Vishay-Israel: Plant Tours: 1999- High Tech In The Promised Land

“We’re not going to have a country here unless we have industry.”- Shimon Peres
August 1999, Edition Passive Component Industry Magazine
By Dennis Zogbi

Dr. Felix Zandman, Founder of Vishay (L) and Dennis Zogbi, Founder of Paumanok Publications, Inc. and Owner of Passive Component Industry Magazine (R)


Introduction:
The contrast in the middle of the Negev desert is surreal. There are camels, donkeys and sheep tended by Bedoins; Galils and M-16s tended by soldiers; a constant sun, whose heat can only be described by the pages of The Old Testament; and then, between all this, there is one of the largest tantalum capacitor production plants in the world.

The contrast is not lost of the Vishay Intertechnology management, owners and operators of the Dimona plant; that in this ancient corner of the world, which has largely remained unchanged for 2000 years; electronic components are made that are an integral part of personal computers and cellular telephones.

And while Vishay has four primary production facilities here in Israel, the Dimona plant stands out for its singularity in the worldwide capacitor industry. There are in fact so few tantalum capacitor production plants in the world compared to other types of capacitors, because of the tremendous difficulty in making these high capacitance, low voltage, surface mount devices (some 52 steps, compared to MLCC production, which takes about 25 steps).

There are other facilities on par with Dimona. Kemet’s Greenville, North Carolina Tantalum plant; AVX’s Lanskrovn, Czech Republic plant, and NEC Tantalum Corp’s Thailand facility, each with 1 billion+ tantalum capacitor production capability and each of course in its own distinct and interesting part of the world; but of course, in no other part of the world will you pass signs pointing toward Bethlehem and Nazareth as you travel toward a tantalum capacitor plant.

About Vishay:
The facts are that Vishay Intertechnology, Inc., is one of the world’s largest manufacturers of passive electronic components (1999 calandar revenues are forecasted by Paumanok to be between $1.6 and $1.7 billion, with about $1 billion in passive component revenues; comprising all capacitor dielectrics; resistor products; and magnetic components, with major competitive positions in tantalum, film and ceramic capacitors; nichrome, wirewound, flat chip and network resistors and wirewound inductors); and there is no doubt that even though the direction of the operation are located in Malvern, Pennsylvania, the heart of the company is located in Israel.

In the first half of 1999, Vishay operated four production facilities in various parts of Israel, employed 3,000 there, and generated approximatley $330 million U.S. dollars in revenues from their Israeli operations, of which about 90% is derived from exports to European, Asian and American customers.

This is of course, ironic, given the difficulty Dr. Felix Zandman, president and chairman of Vishay Intertechnology, Inc. had in setting up production operations in Israel back in the 1960’s, and again in the 1980’s when he wanted to buy Dale Electronics and relocate production to Israel to take advantage of the low-cost labor and high work ethic evident in the region.

Back in 1966, when Vishay (named after the Lithuanian village where Dr. Zandman’s great-grandparents, Chaya and Sender Solnicki lived) was doing about $6 million in sales of the surface mount resistor (metal foil on glass substrate) , which was conceived by Dr. Zandman through his work on stress measurement at Budd Industries in 1960; the company decided to gamble on opening a factory in a suburb of Tel Aviv, to emulate the production process for the flat chip resistor Vishay had perfected in their Malvern, Pennsylvania operations. For the first year it was dificult for his new Israeli employees to produce the flat chip resistor, because it was their nature to attempt to improve upon its design; and not simply mass produce the product. After one year however, production became much smoother and Vishay had a foothold in Israel.

In 1985, Israel began to play a major role in the future of Vishay Intertechnology, Inc. when the company attempted to buy Dale Electronics from The Lionel Train Company (and yes, that is the producer of the model trains). It was, and has consistenly been the basic Vishay acquiistion strategy to purchase companies and move a part of their production to Israel to increase margins through low wages and tax incentives offered by the Israeli government.

But getting special treatment from the Israeli government back in 1985 was a difficult matter. In fact, Vishay representatives could not even get a meeting withYigael Cohen-Orgad, the Minister of Finance, who seemed to constantly avoid them. Instead, it was the Prime Minister, Shimon Peres, who finally agreed to a meeting with Dr. Zandman, and got the ball rolling; but the catch was that Israel would be willing to support Vishay’s growth in the region, but there would have to be certain compromises. First, and most important, was that the government wanted the plant to be located in the middle of the Negev desert at Dimona, in a region where unemployment was extremely high. This seemed untenable at first to Vishay, but Vishay also wanted Israel to change its policy regarding taxation on foreign corporations. Vishay wanted the Bank of Israel to view money taken out of the Vishay-Isreal operations as an expense of the company instead of a dividend. Vishay would use the revenues derived in Israel to pay back the debt realized in the purchase of Dale Electronics. If the Bank of Israel viewed the money that Vishay relaized in Israel as going toward a debt payment it should theoretically be viewed as an outside purchase of capital equipment, which would be subjected to a much lower tax rate than if it was viewed as a dividend. The Bank of Israel resisted this plan however; so in order to secure an amiable resolution, Vishay agreed to use only after-tax profits generated from export sales from Israel to pay down the debt from the purchase of Dale Electronics. They also agreed to make Dale a subsidiary of Vishay-Isreal. This would give the Israeli government access to information regarding Vishay employment and the flow of money into and out of the country. Thus, in effect, the government of Isreal became a partner in Vishay Intertechnology, Inc. And thus, Vishay’s second plant in Israel, the Dimona plant was born in a 350,000 square foot, former automobile brake manufacturing plant.

Dimona, eventually became the second, prime manufacturing location for Dale Electronics (in addition to their primary plant in Norfolk, Nebraska); and over the past ten years has produced a large portion of the world’s nickel chromium and wirewound resistors under the Dale brandname. Thus after 1985, Vishay operated two production plants in israel, both for resistors; the Holon plant in the suburbs of Tel Aviv and the Dimona plant in the middle of the Negev desert.

By 1990, Vishay’s Dimona plant employed 500 people and generated $30 million U.S. dollars in revenues. But it was time for plant expansion. Vishay had acquired the world reknowned Sprague Electric from Carl Lindner, a financier from Cincinnati, who in turn had bought it from General Cable, a Penn Central subsidiary. Sprague had been in financial difficulty after the company invested heavily in the semiconductor business and faced stiff competition from larger American and Japanese semiconductor manufacturers. Sprague controlled a considerable portion of the worldwide tantalum capacitor business in 1990, and could be profitable if a portion of production was moved to the Dimona plant in Israel. Having established a track record with the Israeli government and meeting their five year goal with respect to Isreali employment and revenues with their transplanted Dale operations, Vishay found it much easier transplanting the Sprague tantalum capacitor operations to Dimona, not only obtaining their usual 38% grant for equipment, but also an additional 10% reduction in Israeli income taxes. Thus the Dimona Plant #2 was born to house the production of tantalum capacitors; the entire process emulated from Sprague’s Sanford, Maine USA operations, including tantalum pellet pressing, anode firing, cathode formation, wire attach and de-attach, molding and coating, termination, test, tape and reel. Dimona supplies tantalum capacitors to the worldwide cellular telephone, portable and desktop computer and automotive engine control unit markets worldwide.

The next, and one of the largest aquisitions by Vishay that also had an Israeli connection was the purchase of Vitramon from Thomas & Betts Corporation in 1994. It had become apparent in the worldwide ceramic capacitor industry that Thomas & Betts wished to sell their Vitramon operations after they themselves purchased American Electric Products and assumed almost $500 million in debt in the process. The management of Thomas & Betts, led by CHB and CEO Kevin Dunnigan, made it clear to the industry that there would be a premium for their Vitramon subsidiary since it was one of the last large MLCC houses in the world that could be purchased and one that had a good market share in terms of dollar revenues (Thomas & Betts was asking $225 million for Vitramon at the beginning of negotiations with Vishay). Vishay needed the MLCC technology to compliment their tantalum capacitor (Sprague), and DC film capacitor businesses (DC film capacitors are embodied by Vishay’s Roederstein division, a purchase which was negotiated at the same time the Sprague operations were acquired in 1990). At the time it was apparent to Vishay that Vitramon needed a $100 million investment to expand production capacity. Vitramon’s MLCC had an excellent reputation for quality and the company was working three shifts, seven days a week to keep up with demand and they desperately needed additional production capacity. Thomas & Betts needed capital to buy down debt from their purchase of American Electrical Products and did not have the money for further investment in Vitramon. Thus, in July of 1994, Vishay paid Thomas & Betts $184 million U.S. dollars for the division (a nice compromise between what Thomas & Betts wanted for the company and what Vishay was willing to pay).

Vishay relocated about one half of Vitramon’s unit production to Migdel haEmek in northern Israel, once again emulating the entire production process of Vitramon in Monroe, including titanate milling and formulation; wet stacking on computerized doctor blades, electrode formulation; body firing, termination dipping, test, tape and reel. Migdal haEmek was the only Vishay-Israel plant constructed from the ground up and is therefore the nicest, most modern plant Vishay has in Israel. Migdal haEmek supplies MLCC to the worldwide automotive electronic subassembly industry, which is its prime customer base (high reliability MLCC).

Holon Plant:
The oldest continual operation owned by Vishay-Israel is in Holon, a suburb of Tel Aviv. This plant also serves as the Vishay-Israel corporate headquarters. Holon is a specialty resistor plant, and is the transplanted Vishay Resistive Products operation from Malvern, Pennsylvania. The Holon plant has been in continuous operation since the early 1960’s; and the building has been expanded both laterally and vertically over the past 33 years to achieve its current 80,000 square foot mass today. Vishay’s Holon plant specializes in the production of bulk metal foil (nickel-chromium) resistors in chip, leaded and network configurations. The majority of resistors produced in Holon are manufactured by hand. The factory employs 530 people in six floors; it is an extremely busy plant, producing specialty products for demanding customers in the military, medical, downhole pump and instrumentation business, where volume is low, but average unit prices are extremely high (Dr. Zandman describes the profits from the Holon operations as what enabled them to purchase Dale Electronics in 1985). The Holon plant is labor intensive, with a large portion of production, testing, packing and shipping accomplished by hand. The employees are predominantly Russian women who work extremely diligently. The labor force in Holon is trully one of Vishay’s unseen assets. A small automated nickel-chromium resistor line is included on the first floor of this plant, but it may be moved to Beersheba in the near term.

Dimona Plant:
The Vishay capacitor and resistor plant located in Dimona, a desert community about 30 miles from Beersheba is dedicated to the production of tantalum capacitors and flat chip resistors. The tantalum capacitor operations have been transplanted from Vishay’s Sprague facilities in Sanford, Maine and Tours Cedex, France. The flat chip resistor operations, while employing patented technology from the company’s Roederstein purchase, is basically a new product line for the company. The flat chip resistor operations are highly automated, with resistor body development, termination, test, tape and reel a computerized, modern process.

The tantalum operations are quite impressive and self-contained. The company recieves processed capacitor grade tantalum powder from one of three noted worldwide vendors (i.e. H.C. Starck, Cabot Corporation and Nigxia Non-Ferrous Metals), which they then press into anodes, fire, and then grow layers of manganese dioxide and carbon. The tantalum capacitors are then packaged either into leaded, molded or coated chips, and sold to various industries, including the cellular phone, computer subassembly (motherboards and disc drives) and automotive electronic subassembly (primarily engine control units) markets worldwide.

Migdal haEmek:
This is the location of the Vitramon division’s multilayered ceramic chip capacitor manufacturing plant in Israel. Certainly the most modern of the Vishay plant’s in Israel, this operation was constructed from the ground up at a cost of about $100 million U.S. dollars. An enourmous facility, the operation still has considerable room for expansion (as do all the Vishay operations in Isreal, except for Holon, which is at capacity). The Migdal haEmek plant includes ceramic titanate material production from precursors. Titanates are also milled to submicron levels after they are received from the merchant market before they are screened into dielectric layers through computerized doctor blade machines.

All electrode and termination materials are purchased from the merchant market as paste and applied to the dielectric layers using sophisticated computer controlled equipment.

The MLCC production process at Migdal haEmek is unique and proprietary and part of the intelectual property received in the purchased of Vitramon by Vishay from Thomas & Betts in 1994.

The most impressive portion of the Migdel Hamek facility is the quality control and testing operations, which are in-depth; and a combination of automated and labor intensive test and inspection of finished MLCC.

Beersheba:
The Beersheba operations are located about 30 miles from Dimona. In fact, some partial production of dipped tantalum capacitors has actually been moved from Dimona to Beersheba. In fact, not only are the dipped tantalum capacitors produced at Beersheba automated, they are mobile as well; and the process can be moved to various production locations quite easily.

Beersheba is the result of the transference of a large portion of the Dale resistor operations (Vishay’s first major purchase in 1985). The resistor operations at Beer Sheva are nickel chromium film and wirewound; and compliment the operations in Holon. Beersheba is also home to a portion of Dale’s inductor operations. Dale’s primary research & development and partial production of inductors occurs at the Dale facility in South Dakota.

Summary:
Thus, between 1966 and 1999, Vishay Intertechnology has built a remarkable presence in Israel; in fact, growing production of passive electronic com ponents from less than $1 million USD to $330 million USD, which represents an average annual growth rate of about 17% per year over the last 33 years.

At press time it was announced that Vishay has set in motion plans to use the available square footage in the Dimona plant to begin finishing operations for the Power Mosfets built by Siliconex, a new acquisition by Vishay in 1997.

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