curious about what you're seeing in terms of the current pace of design wins kind of at the leading end of your go-to-market upgrades, just kind of win rates, what's rolling in, in pipeline and such ahead of actual win rates.

Joel Smejkal

Okay. Power. Industrial power is one of the leading design-in activities. We see a lot of high-voltage requests, capacitors, resistors, circuit protection, MOSFETs, diodes, all of the technologies with high-power industrial. The design activity continues to be very strong. We have a CRM, a new CRM in the company, which is the opportunity management. Engineers, FAEs, sales reps are ending their design. So the design activity is good in industrial. AI, we continue to meet with the AI chipset companies to get more passives, MOSFETs and diodes on their bill of materials. So we're gaining there, not to put any specific numbers on it at this point, but we are gaining. We see it in the orders that we're receiving in Asia for AI through EMS customers. Automotive continues to be a strong part of our business with strong design in as well and then military defense and medical. So I would say design activity is strong. We haven't seen any slowdown in new programs because of the trending to higher voltages and greater efficiencies and precision.

Christopher Glynn

I appreciate the global comment. I wanted to -- auto is a little different, I think, just in terms of light vehicle production, not really a growth sector. I know there's content and share aspects, but all your other verticals really have distinctive long-term growth drivers. So in auto, you talked about new model years, suggests maybe some stocking going on. You've had a great year in auto. Would we think that auto would be one area that probably levels off for you within the next quarter or 2?

Joel Smejkal

Well, you mentioned it right. The car count seems to be generally flat. But the new program launches for EV, traction inverters, ADAS, power management in the vehicle, DC to DC, we continue to see more and more demand for our products. Quite happy with the growth in resistors in automotive, capacitor opportunities with polymer tantalum coming, film capacitors as well with DC link. So across capacitors, always inductors, IHLP products is there. So automotive, because of the increasing electronic content, we see it flat next quarter, it's a 12-week quarter. They are trying to build inventory versus just having products be delivered for consumption. Not a lot of success in building inventory. Most of what we ship is in programs. But we continue to see automotive flat for the next quarter, but continuing to move up with more content. We like the release of these new EV programs because Vishay has strong positions there.

Operator

Our next question comes from the line of David Williams of Needham.

David Williams

Let me also add my congratulations on the really solid results here. Maybe first, Joel, are you seeing any scenario maybe develop where the critical components are in shortage and you've got some inventory building, maybe around some of the adjacent components. Just trying to understand how you're seeing that demand environment. And could we get into another scenario where it's the golden screw effect that could potentially be an issue down the road?

Joel Smejkal

We hear about the shortages of PCBs in some cases, more in AI, but here somewhat in automotive. Hasn't been a showstopper. When we talk to our distributors, EMS customers and OEM across all regions, they say, we'd like to build stock. We'd like to have inventory, but it's a challenge because parts are being consumed. We look at the POS that goes through distribution with the number of components 57% up year-on-year, that's a POS number. That's the consumption of Vishay products. Distributors would like to put more on the shelf. They haven't been able to restock. You've seen our weeks of inventory be 18 weeks now, 2 quarters in a row. We shipped much more POS -- POA to the distributors in the quarter versus Q2, but it went out the door. So we watch for double ordering. I can't say we can say it has any significance at this point. Looking for shortages that might impact in the golden screw, we continue to have customers say ship. We'll take the product, just ship it. So we're watching the inventory, David. I haven't really seen that anybody can build significant inventory yet.

David Williams

And then maybe just from the pricing environment. I know you're holding the pricing really to just inflation here. But just curious if you're seeing anything maybe irrational from your competitors that maybe helping lift your share opportunities? And just kind of given where EMS is reaching an all-time high in bookings, it feels like you certainly are seeing the share gains there. But just kind of curious how the pricing environment is developing and how that's helping you gain share.

Joel Smejkal

We started with price increases in the first quarter of this year and with all of the technologies of Vishay's 17 business units. It hasn't been all at once. So we've seen price increases each quarter. and there's still some new price increases coming in the fourth quarter. Competition is doing the same thing. Everybody has the metal impact. So we pass it along. Our competitors seem to be passing it along. The customers understand it. They don't like it, but they understand that the costs are there. They also understand that the demand for the components is high, and they see Vishay's new strategy as channel management. We look at the customers that are providing us better margins, and we're loading the factories to be able to support the higher-margin customers. I think you see that in how our gross margin moved in Q3 versus the guide and how the margin turned out in Q3 versus Q2.

So we're actively managing our business. We're passing on price increases. EMS and others are looking at supply assurance as the #1 priority, where I think we're positioning well here. The EMS highlight, all-time high in orders. EMS is really focused on lead time. You got to have competitive lead time first. We have that. So then the pricing, if it's reasonable, you gain the order, you gain the share, and I think that's what we're seeing.

David Williams

It's great to see the strategy really working here, Joel. So congratulations on that and looking forward to seeing your continued success.

Operator

Our next question comes from the line of Will Stein of Truist.

William Stein

Congrats on the great results and outlook. Joel, for investors trying to distinguish between the cyclical strength that we know is present today and the structural improvements from Vishay 3.0, what can you tell us to help us quantify the contribution from each of those?

Joel Smejkal

Structural improvements is a big step here. When we look at gaining customer count, gaining share, putting more products on the customer bill of materials, those are 3 big things. The comments that we're receiving from customers, very openly, one of our sales leaders went to a customer in Asia, and they said, "What are you doing here?" And he said, "What do you mean?" He goes, "You're not on my risk supplier list. Why are you here?" Well, we're here to support you further, Mr. customer. We're here to show that Vishay has got competitive lead times. I think that's a great story of how the structural change of Vishay is resonating across all regions.

Customers love Vishay's product. When you can deliver the product and you can continue to bring new technologies, the customer wants to bring you into deeper discussions into their technology road map. So I think a lot of this growth is structural change. We're enjoying the cyclicality of the market and the many market segments that are up, but a majority of this is the change of Vishay's operating approach in 3.0.

William Stein

The other question I had was also related to the Vishay 3.0 progress. I think there's a project that we've been waiting to hear about that I think relates to back-end assembly of semiconductors and I was hoping we could get some update on that -- on those plans.

Joel Smejkal

Great. Back end is an important strategy in our margin improvement. We've mentioned in the past, we have our own fabs that finish -- our own back end that finished product for us after the wafers come from the fab, but we also use a high number of subcontractors. So the back-end strategy is moving quickly. Don't have anything to announce at this moment. It's moving at an excellent pace. We have it as a primary margin improvement initiative -- so we hope in the next -- by the end of the year, we hope to be announcing something. It's moving quickly.

Operator

Our next question comes from the line of Ruplu Bhattacharya of Bank of America Merrill Lynch.

Ruplu Bhattacharya

Joel, can you give us an update on the qualification process you had with external foundries? How much of the production is now outsourced to foundries? And I think you said AI related to the Korean foundries. How much is the total AI revenue this year that you're expecting? And I have a follow-up.

Joel Smejkal

Outsourcing, when we -- if we just speak about the wafer foundries, it's 35% of our wafer build, 35%. We -- as I mentioned, Newport, we're loading another 10% every quarter to the wafer build there. We're shifting as we get programs from automotive quals, we're shifting the load from Itzehoe to Newport. And then we're able to use Itzehoe, which is a more flexible fab. It's kind of the umbrella fab to deliver products to all market segments. Ruplu, the second part of your question was?

Ruplu Bhattacharya

Was on AI. AI revenue.

Joel Smejkal

AI revenue last year, we were around $100 million. This year, we keep pushing to be near $200 million is what our push is.

Ruplu Bhattacharya

Just a follow-up on the moves in terms of the footprint. When you -- beyond the back-end packaging, when you look at the fabs that Vishay has, do you see any scope or is there a plan to move some of the fabs from high-cost geographies to low-cost geographies? And can you give us an update on your CapEx cadence over the next couple of years?

Joel Smejkal

Always looking at efficiencies in manufacturing and cost. So when you think about back end in particular, the outsourced fabs, many, which may only be building one package type. We need to bring this into a campus, into a Vishay campus so we can maximize the capacity we're going to put in that campus across a lot of different products and reduce cost. Reduce the margin we pay for the subcon and have this in-house. We'll take similar looks at our own locations internally. There will always be a move for expansion of product because we need more capacity. We've got a 12-inch fab coming, which is going to bring us a lot of wafer volume, and we need large-scale back end. So the back end will be supporting the 12-inch, will be subcon moving into Vishay's back end. We'll be also looking at our own locations and maximizing our margins on those products. Take the CapEx one.

David McConnell

So Ruplu, on the CapEx, good question. So we'll have more for you on the next call, obviously, related to '27. As we've been discussing, the capital intensity certainly drop in terms of our revenues are going up. We don't have 2 fabs at the same time we're building. That being said, back-end location may require some CapEx, finishing the 12-inch fab completely filling it will require CapEx. But what's going to be different is we're going to have government subsidies most likely on both those projects. So we may have a net CapEx that's much lower than our current run rate.

Ruplu Bhattacharya

And if I can just squeeze one more in. Joel, you've been working with distribution to add a lot of your SKUs into distribution. How do you see the total inventory of Vishay products in distribution? Is there more scope for selling into distribution? Do you see distributors pulling more inventory as end market demand improves? Any thoughts on just overall inventory of Vishay products at distribution?

Joel Smejkal

Yes. We continue to drive the distributor strategy with great intensity. We're at 18 weeks of inventory, it was pretty flat. That's a global number. The Asia number, Dave, what do you have, 12 weeks of inventory in Asia. It's low. We want to put more products on the shelf in Asia. They want to stock, but they're having pull through, and they're not able to put much of inventory. Some of these part numbers are not at 12 weeks. Some of them might be at 3, 4 weeks. So we need to enhance that further. Dave, what do you have there for the Americas?

David McConnell

The Americas is at 35 and Europe at 15.

Joel Smejkal

So both the Americas and Europe, more inventory. We're having great success by having parts on the shelf. When we were putting inventory in place in '24 -- '23, '24 and '25, I know many folks are saying, why are you doing that? Well, it was to get ready for this upturn. And it's been fantastic market share gain for Vishay because the distributors absorbed the first wave of demand. So yes, we want to put more on the shelf. The distributors want to pull in more of the backlog, they'll take it because they're not comfortable with their inventory position. They can satisfy more customers if you have the product on the shelf. So we continue to push. You see the part number add of 17,000 SKUs in the quarter. It's great. We've added a tremendous amount of part numbers to the distributors, which puts us into much more of the spend at the customer.

Operator

Our next question comes from Melissa Fairbanks of Raymond James.

Melissa Dailey Fairbanks

Maybe to follow up along the same thread, with the extended lead times for the equipment and tooling, is there a potential risk that those delivery times slip further next year? Or do you actually have firm supplier commitments to deliver as needed next year?

Joel Smejkal

The equipment that's in Itzehoe12 is landed, and we're doing the final connections. So the Itzehoe 12 is going to help us in the middle of next year with the commercial nonautomotive MOSFET. That's a good help, a good start. The AI business that we're running through Korean foundries, we've got upside capacity available there. Back end is always challenging because there's a tremendous amount of even our competitors using outsourced back end. So we need to continue to accelerate our initiative. Nothing that's going to derail at this point. We're able to support the customers. Passives, we continue to debottleneck processes, might be adding lasers or packaging equipment plus an expansion in polymer tantalum, which will be equipment lending throughout 2027.

It's definitely an exciting and robust environment. There's challenges always, but our teams have worked very hard to keep our lead times competitive or better than competition, so the customers keep coming to us. We've got a company-wide push of lead times of 26 weeks or less. That's our target. Much of our product line is there. There are some parts that are longer, but we've got capacities that are coming quarterly to reduce those lead times.

Melissa Dailey Fairbanks

Maybe just as a quick follow-up to that one, and then I'm probably going to try to squeeze in another question after that. I know the equipment and tooling lead times have been an issue for quite some time. We've kind of seen this going on in the industry for 2 or 3 years at least. Is this changing the way that you think about adding capacity? Do you want to be advantageous if you're able to get tooling and capacity to bring that -- at least bring it -- land the equipment and then have it in place for when the demand requires it?

Joel Smejkal

Definitely. If you look back, when we announced in 2023 that we're going to spend $2.6 billion, that was the beginning of that approach. We had to prepare for this up cycle that was coming. I think what has Vishay in a little different position than others is we spent significant CapEx in 2023, 2024, 2025. So we had orders in at these houses for tooling or for the equipment and the equipment landed. So now it's small pieces of equipment. It's some tool or packaging material for core packaging. It's not a complete process that you're looking for in semiconductors. We've got Newport equipment for silicon. We've got our silicon carbide equipment in Newport that we're setting up as 8-inch wafer fab. So that equipment is there.

We've got the 12 equipment being put in place and being cooked up. So that's there. I think we're ahead by the spending that we did in '23, '24 and '25. We're not seeing -- I mean, when we buy some tooling, we see long lead times, but it's not where we have a product line that's stalled out waiting for 2-year equipment delivery. We're not seeing that. It's bits and pieces.

Melissa Dailey Fairbanks

And yes, great strategy over the past few years. Maybe if I can squeeze in one follow-up, not a follow-up, just a different question. So it's great to see cash -- operating cash flow and free cash flow improve pretty dramatically. At the same time, obviously, cash cycle days have been declining pretty significantly. Is there a rough estimate that we can use to understand what each reduction in cash cycle days means for free cash flow? Or does that vary depending on what's going on in the market?

David McConnell

Yes, I would say it varies. I mean, we're generating -- as you can see, we're generating some good operating cash now. And this is -- turnaround, obviously, from 3 quarters ago or 4 quarters ago. But yes, we did guide approximately 0 for the year on free cash because we're going to repay our securitization, which help us get through some of the leaner quarters on the free cash flow.

Operator

Our next question comes from the line of Christopher Glynn of Oppenheimer.

Christopher Glynn

Just a quick one on capital allocation, kind of how is the pipeline looking? And also curious just your operational capacity and interest for maybe inorganic growth right now given just the really extensive range of various capacities that you're working on currently?

Joel Smejkal

Capital allocation, expanding capacities, the semiconductor back end, the Itzehoe12-inch continuing that fab. That fab has got multiple stages. The passive expansion with the capital that we have now, we're able to accelerate tantalum polymer expansion and other passive.

Christopher Glynn

Yes. Sorry, Joel. I mean I might have cut out. I didn't mean to make you repeat yourself. I think I might have cut out a little bit. I was wondering about the inorganic side, if that's even a priority now given all that you do have going on in the internal network.

Joel Smejkal

The M&A activity? Yes, we're looking at M&A activities. A number of meetings have happened and more meetings to happen in the fourth quarter with potential targets. So we are actively on the M&A path as well. Nothing to announce yet, but that is a priority.

Operator

I'm showing no further questions at this time. So I would like to turn it back to Joel Smejkal for closing remarks.

Joel Smejkal

All right, Ari, thank you. Thank you, everyone, for joining us today. Before we hold our fourth quarter call, which is in February 27, we will be at Raymond James on December 8. We'll be presenting at Raymond James in person. And also we'll be at the Needham Growth Conference in January. So hopefully, to see many of you there. Thank you very much. Have a good day.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.