Greetings. Welcome to Vishay Intertechnology Fourth Quarter End of Year 2021 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Peter Henrici, Head of Investor Relations.

Thank you, Sherry. Good morning and welcome to our fourth quarter and year 2021 conference call. With me today are Dr. Gerald Paul, Vishay's President and Chief Executive Officer and Lori Lipcaman, our Executive Vice President and Chief Financial Officer. As usual, we'll start today's call with the CFO who will review Vishay's fourth quarter and year 2021 financial results. Dr. Gerald Paul will then give an overview of our business and discuss operational performance, as well as segment results in more detail. Finally, we'll reserve time for questions and answers. This call is being webcast from the Investor Relations section of our website. The replay for this call will be publicly available for approximately 30 days. You should be aware that in today's conference call, we will be making certain forward-looking statements that discuss future events and performance. These statements are subject to risks and 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. In addition, during this call, we may refer to adjusted or other financial measures that are not prepared according to generally accepted accounting principles. 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 that we also provide. On the Investor Relations section of our website, you can find a presentation of the fourth quarter and year 2021 financial information containing some of the operational metrics Dr. Paul will be discussing. Now, I turn the call over to Chief Financial Officer, Lori Lipcaman.

Thank you, Peter. Good morning, everyone. I am sure that most of you have had a chance to review our earnings press release. I will focus on some highlights and key metrics. Vishay reported revenues for Q4 of $843 million. EPS was $0.25 for the quarter. Adjusted EPS was $0.62 for the quarter. The only reconciling items between GAAP EPS and Adjusted EPS are tax-related. There were no reconciling items impacting gross or operating margins. Yesterday, Vishay announced the Stockholder Return Policy whereby Vishay will return at least 70% of annual free cash to stockholders directly in the form of dividends or indirectly in the form of stock repurchases. For 2022, we intend to return at least $100 million. As a direct result of a change in tax law in Israel during the fourth quarter, the company made the determination that substantially all unremitted foreign earnings in Israel are no longer permanently reinvested. The distribution of these foreign earnings to the United States will initially be used to fund the stockholder return policy. We recorded additional tax expense of $53 million during quarter four as a result of this tax law change in Israel. Revenues in 2021 were $3.240 billion, up by 29.5% from the prior year. Gross margin was 27.4%. Operating margin was 14.4%. There were no reconciling items to arrive at adjusted operating margin. EPS was $2.05, adjusted EPS was $2.32. EBITDA was $618 million or 19.1%. There were no reconciling items to arrive at adjusted EBITDA. Revenues in the quarter were $843 million, up by 3.6% from the previous quarter and up by 26.4% compared to the prior year. Gross margin was 27.3%. Operating margin was 14.4%. There were no reconciling items to arrive at adjusted operating margin. EPS was $0.25, adjusted EPS was $0.62. EBITDA was $160 million or 18.9%. There were no reconciling items to arrive at adjusted EBITDA. Reconciling versus prior-quarter operating income Q4 2021 compared to operating income for prior quarter based on $29 million higher sales or $37 million higher sales excluding exchange rate impacts. Operating income decreased by $2 million to $122 million in Q4 2021 from $124 million in Q3 2021. The main elements were average selling prices had a positive impact of $11 million representing a 1.3% ASP increase. Volume increased with a positive impact of $14 million equivalent to a 3.2% increase in volume. Variable costs increased with a negative impact of $4 million primarily due to increases in logistics and materials and services, not completely offset by cost reductions. Fixed costs increased with a negative impact of $13 million primarily due to higher repairs and maintenance costs, R&D expenses, and other individually insignificant items. Inventory impacts had a negative impact of $6 million. Exchange rates had a negative effect of $3 million. Reconciling versus prior year, operating income Q4 2021 compared to adjusted operating income in Q4 2020 based on $176 million higher sales, or $187 million excluding exchange rate impacts. Adjusted operating income increased by $62 million to $122 million in Q4 2021 from $60 million in Q4 2020. Main elements were average selling prices had a positive impact of $28 million, representing a 3.4% ASP increase. Volume increased with a positive impact of $76 million, representing a 23.2% increase. Variable costs increased with a negative impact of $5 million, primarily due to increases in cost of materials and services, metals, labor, and logistics, not completely offset by manufacturing efficiencies and cost reduction efforts. Fixed costs increased with a negative impact of $25 million, primarily due to annual wage increases and higher incentive compensation, as well as general inflation. Inventory impacts had a negative impact of $2 million. Exchange rates had a negative effect of $8 million. Reconciling the full-year 2021 versus 2020, operating income for the year 2021 compared to adjusted operating income for the year 2020 based on $739 million higher sales or $704 million excluding exchange rate impacts, adjusted operating income increased by $254 million to $468 million in 2021 from $214 million in 2020. The main elements were average selling prices had positive impact of $32 million representing 1.0% ASP increase. Volume increased with a positive impact of $307 million representing a 26.2% increase. Variable costs remained on the same level as 2020 primarily due to increased manufacturing efficiencies and cost reduction efforts which offset higher metal prices, customs and duties, labor costs, materials and services, and logistics. Fixed costs increased with a negative impact of $68 million primarily due to annual wage increases, higher incentive compensation, as well as general inflation. Inventory impacts had a positive impact of $12 million. Exchange rates had a negative effect of $29 million. Selling, general, and administrative expenses for the quarter were $108 million, higher than expected due to individually insignificant items. Selling, general, and administrative expenses for the year were $420 million. For Q1 2022, our expectations are approximately $112 million of SG&A expenses. The increase is primarily due to wage inflation and uneven attribution of stock compensation expense. For the full-year 2022, our expectations are $445 million of SG&A expenses. Based on our cost cycle, our SG&A expenses are expected to be at the highest quarterly level in Q1. The debt shown on the face of the balance sheet at quarter-end is comprised of the convertible notes due in 2025, net of debt issuance costs. There were no amounts outstanding on our revolving credit facility at the end of the quarter. However, we did use the revolver from time to time during Q4 to meet short-term financing needs, and expect to continue to do so in the future. No principal payments are due until 2025, and the revolving credit facility expires in June 2024. We had a total liquidity of $1.7 billion at quarter-end. Cash and short-term investments comprised $921 million, and there were no amounts outstanding on our $750 million credit facility. Total shares outstanding at quarter-end were $145 million. The expected share count for EPS purposes for the first quarter of 2022 is approximately $146 million, excluding any impact of share repurchases. The full-year effective tax rate on a U.S. GAAP basis was approximately 31%, which mathematically yields a rate of 68% for quarter four. The fourth quarter and year-to-date GAAP rates include additional tax expense of $53 million as a direct result of an Israeli tax law change. The year-to-date GAAP rate also includes a tax benefit of $5.7 million due to the reversal of deferred tax valuation allowances in certain jurisdictions, and benefits of $8.3 million due to changes in tax regulations recorded in earlier quarters. Our normalized effective tax rate, which excludes the unusual tax items, was approximately 22% for the year and 21% for quarter four. We expect our normalized effective tax rate for the full year 2022 to be between 22% and 24%. Our consolidated effective tax rate is based on an assumed level and mix of income among our various taxing jurisdictions. A shift in income could result in significantly different results. Also, a significant change in U.S. tax laws or regulations could result in significantly different results. Cash flows from operations for the quarter was $147 million. Capital expenditures for the quarter were $100 million. Free cash for the quarter was $46 million. For the full year, cash from operations was $457 million. Capital expenditures were $218 million split approximately for expansion, $141 million, for cost reduction, $12 million, for maintenance of business, $65 million. Free cash generation for the trailing 12-month period was $240 million. The full-year period includes $15 million cash taxes paid for the 2021 installment of the U.S. tax reform transition tax. Vishay has consistently generated an excess of $100 million cash flows from operations in each of the past, now, 27 years and greater than $200 million for the past, now, 20 years. Backlog at the end of Quarter 4 was at $2.307 billion or 8.2 months of sales. Inventories increased quarter-over-quarter by $8 million excluding exchange rate impacts. Days of inventory outstanding were 79 days, days of sales outstanding for the quarter were 42 days, days of payables outstanding for the quarter were 35 days, resulting in a cash conversion cycle of 86 days. Now I will turn the call over to our Chief Executive Officer, Dr. Gerald Paul.

Thank you, Lori, and good morning, everybody. Despite ongoing pandemic-related issues and an increased inflation rate, 2021 for Vishay has become one of its most successful years ever. Vishay, like electronics in general throughout the year, enjoyed quite excellent market conditions in virtually all market segments worldwide. Driving to maximize production output, we continue to expand critical manufacturing capacities, defining at the same time ambitious targets and measures for supporting future accelerated growth. For the year, I think we achieved strong results, gross margin of 27.4% of sales versus 23.3% in 2020. Adjusted gross margin also of 27.4% versus 23.4% last year. Operating margin of 14.4% of sales versus 8.4% in 2020, adjusted operating margin also 14.4% of sales versus 8.5% in 2020. Earnings per share of $2.05 versus $0.85 in 2020, adjusted earnings per share of $2.32 versus $0.92 in 2020. The generation of free cash also in 2021 remained on a quite excellent level. We, in 2021, generated free cash of $240 million despite our high rate of CapEx. The fourth quarter shows a continuation of our strong financial performance in prior quarters. However, it's a flat gross margin. Vishay in the fourth quarter achieved the gross margins of 27.3% of sales versus 27.7% in the third quarter. An operating margin of 14.4% of sales versus 15.2% in the third quarter, earnings per share of $0.25 versus $0.67 in the third quarter, adjusted earnings per share of $0.62 versus $0.63 in the third quarter. Vishay in Q4 generated $46 million of free cash. Let me talk about the economic environment. The year 2021 in our industry will be remembered as a fairly unique year of a strong recovery, a real, may I say, boom year, characterized by record orders, record backlogs, and lead times, and very low inventory levels in the supply chain. Virtually all market segments globally were flourishing, except for the automotive sector that suffered from shortages of supply which for sure will be temporary. Sales of the component manufacturers in 2021 were more or less limited by the manufacturing capacities; shortages of supply continue to exist. Increased inflationary pressures on the cost commanded broad price increases, which were widely accepted by the markets. All regions remained exceptionally strong, showing a continued robust demand. POS in all regions remains close or above all-time highs, continuing to grow further. Global distribution remains confident concerning their short and midterm business outlook in view of very high backlogs and an ongoingly strong POS. In the year 2021, POS of global distribution was 32% above the prior year, running at record levels. POS in the fourth quarter was on the level of prior quarter and 30% above prior year, especially the POS in Asia is at an all-time record high. Global inventory in the fourth quarter increased by $40 million versus the prior quarter and by $49 million versus the prior year. There is an impact of price increases during the year indicating a lower increase in terms of pieces. Inventory turns of global distribution in the fourth quarter are at a still high level of 3.9, slightly down from 4.2 in prior quarter. And the Americas have 2.2 tons, after 2.2 also in Quarter 3, and 1.6 in prior year. In Asia, 5.3 tons after 6.1 tons in Quarter 3 and 5.0 in prior year. In Europe, 4.3 tons after 4.5 tons and 3.2 tons in prior year. Coming to the industrial segments. After several quarters of relatively weak performance, the automotive market seemingly started to recover in the fourth quarter. Customer supply, in particular with IC devices, has started to improve. Also, in light of vehicle inventory remaining globally depleted, we expect a strong year, 2022 in automotive. The industrial segment continues to provide solid growth reflecting increased electrification across a wide range of applications. Industrial automation robotics continue to accelerate. We also see a continued recovery in oil and gas markets. Computing markets performed well driven by a strong service sector. In the telecom segment, 5G starts to gain momentum globally. The AMS business continues to develop positively also supported by a beginning recovery of the commercial avionics sector. Air conditioning, TV and gaming sectors keep supporting the consumer sector. Medical remains positive with a recovery of traditional applications. Due to an exceptionally strong performance in particular of our Chinese plants versus original expectations, the fourth-quarter sales excluding exchange rate impacts came in above the midpoint of our guidance. We achieved sales of $843 million versus $814 million in the prior quarter and $667 billion in the prior year. Excluding exchange rate effects, sales in the fourth quarter were up by $37 million, over 5% versus the prior quarter and up by $187 billion or 28% versus the prior year. Sales in the year 2021 were $3.24 billion versus $2.50 billion in 2020, an increase of 28% excluding exchange rate effects. Book-to-bill in the quarter, despite very high backlogs remained above parity, 1.09 after 1.26 in the prior quarter. 1.06 for distribution after 1.29 in the third quarter, 1.15 for OEMs after 1.23, 1.08 for semiconductors after 1.27 in the third quarter, 1.11 for the passives after 1.26 in Q3. 1.10 for the Americas after 1.30 in Q3, 1.0 for Asia after 1.14, 1.21 for Europe after 1.41. We continue to see a broad continuation of an excellent economic environment whereby Europe based on automotive is catching up. Backlogs in the fourth quarter remained at record levels of 8.2 months after 8.3 months in the third quarter, 8.9 months in semiconductors after also 8.9 months in the third quarter, and 7.5 months in passives after 7.6 months in Q3. We continue to raise prices in a broad way, plus 1.3% versus the prior quarter and plus 3.4% versus the prior year. For semis, we raised by 1.7% versus the prior quarter and by 5% versus the prior year; for the passives, 0.8% versus the prior quarter and 1.7% up versus the prior year. Some highlights of our operations, despite the continued good level of plant efficiencies and despite price increases, the contributive margin in 2021 remained on the level of the prior year, which has been somewhat below the long-term average. We continue to suffer from substantially increased transportation costs in metal prices, but also from higher wages in general, due to the inflation globally. We expect to return to historical levels of variable margin percent in the course of this year. SG&A costs in the fourth quarter came in at $108 million above expectations when excluding exchange rate impacts mainly due to higher R&D costs and several individually immaterial items. SG&A costs for the year 2021 were at $420 million, $37 million or 10% above the prior year at constant exchange rates, mainly due to higher incentive compensation and wage inflation. Manufacturing fixed costs in the quarter came in at $142 million according to expectations when excluding exchange rate impacts. Due to substantially higher manufacturing activity, manufacturing fixed costs for the year 2021 increased to $559 million, $39 million or 6% above the prior year at constant exchange rates. Due to a higher manufacturing output, total employment at the end of 2021 increased to 22,825, 6% up from the prior year. Excluding exchange rate impacts, inventories in the quarter increased by $8 million, by $7 billion in raw materials and by $1 million in WIP and finished goods. Inventory turns in the quarter remained at a satisfactory 4.5. Excluding exchange rate impacts, inventories in the year 2021 increased by $99 million, raw materials, increased by $59 million in WIP and finished goods by $60 million. Inventory turns for the entire year 2021 were at a very satisfactory level of 4.7 up from 4.3 in the prior year. Capital spending in 2021 was $218 million versus $124 million in the prior year, $141 million for expansion, $12 million for cost reduction, and $65 million for the maintenance of business. We are preparing ourselves for an accelerating growth in years to come. For the year 2022, we expect CapEx of approximately $325 million, a sharp increase due to our project of building a 12-inch MOSFET fab adjacent to our existing eight-inch fab. We, in the year 2021 generated cash from operations of $457 million compared to $315 million cash from operations in 2020 which includes $16 million cash taxes for cash repatriation. We, in 2021 generated free cash of $240 million compared to a free cash generation of $192 million in 2020 which includes also $16 million cash taxes for cash repatriation. Vishay also in a year of high CapEx has continued to live up to its reputation as an excellent and reliable producer of free cash. Let me go through our product lines and I start, as always, with resistors. With resistors, we enjoy a very strong position in the automotive, industrial, military, and medical market segments. We offer virtually all resistor technologies and they are globally known as a reliable, high-quality supplier of the broadest product range. Vishay's traditional and historically growing business has returned to record levels. Sales in the quarter were $190 million, up by $11 million or by 6% from the prior quarter and up by $32 million or by 20% versus the prior year, excluding exchange rate impacts. Sales in the year 2021 of $753 million were up by $134 million or by 22% versus the prior quarter, including $18 million coming from our acquisition ATP. All these numbers and comparisons exclude, again, exchange rate impacts. Book-to-bill ratio in the fourth quarter was 1.14 after 1.26 in the prior quarter. Backlog remained at 7.8 months, a record level. Gross margins in the quarter were at 29% of sales, up from 27% of sales in Q3, gross margins for the year 2021 were also at 29% of sales, up from 25% in 2021 mainly due to substantially higher volume. Inventory returns in the quarter remained at a satisfactory level of 4.5. Inventory returns for the full year were at 4.8. Pending prices continue to increase by 0.6% versus the prior quarter and by 1.3% versus the prior year. We are continuously raising critical manufacturing capacities mainly for resistor chips and for power wire wounds. We continue to broaden our business with specialty resistors by targeted acquisitions like ATP and recently various industries. ATP in the meantime has been integrated successfully. Inductors; the business consists of power inductors and mechanics. We exploit the continuously growing need for inductors in general. Vishay developed the platform of robust and efficient power inductors and leads the market technically. With magnetics, we are very well positioned in many specialty businesses, demonstrating also in this field steady growth. Sales of inductors in the fourth quarter were $82 million, slightly down by $3 million or by 3% versus the prior quarter, but up by $7 million or by 9% versus the prior year, excluding exchange rate effects. Sales in the year 2021 of $336 million were up versus the prior year by $40 million or by 14%, excluding exchange rate impacts. Book-to-bill in the fourth quarter was at 1.13 after 1.11 in the prior quarter. Backlog has increased to six months from 5.4 months in the prior quarter. Gross margin in the fourth quarter was at 29% of sales, down versus prior quarter at 32% of sales, mostly due to temporarily lower volume and also due to higher logistics costs. Gross margin for the year was at quite excellent 32% of sales virtually on the level as prior year. Inventory turns in the quarter were 4.6 as compared to 4.8 for the whole year. Some price increases also at inductors, plus 0.1% versus the prior quarter, plus 0.5% versus the prior year. We continuously expand our manufacturing capacities for power inductors and remain open for acquisitions, in particular, in the field of specialty businesses. Coming to capacitors. Our business with capacitors is based on a broad range of technologies with a strong position in American and European market niches. We also enjoy increasing opportunities in the fields of power transmission and of electric cars mainly in Asia. Sales in the fourth quarter were at $129 million, 13% above the prior quarter, and 45% above prior year rates, which excludes again exchange rate impacts. Year-over-year capacitor sales increased by $103 million or by 28% excluding exchange rate impacts. The book-to-bill ratio in the fourth quarter was 1.4 after 1.37 in the prior quarter. In the third quarter, we had received large orders for power capacitors. Backlog decreased slightly to a still extraordinarily high level of 8.1 months from 8.9 months in the third quarter. Gross margin in the quarter was at 22% of sales up from 21% in the prior quarter mostly due to higher volume and a more normal product mix. Gross margin for the year 2021 was at 22% of sales up from 19% in 2020, mostly due to increased volume. Inventory turns in the quarter increased to 3.7 as compared also to 3.7 for the whole year. Continued price increases, 1.6% up versus the prior quarter and 3.0% up versus the prior year. We remain confident for capacitors for the mid-term in light of increasing design wins. Opto products. Vishay's business with Opto products consists of infrared emitters, receivers, sensors, and couplers. Also, in Opto, we continue to see a strong acceleration of demand. Sales in the quarter were $78 million, 12% above the prior quarter and 17% above the prior year without exchange rate impacts. Year-over-year sales with Opto products went up by $62 million or by 26% when excluding exchange rate impacts. Book-to-bill in the fourth quarter was at 1.21 after 1.36 in the prior quarter. Backlog remains at a quite extreme level of 10.4 months after 10.9 months in the third quarter. Gross margin in the quarter for Opto products came in at 34% of sales on the level of prior quarter. Gross margin for the year 2021 increased to an excellent 33% of sales as compared to 28% of sales in 2020, mostly due to a much higher volume. Also, for Opto products, we continue to raise selling prices. They were up by 1.9% versus the prior quarter and by 4.6% versus the prior year. We are in the process to start production now in our modernized and expanded Heilbronn wafer fab. And I said it before, Opto products continue to be a relevant factor for Vishay's growth expectations going forward. Coming to diodes. Diodes for Vishay represent a broad commodity business where we are the largest supplier worldwide. Vishay offers virtually all technologies as well as the most complete product portfolio there. The business enjoys a very strong position in the automotive and industrial market segments and keeps growing steadily and profitably since the years. Sales in the quarter were $192 million, up by $8 million or 5% versus the prior quarter and up by $55 million or 40% versus the prior year which excludes exchange rate effects. Year-over-year sales increased sharply by $201 million or by 40% excluding exchange rate impacts vis-à-vis the prior year and reached a record level of $709 million. The book-to-bill ratio in the fourth quarter was at 1.10, after 1.31 in the prior quarter. Backlog remains at a very high level of 8.8 months, virtually on the level of the prior quarter. Gross margin in the quarter was at 24% of sales as compared to 25% in the third quarter, impacted by higher logistics costs and the reduction of inventories. Gross margin in the year 2021 was at 24% of sales up from 18% in the prior year, mostly due to substantially higher volume. Inventory turns in the fourth quarter were at 4.7 as compared to also 4.7 for the whole year. We continue to raise ASP for the diodes plus 1.9% versus the prior quarter and plus 6.5% versus the prior year. Our large and growing business with diodes remains one of the most important elements of our growth plans. Finally, MOSFETs. Vishay is one of the market leaders in MOSFET transistors. With MOSFETs, we enjoy a strong and growing market position, particularly in automotive, which in view of an increasing use of MOSFETs will provide a very successful future for this line. Demand over the year has reached extreme levels and is expected to increase rapidly further in the years to come. Sales in the quarter were $171 million, 2% below the prior quarter but 32% above the prior year, excluding exchange rate impacts. Year-over-year sales with MOSFETs increased steeply over the prior year by $163 million or by 32% to $668 million, all this excludes exchange rate impacts. Actually, sales in 2021, in MOSFETs in particular has just been limited by manufacturing capacities. Book-to-bill ratio in the quarter was at 1.01 after 1.19 in the third quarter. Backlog remains on a very high level of 8.2 months. Gross margin in the quarter was at 30% of sales, after 31% of sales in the third quarter. Driven by volume, gross margin in the year 2021 came in at 28% of sales, a substantial increase from 23% in the prior quarter. Inventory turns in the quarter were at 5.0 as compared to also 5.0 for the entire year. Also, for the MOSFETs, we continue to implement price increases plus 1.5% versus the prior quarter and plus 3.5% versus the prior year. MOSFETs remain key for Vishay's growth plan going forward. We intend to keep a proper balance between in-house manufacturing of wafers and purchases from foundries. With this in mind, we decided to build a 12-inch wafer fab in Itzehoe in Germany adjacent to our existing 8-inch fab, increasing our in-house wafer capacity by 70% within 3 to 4 years. Let me summarize, looking back, 2021 has developed into one of the best years in the history of Vishay, despite the ongoing influence of the pandemic and accelerating inflation. Our success has been supported by a globally high demand but has not been the result of a specific shortage nor has it been achieved by inflating the supply chain with inventory. I believe that 2021 has clearly demonstrated the strength and growth potential of electronics in general but also the advantage for a broad liner like Vishay who can exploit upturns in a broad manner. We continue to be financially more than stable, are very well established in most markets globally, and used to react quickly and professionally to the market changes as they may occur. Our financial strength and independence allow us to invest in a substantial way in critical manufacturing capacities while supporting the development of new processes and products. We remain committed to shareholder value and pursue long-term strategies independently of the economic environment. Yesterday, we announced a structured and ongoing stock buyback program in parallel to the dividend payouts. We are confident for 2022, expecting also a strong recovery of the car industry. For the first quarter, we head for quarter four exchange rates guide to a sales range between $820 million and $860 million at a gross margin of 27.3% plus/minus 50 basis points.

Thank you, Dr. Paul. We'll now open the call to questions. Sherry, please take the first question.

Thank you. Our first question is from Ruplu Bhattacharya with Bank of America. Please proceed.

Good morning. Thank you for taking my questions.

Morning, Ruplu.

Dr. Paul, in the fourth quarter, you had strong revenues, revenues came at the high end of guidance. It looks like gross margin was at the lower end of guidance. Can you just talk about that 40 basis points of sequential decline in margins? What were some of the factors? How much was mix? How much was FX? And how do you see margins going forward?

We were impacted by logistics costs, which turned out to be higher than we anticipated. This is the main issue; efficiency levels remained strong throughout the year. The challenges stem from inflation, wages, and primarily logistics expenses. We expect logistics costs to improve over the course of this year as traffic returns to normal.

Dr. Paul, regarding the logistics costs, do you believe you will be able to pass these costs onto your customers, considering they are likely to remain high over the next couple of quarters? Is that something you can manage?

Well, we do so principally as we raise prices. We raised prices in these quarters and we will continue to do so. We will more and more offset that and I guess, as I said, logistics costs depend on the general air traffic. It hopefully will not last a full year; we expect some kind of an improvement in the course of the second half.

Can I ask you a long-term focused question? Currently, the backlog is quite high, with most product lines experiencing about eight months of backlog. What was the backlog like before COVID, and as things return to normal, where do you think that backlog will settle? Do you believe it will stay high at eight months, or do you think it will decrease as we move through 2022, and where do you anticipate it will end up?

If you really look back to history, the normal backlog was three to four months, to say it frankly. That was the average for a long period of time, then since the year 2017, it started to grow. But at the moment, it's record high and this is, of course, not normal. We do expect that the backlog will come down as we go with the normalization. Whether they will ever return to three months, that is the question. I believe there's more skepticism concerning low inventories, supply problems, etc. So, I could imagine going forward, we will not go back to these three months, which were indeed historically the case. There will be a reduction, but not to historical levels, I believe.

Okay. And maybe just one last question. Yesterday, you announced a shareholder return policy. How does further mergers and acquisitions fit into that? Do you have any thoughts on additional acquisitions? Are you considering any, and in which areas, whether passive or active? I would appreciate any insights you could share.

First of all, I want to clarify that acquisitions are not competing with this program. We will continue to pursue acquisitions in the same manner, and there will be no change. Our focus will remain on specialty businesses as we move forward.

Alright, thank you for all the details. Appreciate it.

Our next question is from Karl Ackerman with Cowen & Company. Please proceed.

Yes. Thank you. Two questions, please. Dr. Paul, I don't think you've grown SG&A above revenue growth since 2013. With SG&A up roughly 6% to 2022, and based on your commentary that contribution margins should improve, it appears you're relatively optimistic about 2022. Clearly, backlog remains elevated at over eight months, but are there market share opportunities or end-market growth opportunities you would call out that anchor your expectations for 2022?

It's still foreseeable that our entire sales are influenced by manufacturing capacities. While there's a general expectation of a long-term economic slowdown, we haven't observed that yet; our backlog is actually increasing. I would say our sales, which we feel optimistic about, are a result of our established capacities, and we are expanding those capacities. If we were to highlight a particularly strong product line, it would definitely be the MOSFETs; there is significant demand to boost manufacturing capacities in that area due to the growing applications for MOSFETs.

I appreciate that. Some of your peers quantify the benefit from automotive restocking in calendar '21 and suggested the inventory benefit may not carry over into 2022. Nevertheless, though, I think at least half of your automotive business is on consignment that better aligns your supply with end-market demand. But I'm wondering if your automotive customers have indicated your products are now balanced at a high level or whether your automotive products remain very tight and have seen lead times extended. Thank you.

It's the latter. We are experiencing numerous escalations in higher shipments from our large automotive customers. MOSFETs, in particular, are facing significant challenges. We do not anticipate a slowdown; rather, we expect the opposite. Due to improvements in their supply situation, the automotive sector is likely to increase their demands this year. Consequently, our challenge will be to meet their needs rather than to handle low demand.

Thank you.

Our next question is from Matt Sheerin with Stifel, please proceed.

Yes. Thank you and good morning. I just wanted to follow up on Karl's questions. One, regarding your outlook for the year, Dr. Paul, like you said, it sounds like you've got confidence. It's really up to your ability to increase your capacity. So, do you have any outlook in terms of what we should be thinking about growth rates for Vishay this year?

We expected, we've said it before, higher sales than in 2021. We expect higher sales. We had put a number to it; it's at least 5% up.

And what about your ability to meet that demand? I know you've got the CapEx. I know there's a lag there of at least 12 months in some products. And if you look at the capacity and your price increases, does 4% or 5% growth sound conservative?

Price increases together with capacity increases exist but as you said, price capacity increases come step-by-step. And in the first quarter, I feel we could still see a negative impact of the COVID pandemic especially in our plants in China which make the start a little slow by nature.

Okay. And then you sounded like your distributing inventory levels are still fairly lean but we're hearing from some of your peers that other sectors like OEMs and EMS are starting to build inventory and see some imbalance of parts. Are you seeing any signs of that yet?

There’s no report, but I think a good indication is the number of escalations we see. In fact, we are still under pressure from customers who want improved volumes and shorter lead times. It would be naive to say that inventories at OEMs haven’t increased, but overall, there are still shortages for many product lines, especially for MOSFETs. However, it seems that customers are not building excess inventory for discrete semiconductors in general.

Okay. And just lastly, a question for Lori regarding that one-time tax issue in Israel. Was that a cash payment? And it doesn't look like you're guiding, I guess, a 23% tax rate going forward, so there's no impact going forward on that?

So maybe I'll start first. So, the $53 million loan was a charge to the P&L, and it will be paid out over a period of time. Because it was previously untaxed income to some extent, and then we accrued some withholding tax for the repatriation to the U.S. But the repatriation of the U.S. will be over a period of several years eventually, and therefore it will be a cash out but not immediately. We're still guiding to the 22% to 24% tax rate at this point in time.

Okay. Thank you.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing comments.

Thank you for attending today's call and for your interest in Vishay Intertechnology. This concludes our fourth quarter end of year 2021 earnings call.

Thank you. You may disconnect your lines at this time and thank you for your participation.