Thank you for attending our first-ever Analyst Day. Welcome to Vishay 3.0. I will just read. One second, sorry. It's this one. Little glitch. Whoop, whoop.
One rating.
Okay. Sorry about the glitch. I prefer to read the text to go with the forward-looking statements. Comments in the following presentations, other than statements of historical fact, may constitute forward-looking statements. Such statements are based on current expectations only and are subject to certain risks, uncertainties, and assumptions, many of which are beyond our control. Please refer to this slide and our filings with the SEC for more information about these risks. The following presentations also include non-GAAP financial measures. Again, please refer to this slide for more information about these non-GAAP measures. Thank you. And, now we'd like to open with a short introductory video on the new Vishay. Thank you.
Vishay Intertechnology is all around us. Our breadth of products helps to bring the world of electronics in automotive, industrial, aerospace, and defense, medical, telecommunications, computer, and consumer electronic devices to life, every day, for everyone. We call it the DNA of tech. The Vishay journey began with our visionary founder, Dr. Felix Zandman, whose groundbreaking patents laid the foundation for Vishay's success. Our journey continued with a period of financial stewardship focused on harvesting the portfolio and operational excellence.
A new Vishay is in motion. We're expanding beyond our roots of innovation, becoming a customer-first, market-focused, and business-minded company. We're re-engaging with customers and distribution partners who want more from the new Vishay. And we're working diligently to design- in and proactively expand capacities to meet the future demand for Vishay components. Our goal is to bring product differentiation, help more customers innovate and scale, and provide excellent customer experience.
We invite you to join us on our journey of innovation, collaboration, with a focus on connectivity, e-mobility, and sustainability. Together, we will shape the future of technology.
Welcome. Nice to see you all. Welcome to the new Vishay. We call it Vishay 3.0. We're changing the company. We're doing a lot of new things in the first year, year and a half, of this new leadership team. We're excited to see all of you here today, excited to present to you our business plan, where we're going to take the company in the next five years. That's what you'll see throughout the session today. The opening video, the one that was rolling earlier, shows the breadth of our customer base, the breadth of the applications that we support. And our strategy inside this five-year plan is to be able to participate at a greater rate in all of those market segments and applications that you've seen. We're changing the company. You've heard a lot if you've listened to earnings calls. We're changing the company.
We're 180-degree different from how the company operated two years ago. We're driving a customer philosophy. Think customer first. There's an intensity in the organization. There is excitement. There's new energy. And every conversation with our employees about is about think customer first. We're driving a business-minded approach to how we run the business. Previously, we were very operationally focused, and we're driving a business-minded focus. So reshaping the company is quite important. But then we also talk about what matters in the end is revenue growth and profitable revenue growth, enhancing our margins. So this is quite important to us. And it's two levers that we speak about in every business decision: growth of revenue and profitability. I refer to Vishay often as a well-funded startup, the new Vishay. I think it's important to think of us that way because we're looking at every opportunity.
We understand the business quite closely in this new leadership team, and we're looking at every business opportunity like a startup would. We want to grow at a greater rate, and you'll see that through our plan today. We've got a new executive team. I'd like to introduce the team. I'm very excited about this team. This team brings a lot of experience, a lot of talent, and they're quite aggressive. They also are willing to take a calculated risk. And that's part of growing a company: is willing to take a calculated risk. So this team of leaders, myself, you've heard me on calls, 33 years with the company, different experiences. I've had engineering roles. I've had marketing, sales responsibilities, operational, P&L, business development. I've seen the company from inside and out.
When I was in my sales role, this helped me see Vishay from the outside looking in and how we could better perform. Jeff Webster. Jeff is here today. Jeff's our Chief Operating Officer. Jeff will be presenting the operational strategy and the manufacturing capacities. Jeff has 24 years with the company. Quality in his background, very strong quality person, operations, P&L, IHS, and marketing. Dave McConnell. Dave McConnell is our new Chief Financial Officer. Dave has been 32 years of service, in many different roles. He's treasurer. He's in audit. He's in operational finance. He understands the company quite well from the numbers perspective. Roy Shoshani, 20 years of service with the company. Roy came from our semiconductor side of the business. He developed the IC business in Vishay from the ground up, and it was quite successful. Roy is also, operational P&L experience, M&A.
Roy has been quite involved in the Newport acquisition. He led this as well as the Max Power. He led that acquisition. Michael Sullivan, a new position that we created. He's the Chief Administrative and Legal Officer. Mike's got 12 years in the company: legal, compliance, ESG, EHS. And Peter Henrici, 26 years of service with the company, marketing communications, internal communications, Corporate Secretary, and a number of different roles. I show you this, but I want to also make a comment. Even though you see decades of responsibility, decades of experience in the company, these are all seasoned individuals who have had success inside the company in their responsibility. I've heard some people say a lot of the people are promoted from within. There's quite aggressive people which are inside of Vishay, and they're going to show you the plan of growth today.
And I think you'll appreciate the difference in what you may have seen in the past, the mindset towards growth, and where we're going to go collectively as a team. This leadership team is driving change. They're driving this change in the company. We talk about Vishay. Maybe the left is Vishay 2.0 and the right is 3.0. We were a company that was very operationally minded. We had a set capacity, and often we were sold out. We were on allocation a number of times in the last two upcycles and unable to take on a greater rate of business. We had to choose customers. And we're moving more now in Vishay 3.0 to a customer focus, a market focus, to really understand where the business is going and prepare for it.
We were a company that concentrated on cash flow, and we're moving to a P&L mindset where we're running this business on profit and loss decisions, product technology by technology, manufacturing location by location, to drive greater outcomes financially. Fulfilling orders. We took orders. We built product, and we shipped product. We're about now anticipating customer need with a lot of my experience in front of the customer, a lot of travels in front of the customer. If we are there to scale, the customer will share their forward plans. They'll share a two-year plan, a three-year plan of demand. And we want to learn that. We want to have that information, and we want to incorporate that into our growth plans for the company. The agenda we have today. I'm doing the opening.
Jeff Webster will step up and talk to you about manufacturing, the capacity expansion plans, channel management. I'll come back and talk to you about how we're engaging the different channels of the business. We'll take a Q&A session after that for Jeff and I, our portions of the presentation. Then we'll have a short break. silicon carbide strategy. Roy will speak about how we're moving fast now after the acquisition of Newport. Product development. Roy will talk about development plans and talk about solution selling, the applications that we talk about to showcase Vishay. Financial targets. Dave McConnell, our new CFO for 30 days now, he'll have the opportunity to present the financials. Capital allocation will be discussed. We'll have closing remarks, and then we'll have another Q&A session. So let's talk a bit about the company. We're the broadest manufacturer of semiconductors, discrete semiconductors to passive components.
There's no other supplier that matches the portfolio of Vishay. So I know from your perspective, it's hard to gauge someone. It's hard to gauge Vishay against someone. You gauge us against a semiconductor company or maybe a passive company. But we're a little bit unique. We have this product differentiation, and we need to leverage it with our customers. This is a promotional aspect of our business for growth. We have the lowest voltage diodes all the way to the highest energy capacitors. High energy capacitors are quite large. They're as big as file cabinets in your office that are used in electrical distribution systems. We really strive here in power applications. And this is a new promotion we put together at Electronica. We can populate 80% of the electronic components on a circuit board, 80%. There's no other supplier that can do that.
So this is a focus for our sales force, our marketing people, our business development people. Go populate the board. We'll have the capacity to support what you do design in. And we're giving the assurance to the customer that we'll be there when they scale. Oops. Customers. We've got OEM customers. We've got EMS customers, and we've got distribution trusted by customers. The strategic accounts we often talk about, these are the top accounts. But there's thousands of Vishay customers as we go through distribution. The left side here is automotive. You see many big names from Conti to Bosch to Hyundai, BYD. There's the automotive customer base, just a sampling of it. The far right side is many big industrial names: Honeywell, Siemens, ABB, GE, all strong customers for Vishay. In the lower middle here, you see just a sampling of military accounts.
You see Raytheon, BAE, and Northrop Grumman. But there's others. You see computer companies: ASUS, Gigabyte, NVIDIA. These are customers where now, with this capacity growth plan, we will have the ability to go engage, where previously the capacities went to automotive, industrial, military, medical. We didn't have the capacities to go and focus on some of these. So these are the others. When you see our market segment charts, the Nokias, the Ericssons, designing in Vishay, but we didn't formally have the capacity to support their demand. So these are opportunities for us to grow. A broad customer base we're quite proud of: the EMS. You see the big names here: the Jabil, the Flex, the Sanminas. They're all strong users of Vishay. And I'll talk about those later in the channel management, about our strategy to provide more to them and distribution.
We've got a broad list of distributors. Here's just a sample. We've got global distributors. We've got catalog distributors that support us quite well. And we have regional distributors. It could be regional distributors in China, in India, where it's a different type of business approach. So we've had to add some local VARs, value-added resellers, or distributors. So what are the customers saying about us? I travel a lot to customers. Every week I'm on the road somewhere because I feel it's very important to be engaged in what the customer is looking for from us. And the key statement across the top is the common theme: the customer wants more from Vishay. So here's a few testimonials, from different customer segments. This happens to be catalog distribution. Vishay does not rely on existing technology. The new Vishay focuses on developing innovative solutions to fit the changing technical challenges.
Vishay's level of customer engagement and support is best in class. That's from the leader of Mouser. Honeywell. Vishay's wide product offering has added value. Take the business relationship to the next level as both the organizations align on new technology roadmaps. This is what I was speaking about. We want to hear what the customer is going to do in year two and year three, not just next year. Jabil. From the chief procurement officer, Vishay is laser-focused and determined to ensure that there is a continued smart investment strategy that will allow customers to have peace of mind around continuity of supply. Operational excellence, as well as product technology, continues to be a differentiator for Vishay. And the last one is Bosch. Vishay has a good understanding of our needs and aspirations, aligning their expertise to support customers on strategic vision, a commitment to innovation.
They're very excited about what we're doing with silicon carbide. Vishay is characterized by a focus of strategic collaboration, which has been proven by the capacity expansion through the acquisition of Newport or the construction of the new fab in Itzehoe and demonstrates Vishay's strong commitment to new business and customer focus. This is the type of feedback we're getting from the customers. They're excited about what we're doing. Now, we have a job to do as the leadership team. We need to scale our capacity and have proper service to be able to support the customer. If we talk a little bit about 2023, just to give you an idea of the baseline that we're referencing, this is about serving channels as well as the markets.
When we start at 12:00 and we move clockwise around the donut, 53% of our business is distribution, 7% is EMS, and 40% is those OEMs, the strategic account program, plus some military customers or medical customers that want to buy direct from Vishay and markets. Starting at the top, 37% is industrial. This is robotics. This is industrial automation. This is the renewable energy, the solar, the wind, the new electrical grid transformation systems that are coming. There's a lot of industrial Vishay here: power supplies, automotive, automotive, everything. It could be the internal combustion engine. It could be the hybrid vehicle. It can be the electric vehicle. Vishay's breadth of components is supporting it all. It may be in body electronics on the car. It could be in entertainment, infotainment. It can be in traction controls, security systems. Vishay is selling a broad portfolio inside the car.
Aerospace defense, aerospace defense. Vishay is the largest holder of the military QPL, qualified parts list for the passives. Resistors were number one. Capacitors were number one in military components. So anytime there's a military requirement in a rocket, in a drone, any type of high military systems, we're the supplier. And there's significant military growth coming with what's happening in the world with the last two wars. Medical. It's a small piece of the pie, but medical is here because it represents the quality levels of Vishay. We want to grow at a greater rate in medical. We're doing some things to increase that. I'll show you that later in a slide. And then we've got others. And others is what I was speaking about, the telecom, the AI and computing, the consumer, high-end televisions.
These are the type of markets where we would participate, not chasing the low-end consumer, but more where the technology differentiation is needed in key applications, having the capacity. And you hear about the $1.2 billion CapEx that I mentioned in the very first call. This is important to bring Vishay's capacity up to a level where we can support this entire market segment and not just be focused on four slices. We want to focus on the market in its entirety. If we talk about regions, the sales of Vishay, 37% are Asia, 26% the Americas, and 37% in Europe. This is 2023. We foresee the Americas growing. We know what's happening with onshoring, nearshoring. Things are moving out of China, and companies are coming to Mexico. So we're talking to a lot of companies that are looking for that regional supply of product.
Hence, you heard about the La Laguna factory in Durango, Mexico area. Jeff will talk about that, as well as an expansion in Juárez. Customers are looking for product to be manufactured close to where they're going to consume the product types. 47% of Vishay we refer to as certified products. What does certified mean? These are automotive certified AEC-Q200. These are military certified products. These are UL approved products. If it's our Opto devices, this could also be FDA approved type of product. So they have some level of certification or higher level quality versus a standard commodity product. The next section here is custom. 31% of Vishay's business is custom. These are typically one-to-one a Vishay designed product for a specific customer. They may have needed a different packaging. It may require heat sinking. It may have longer leads on one side versus another.
If it's a thermistor or a sensor, it could be a medical product for an implantable pacemaker. It's a custom device. Then finally, we get to the commodity. The commodity is 22% of Vishay. As I've traveled and talked to some people, they say, "We think Vishay is a commodity company." The reason Vishay hasn't been investing is they're concerned about other commodity suppliers just, having significant capacity where Vishay can't catch up. I said, "That's not the story." The story is we're a technology company. We are a certified company. We are a custom company. We're engaging customer engineers. They would like to buy a data sheet product first. The engineers would naturally like to choose a standard data sheet product. But when you get into the technology discussion, they're often looking for better. They're looking for better performance.
And that's why you see almost 80% of Vishay is certified or custom. So let's talk about a couple of applications. This happens to be automotive. This is the 800-volt battery electric vehicle power application. We all know the car was a 12-volt car. Then it moved to 48-volt, and 400-volt is out there now. And engineers are designing for 800, 800-volt systems. What are they after? They're after faster charge time and longer range. Everybody hears it. If the EV is really going to accelerate, it's got to be convenient for the consumer. So we show you this real quick because there's four main applications inside the EV. There's the main inverter, there's the onboard charger, there's the high-voltage battery, and there's this suspension control, active suspension control.
What's important to show here is in red are the passive components that we can supply. You see many inductors, capacitors, resistors. In blue are the semiconductor products. Roy will talk about this diversity when he gets into the product development side of the business. Onboard charger. Same thing. You've got MOSFETs, you've got diodes, you've got TVS high voltage protection devices. There's many different capacitors required in the onboard charger, resistors, and also thermistors in the high voltage battery. Similar, a different mix of semiconductors, diodes, and MOSFETs. Also optical devices, the OPTO product. Then the suspension. The same thing. This is the breadth of Vishay. This is where I speak about selling more products to a customer. We shouldn't just be selling resistors to a customer or only inductors to a customer.
We sell the Vishay portfolio to the customer, and we design it in. If we talk about sustainability, this is a little city we built. Let's start with energy collection, energy generation. You've got solar here, solar panels, the inverters that require the breadth of Vishay semiconductors. You see MOSFETs, diodes, and OPTO product, as well as resistors and inductors and capacitors in the inverter. If we step over here to wind power, another energy generator and collector, MOSFETs, diodes, capacitors, and resistors. We've got to transmit that energy. We'll talk about the transmission lines. A lot of very large, high energy capacitors here. The Siemens, the Schneiders, the ABBs, the Hitachis. Those are customers that we're engaged with. We're talking about the grid, the new design of grid systems. You get into energy storage.
Again, heavy capacitors, resistors, and semiconductors to help with the control systems. Finally, what we all know out in our world is charging stations. There'll be more charging stations. You got to have a way to offer the power to the user. You see many Vishay devices there. This is our company. This is what's exciting about Vishay, is the breadth of technology from semis to passives. When our engineers or our sales team sit with a customer, we have a big toolbox and we're going to have the capacity to support the customer. Every customer I speak to had issues with assurance of supply over the last two upcycles, so they want to engage a supplier who has the ability to scale. This is our message. We have technology. We're going to have front position. We're going to be in the up-and-coming applications.
We're going to continue to innovate because we're talking to the engineer, but we're also going to have the capacity to scale so the purchasing and the commodity teams feel confident about the direction we're going. So we got levers. We talk about levers often inside the company. Each leader has levers they can pull. When I talk about Vishay, historically, there's a market out there. The market is left to right. It's a big market. We served a very narrow portion of the market. We had limited capacity. We had a lot of technology. We designed across the market, but we served a narrow portion, often sold out. So we have levers. We have eight levers we can pull. Invest in internal capacity expansion, $1.2 billion of CapEx over three years. And now with Newport, we're adding another $200 million.
So it's going to be $1.4 billion over the three years. Jeff will give you some insight into what that looks like afterwards, out to 2028. But we're going to invest. We need to invest to catch up because the customers, again, the customers want more from Vishay. So internal capacity is one. External capacity is another. We are qualifying a number of commodity products, commercial products with outside sources for passives, with third-party resellers, contract manufacturers, so we can free up Vishay capacity for that pie chart where the donut where I showed you the certified and the custom. We need to have attractive lead times. So we're going to move some of the commodity devices to an outside source. It's going to be the Vishay recipe. It's qualified. The customer is going to get the same level of performance in that commodity.
We're just going to be able to have flexible capacity, whether inside or out, optimizing the global manufacturing footprint. In a lot of my travels, customers a couple of years ago said, "Joel, we know we told you globalization for the last 20 years. Forget it. It's regionalization now. You got to be where we buy. We need faster service." So you look at the Vishay's manufacturing footprint. Jeff will talk a little bit about it. We are a company that's quite regionalized in the manufacture of products supporting the customer. Increasing technical headcount. We've got this breadth of product. The engineers want help. They want solutions. They want reference designs. They want engineers which can coach them and guide them on new technologies. We're adding the engineers to be able to do this, to engage the customer and design in to reach that 80% of the bill of materials.
Enhanced channel management. This is about having capacity for OEM, not just a strategic account, but all the OEMs that are interested in Vishay, the EMS. We had to allocate over the last two upturns to EMS. We don't want to allocate. If we've won the bill of material position, we want to support it with volume. And then finally, with the distributors, whether it's catalog or the mainline distributors. You've heard me talk about SKU counts, adding SKUs, adding part numbers where previously we couldn't add those part numbers because we didn't have the capacity to support. I'll speak about that in channel management as well. Innovation. How do we get innovation?
Well, the engineers are sitting with the customer engineers and they're talking about the portfolio of Vishay and now the next new need of a product that's needed in two years out or three years out is spoken about. This then comes back to our R&D team, and Roy leads that to decide, do we put the resources to R&D that product together? Do we get into maybe a joint venture with someone? Do we make an acquisition? So this is a trigger. This is information gathering to make a business decision with innovation. Solutions. As we're sitting with the engineer and we're able to populate 80% of the products on the board, let's start talking about solutions. And we're doing this. We've released a number of solutions Roy will share where the customer can quickly see, here's a potential reference design from Vishay.
Here's the controller with all the Vishay products on it. Maybe the engineer chooses to use it. Maybe he decides to modify a few of the parts on there because he wants a little different performance. But we're coming to the customer to help the engineer move forward fast. And the last one is M&A. So these are the eight levers. And if we get these eight levers moving, we're now supporting the whole market on top to be able to broaden our portfolio and be truly a valued supplier at the customer where they say Vishay is first because of all of these levers that are being pulled, plus the engineering talent, and the customer feels quite different about our company versus how they did in the past. So that's a snapshot of 2028. We did a five-year plan.
We had a three-year plan originally, and we had the movement with Max Power and Newport, and we said, "That's not going to show the message of what's going to happen with Newport. Buying a fab, getting the equipment landed, and then qualified is going to take some time." So we've got a 2023 revenue of $3.4 billion. Our CAGR is going to be 9%-11% out to 2028 with those levers that I talked about, with the customer engagement that we have. The gross margin in 2023 finished at 28.6%. We're going to be in the range of 31%-33%. What you're going to see here when Dave McConnell speaks, we're investing, and then there's depreciation. So you're going to see how the depreciation falls in 2027 and 2028. We naturally want to move above this number. We do. That's our strategy.
But because of the intense spending in the years 2024 and 2025 with the fab in itself as well in 2026, you're going to see how the depreciation rolls out, which impacts gross margin. Operating margin 14.3% in 2023. We want to be in the range of 19%-20%, 21% or higher. Adjusted EBITDA 19.5%. We want to be in the 25%-27%. That's our target for this five-year plan. Return on invested capital 11.2%, greater than 14% out in 2028. And the capital intensity, this is going to have some flow to it. We're investing heavy now, and we know why we're investing because the customer wants more and we have the technology. So we're at 9.7% of sales. You're going to see this in Jeff's slide, how it moves. And when we get out to 2028, we're going to have capacities.
We're going to have a lower capacity intensity of 6%-7%. So we're now going to shift to Jeff. Jeff's going to speak about manufacturing and our capacity expansion plans.
Good morning. Nice to have you here on our investor day, our first ever. I think you heard that once or twice before. So as Joel mentioned it. I've been here with Vishay for 24 years in different roles. But one of my longer term roles was in corporate quality. And in that role, I was responsible to drive the quality program to get to the medical level, the automotive level, the aerospace level. And so what we had to do at the time is we had to come up with a strong program and execute on that program. I am now tasked to do the same thing in operations. And this is my passion. Come up with a plan and execute on the plan. So this is what we're going to talk about.
are five things that we're going to do to transform us from the Vishay 2.0 to 3.0, which just as a reminder is customer first, growth oriented, and watching the P&L. That's specifically for me. Okay. So here's the five elements that I want to talk about. And when I talk about these five elements, I'm going to always refer to where we were, where we are, to where we are going. Now, we've heard capacity, of course, a lot here, and it's true. Joel has mentioned it. We have great products. We have what the customer wanted, but we weren't able to deliver, to give to them what they wanted because there was just a small upturn in the business cycle and we quickly became full. We use this dreaded word called allocation. Joel talked about that market. When you're on allocation, you shrink it.
You give your product to only a certain select few of customers, although many more want it. So our focus now is to move to what's called capacity ready. We're going to make significant investments to be capacity ready, and it's going to be smart investments. You heard the testimonial about the customer making smart investments. We're using market intelligence from the visits of Joel, of Roy, of our sales team, of our FAEs to understand what the long term roadmaps are from our customers so that we are investing in the right products and technologies. This allows us to be ready not only for a normal business cycle, but for an upcycle as well. I'll get in more detail about what the investment looks like over the years and what our goal is in the end. The other is the customer first element of it.
So we were a very manufacturing-focused company in the past. When the internal metrics were looking okay, we were happy. But we created situations that we had lead times greater than one year, sometimes two years. So you can imagine a customer wants to come and buy product from us and we tell them, okay, it'll be ready in 52 weeks from now. This is gone. We're moving away from that. Our goal is that even in an upcycle that we are going to have competitive lead times. The next element I want to talk about is the global footprints. So Vishay was a company that has grown through acquisitions. When we had those acquisitions, obviously we received facilities as well, but we kept those facilities the same. Typically there were smaller facilities, single line product facilities, and they became siloed.
So now we're looking at optimizing our global footprint and we're looking at it from two perspectives. Number one is to have larger, more efficient facilities, campus-like structures as we call it internally, that are going to service multiple product lines. Number two is that we're going to have regionally diverse facilities, localizations, because our customers want product from us from specific areas. So we're going to accomplish that both in this area. Number four, as Joel has talked about, is external production. I mentioned it once before. We were a manufacturing company. We wanted to do almost everything internal, but we need to grow now. And so we are looking more and more at external partners. And this is going to help us three ways. one is it's going to help us add capacity with little or no capital.
Number two is it's going to bring new products that maybe we haven't produced before because they're commodity based type elements or products. And number three, especially for those commodity items, because they have scale, we'll be able to get products at cheaper than we can manufacture them. And finally, profitability. Our past, we always talked about maximizing utilization independent of what product it was. Now we're looking at managing the product portfolio. And I'll have a separate slide on that to talk about some of the things, how we categorize our products and some of the activities we're going to do with those specific products. Okay. So investments. Joel has mentioned that we are going to initially invest $1.2 billion.
That has now moved to $1.4 billion because we have acquired Newport and we're going to use that money to be able to build our most advanced MOSFETs and prepare for the silicon carbide. But a little history. So in the past, if we look from 2017 to 2020, we were investing at a rate of 5%-8% when we talk about capital intensity. This was not enough to get enough capacity to satisfy our customers. So now we are in a catch up phase and we're going to be looking at spending between 9%-15% out to 2025, after which we're going to decrease it down to a more normal and sustainable level. Now you look and say, okay, you're going to be at maybe 5%-7%. Aren't you going to get back into the same situation you did before?
The answer is no for two reasons. One is in this capacity investment that we're going to be doing here, we're going to have extra capacity. We're also going to be setting the structure up so that any incremental investment that we have to do is going to be less than during this period. In addition, we are going to be bringing more external partners on to help supplement the capacity that we need. So if you look at this time frame from 2023 to 2028, we're going to actually invest $2.6 billion. 70% of that is going to be in capacity expansion and it's going to be focused on our growth products. And our ultimate goal here is two. We want to run our growth lines at 80% utilization.
With that 80% utilization, as the market increases, if we get an upturn, we're going to be able to support that market just with normal capacity. And then on top of that, if it's a very hot market, we have the ability, obviously, to do overtime, work weekend shifts, and these other type of things. The other, and to keep that customer first attitude, is that we're going to do it with competitive lead times. We don't want to go back to the situation where we built strong relationships with customers and they come to us and say, I'm ready to place a lot of order. And we say, you have to wait 52 weeks. This is what we want to get away from. So let's talk a little bit about the footprint. There are seven locations up on this map.
I'm going to talk about four of them specifically and we're going to show you videos of the four specifically. But I'll highlight the screen one as well. I think early on I got a question about back end semiconductor facilities. There is a program to locate our next back end semiconductor facility in Southeast Asia that's going to support all of our semiconductor lines. So we're in the final process of selecting a site and we'll be able to provide some more updates in the next few investor calls in that area. So today I'm going to talk about Newport in Wales, UK, Itzehoe, Germany, La Laguna, Mexico, and Juárez, Mexico. Taipei, Tianjin are two diode facilities that Joel has talked about on the investor calls. They're expanding to 8-inch products and we'll give more information later in the future on those. So Newport.
Newport is the recent acquisition we have done. We just closed it in this quarter in Q1. It's located in Wales, as I mentioned. It's a fab that has almost 3,700 square meters. It has the capacity of about 30,000 wafers per month. We've primarily purchased this facility to be the location that we're going to make our silicon carbide and GaN product. So there's going to take some time. Roy will have a timeline of how we're going to develop that and how it's going to come out. So short term, we are going to fill this with our MOSFET products, some opto products, and some thin film products as well. You will see that our first commercial products will come out in Q4 and then moving to automotive in Q1 of 2025.
So it's important to note that this was obviously a facility being run by a different company. The utilization rate is relatively low and it's going to decrease over time. So we have a strong priority to fill this fab and fill it quickly. The good news is we have the right products to put in there. So it's a positive thing. Okay. I think we're ready to run a short video on this facility.
Our Newport facility in South Wales, United Kingdom is located on 28 acres, making Newport the largest semiconductor manufacturing site in the U.K. The Max Power acquisition in 2022 advanced Vishay's silicon carbide intellectual property and MOSFETs product technology. Now with a Vishay owned fab to qualify and scale our silicon carbide portfolio, we are accelerating our participation in the silicon carbide MOSFETs and diodes marketplace as desired by our customers.
We are excited to further develop our silicon carbide and gallium nitride technology through cooperation with the expertise located in the Compound Semiconductor Cluster in South Wales. Future plans also include the manufacturing of silicon MOSFETs, photodiodes, and other technologies at the Newport campus.
Okay. So one or two other important points about this site. So as mentioned, it's on a 28-acre campus. This gives us the ability to further expand this location. We can expand the existing fab and we can build two additional fabs in the future, potentially getting this site up to 100,000 wafers per month. So this fits exactly in our strategy to have larger multi-product line locations. In fact, with the current footprint, that if we look out into 2028, this is about a 10%-12% capacity expansion for us.
If you look out when this is full with silicon carbide, it can be up to a 24%-25% expansion for us. So this was a very big deal, this acquisition. Okay. So the next is our 12-inch wafer fab that we are building in Itzehoe, Germany. This is located next to our 8-inch wafer fab. In fact, when completed, these two will be connected together. It primarily makes MOSFETs and it's going to be a 4,000 square meter fab. It's designed that we'll be able to be expanded in three phases. Its first phase is going to be able to produce about 20,000 8-inch equivalent wafers per month. And all said and done, when it's completely full, it'll be about 55,000 wafers per month. When full, it's about an additional 12% added capacity for us.
It's going to be one of the most advanced wafer fabs in the world, fully automated, significant reduction in operator-type individuals. So we're very proud for this to be implemented. So we're looking here commercially and automotive that we're going to have a qualification and we can start initial production in Q2 2026 and shipments will be at the end of 2026 to customers in early 2027. So I'd like to show you a little short video of this facility as well.
In Itzehoe, Germany, a 12-inch fab is under construction next to the existing 8-inch fab, which will be one of the most highly automated in the world. Vishay will significantly boost production capacity with this new 12-inch fab, increasing MOSFETs output in this initial phase. This expansion will also meet the growing long-term demand from our automotive and industrial customers.
And the size and layout of the building will allow for additional expansions in the MOSFETs line as required by market demand.
Okay. Next we move on to passives. I gave you some indications of two expansion facilities in semiconductors and now we'll talk about two in passives. The first one is in La Laguna. This is in central Mexico around Durango state. It's going to be an 18,000-square meter building and it's going to house inductors primarily, but also resistors. This factory, in fact, double our power inductor capacity that we produce today. It'll be a complement. Our current production is in Asia. This production will now be in North America. It fits exactly the regional concept that our customers want. But also importantly, power inductors are heavy. These are heavy devices. Logistical costs are extremely high.
With this location, we're going to support our North America and European customers at half the logistical costs. So there's a great cost advantage. It'll be loaded with our most advanced equipment. We call it our Gen 2 equipment that is much more automated than our previous equipment. So commercial Q1 2024, we're starting now. And in automotive, it'll be Q2 2024. So this location is just coming online as we speak. So we'll show you a short video as well of this location.
Our La Laguna facility is located in Gómez Palacio, Durango, Mexico. This LEED v4 certified facility is currently focused on manufacturing power inductors, which supports our plan to double our global inductor capacity. We plan to establish a campus at the La Laguna facility, bringing together product lines from other Vishay business segments.
This campus provides Vishay with a significant manufacturing presence in North America for power inductors and additional product lines. In addition, at this location, sufficient space exists for the construction of an additional manufacturing facility to meet growing demand.
As you can see, there's a lot of space in that facility to expand our capacity. Okay. The last facility today, we're going to talk about our Juárez facility. This will be our fourth location in Juárez, which fits exactly our campus concept. Having buildings in one location obviously helps us reduce our fixed costs. So this will be a new building. It'll be 10,800 square meters. It's going to be mainly focused on shunt resistors, which complements the other three facilities that we have there. Again, we are in exactly the same spot here. Commercially, we're talking about Q1 of 2024, automotive Q2 2024.
What's also unique about this facility is that we are consolidating our supply chain. For this particular technology of product, we actually had processes in three different locations. We are going to consolidate it because we now have enough room into one location. This is going to help us obviously save costs, reduce inventory, improve cycle time. There's lots of benefits with this expansion. Then I'll show you just the last video about our Juárez line.
In Las Torres, Ciudad Juárez, Chihuahua, Mexico, our state-of-the-art production facility is strategically located near other Vishay operations with a total production space of more than 8.5 acres. The new Juárez facility allows the company to significantly increase the current output of WSLX family of Power Metal Strip resistor products.
In addition, Vishay will consolidate several processes that were historically manufactured at other locations to streamline the process, improve cycle time, and reduce inventory and costs.
By the way, just for a little reference, so the product that will mainly be built there is the one that Dr. Zandman invented. You saw a video with the napkin and Dr. Zandman showing some calculations. This is his video. It's the one Joel grew up on, I would say, has many patents on. So it's a wonderful product for us, first to the world. And we're expanding because it's used in multiple different types of applications. Okay. So next, let's talk about external capacity. So as I mentioned to you before, is that we're working more aggressively to supplement our capacity expansion with external partners. And we look at it from two perspectives, one from passives and then one from semiconductors.
So first on the passive side. So as you can see, in 2023, only 4% of our revenue for passives came from external sources, meaning manufacturer partners, either buy resale, subcontractor, whatever it may be. So we're beginning much more aggressive in this area. We are going to more than double it to 10% by 2028. It's going to be a focus on different types of products, mostly resistors, mostly commodity based products, but not only. There'll be some that we're going to add additional product families that we don't have today. So there's a strong program in this area. Now the semiconductor side. So today, 40% of our wafers that we use and we sell are produced by external partners. It's going to stay 40% in 2028. The absolute dollar number is going to grow because we're growing as a company, but the percentage remains the same.
The main reason for that is because of the acquisition of Newport and Itzehoe coming online. Especially in the automotive world and especially in silicon carbide, the customers want the product to be built in-house. It's a critical new technology. Quality is extremely important. They want it built in-house. This is why we bought Newport. This is also one of the reasons why you see this percentage number staying the same. On the assembly side, putting the products in the packages, today we're at 24% and we're going to be moving to 45%, almost doubling it. It's going to be across all the product lines for semiconductors, opto products, diodes, and MOSFETs. Increasing the capacity. Here's just a breakdown. As you know, we report in six different business segments, MOSFETs, diodes, optos, resistors, inductors, and capacitors.
As you can see, the majority of our capacity increase or the one I shouldn't say majority. The one with the largest is the MOSFET area. But all the other areas we're also growing, diodes, opto, resistors, and inductors. As well, when we talk about our categorization of products, the high performing products, the growth products, this is obviously we're making the investments. On the mature products, we're taking an opportunistic approach. If we see some opportunities on a mature product that a customer needs, we will invest as needed. And then on the legacy, of course, we are not growing. So if you look at the utilization, which is, I told you, one of the key metrics that we want to monitor here to be capacity ready. For high performing products, these are the ones that went on allocation when the market went up.
We were running at 90%-100% utilization. We are now targeting the 70%-80% by investing in this capacity. The mature products, 90%-100%, will also go to 78% with maybe some investment, but typically not so much. The legacy, which we're typically running 70%-80%, as time goes and we implement some of our plans that I'll talk to you about in the next slides or two, that capacity utilization will go down because we'll be selling less of them. Maximizing profitability. I already talked to you about high performing, mature, and legacy products, but let me get a little definition for you. High performing products are products where we're technically leading and they are in growth markets. Okay. We are going to be investing the capacity and this should actually be more than 100%.
On the mature product lines, these are leading products, but with limited growth potentials. Here, we're going to be more actively managing them. We're going to be doing things like cost reduction and price management. On the legacy product lines, these are older products with lower growth potentials, heavy price management. If we're not getting what we want out of it, we're going to divest or terminate. Okay. So just to wrap up here, Vishay 3.0, customer first, business minded, growth driven. Being capacity ready is growth mindset. It's also thinking about the customer. Customer and service driven. This is customer first. I told you that we want to have the lead times competitive during the entire business cycle, the ups and the downs. Optimize global operations. This is being business minded. We need to be smarter about our operations to ensure our profitability.
We want to be regionally diverse to meet the localization requirements for the customer. That's a customer first. We're going to be balancing between internal and external production, business minded, adding the capacity without spending the capital. It also allows us to grow because we have that capacity. And finally, maximizing the profitability, keeping this in the business mind. This is an important element because we want to improve our gross margins. Okay. Thanks.
Okay. Thanks, Jeff. We're going to now talk about channel management.
I had an old slide in there.
Channel management. I spoke about this earlier. What are the customers asking for? They want more from Vishay. We were unable to support them. We underserved them. So we are now adding capacity, which gives the customer assurance of supply. Assurance of supply is the first door opener. If we're showing we can scale, now we get to talk to the customer engineers. Historically, we talked to the customer engineers and were not able to scale. Customer had to look for a new supplier. The purchasing people are really now concentrating on which suppliers are focused on growth. So we'll have the capacity. It gets us more engineering activity. Our design activity went up 75% in 2023, 75% with the new messaging and the approach of how we're going to engage customers. Design wins were up that high.
So with this capacity and now the engineering activity, we will have the opportunity to reengage customers that had moved away from Vishay. We have a story to tell. We have a business plan that we're developing and we're executing towards it. We're able to go out and engage more customers. So we want to talk about the three channels. This first one is OEM. OEM, what do they say for us? You guys have all heard it too. It's assurance of supply. Can you scale with me in year two and three of my program? Are you going to be there for me? Technical resources, I mentioned earlier, they want help from component manufacturers. Many of the large automotive OEMs, as they're getting into the E vehicle, the big brands are wanting to bridge those tier ones and they want to speak to the component manufacturer.
Our Chief Technology Officer, Roy, was at CTS and he had many meetings with the Mercedes, the GMs, the Volkswagens. They want to learn about technology. The traction inverter is a big item. It's a high cost item inside the EV. They want to learn about the technology of the component companies to shape the design. So the FAEs is quite important. And then we talked many times about regionalized manufacturing and competitive lead times. That's a common theme. So we look at some of our customers. Again, feedback, how are we doing? This is Continental. Vishay is a key supplier and technology leader for essential components, MOSFETs, metal composite inductors, and thin film. We're showing the willingness to grow and adapt business with us more and faster. BAE Systems, Vishay is newly focused and investments in capacity strengthen the strategic partnership with BAE.
Vishay leans forward in expanding capacity in order to meet the growing demands of aerospace and defense. Seagate, Vishay is at the forefront of MOSFET technology and the first resource I turn to. High quality inductors, very flexible in terms of creating customized solutions. You might not expect to hear that from a computer hard drive company, customized solutions. Northrop Grumman, finding the new substrate sources to meet our war fighter needs. We're innovative. We're helping them with custom products. Those are just a sample of many customers who are giving us positive comments after the first full year of where we're driving the business. If we talk about EMS, EMS, the second item is really the most important item here, being on the bill of materials. This is important as the EMS receives the programs from their OEM. Who's on the bill of materials?
Who am I going to buy from? So bill of materials is first. That's our engineering work out front, assurance of capacity, assurance of the ability to supply and scale. Again, if you're on the bill of materials and the program is moving at a fast growth trajectory, can you support the demand? Engaging the customers in house design engineers. I mentioned in the last call, we just gained access to Jabil's early access program. There's five suppliers who have access to Jabil. These suppliers are not overlapping. So Vishay is the broadest portfolio of semis and passives that gives us access to their design engineers to show them our technologies, to work on reference designs, sometimes a complete design for the Jabil customer. This is new for us. Had the same conversation with Flex, giving us access to their technical team. Many of our competitors have been there.
They've been there for a number of years. We didn't have the access. This is something new now. As they see we have the ability to scale, we're getting access to the customer engineers because they believe in the direction we're going. And then the regional manufacturing. Here is a Flex comment from their VP of procurement. Vishay has shown great responsiveness to our needs, adapting its business practices to provide flexibility we require. Our respective teams are exploring opportunities to enhance collaboration through early engineering and sourcing engagement with our extensive product portfolio. It's a big plus for us. And then Kimball, significant improvements in leadership and customer service since the reorganization, the realignment, delivering on their commitment to the customer relationship. These are all very important pieces of feedback for us because it helps to continue to fuel the direction we're going. Distribution. Distribution.
There's two types of distribution. There's catalog distribution, which is the NPI, and then there's the full service fulfillment distributor. Best in class, Vishay. You heard that earlier in the Mouser comment. Vishay is best in class in new product introduction. We have to make sure we have the products introduced and on the shelves and we don't run out of stock. This is an initiative that Jeff and his operations teams focus on very closely. We can never be out of stock of the new products that go to catalog. Expanding our SKU counts. I mentioned this one in the last couple calls. It's a main initiative. We had limited capacity. We played a narrow game. Our distributors had to service their customers. Our distributors added suppliers because Vishay couldn't support the demand.
By Vishay expanding our capacity, adding the SKU count, we'll be eventually having conversations about they don't need supplier number seven, eight, nine, and ten of a particular commodity. They could rely on 3 suppliers if Vishay is there. Historically, we were viewed as opportunistic. When the business got an uptick, we took our limited capacity and we went to our strategic accounts. The distributors had to find other suppliers. Even though it's 53% of our business, we still underserved. So expanding SKU counts, you hear about it, the continuous supply of product. This was mentioned by Jeff, even during upturns. We can't leave. We can't leave a partner during an upturn. We have to be there with capacity and regional manufacturing. This is comments from Avnet, Phil Gallagher, CEO, a comprehensive offering of both semi and passive technologies addressing the need.
The customer has a bias towards suppliers who are customer focused and solution providers, rapidly migrating away from the collection of desperate brands to a unified enterprise, providing technology solutions and creating extraordinary value for their mutual customers. Vishay truly does build the DNA of tech. We're getting promising comments there. Digi-Key, Dave Doherty, the CEO, the new team has injected a noticeable sense of energy and purpose towards growth. Vishay's ability to service the market with a broad array of products is unrivaled. One must take bold, calculated actions without being reckless. We are seeing and experiencing this spirit with the new Vishay team.
The last one is from TTI, the CEO of TTI, the strategy of developing new technologies and investing in production capacities to create growth versus reacting to market growth creates an opportunity for distributors to offer wider technologies and additional product availability with short lead times, increasing Vishay's market share. It's everything you've heard. Now we're getting the feedback after the first year, even though we're in a sideways soft economy, we're positioning for putting more Vishay on the shelf at the distributors, more part numbers, and being a long term, reliable supplier continuously in all market cycles. So now when we look at the markets, what's this five years look like and what type of projection are we talking about? Automotive is on the left. Automotive, we're saying 11%-13% CAGR. There's a lot of customer to Vishay design activity happening.
So the 11%-13% we're quite bullish and positive with. Industrial, 9%-11%. I talked about redesign of the grid. I talked about energy collection, energy distribution, charging stations, robotics. There's a lot going on in industrial and we're all watching the world. The industrial segment is the weak one right now. Automotive is showing it's positive a bit. Car count, they say, is going up a touch, but there's always more automotive electronics. So here we are. Industrial, government investment in infrastructure needs to be the trigger and we're all looking for that so we can enjoy the design activity that we have with customers. We can put it into use. Medical, medically, you see 1%-2% here. We've just added a new medical sales leader in the Americas. This is growth that is at this point a small target. Medical takes some time.
We have a couple of key medical customers, but we want to expand further. Why did I say it takes time? FDA approval on a number of things takes years. So getting the design activity and getting that moving, we want to see a better number the next time we have an investment day. But at the moment, it's 1%-2%. Aerospace defense, aerospace defense is 7%-9%. This is warfare. This is missile guidance systems. This is soldier to soldier communication, walkie talkies. There's a lot going on in aerospace defense. Plus, you see the Airbus and you know the backlog of Airbus and Boeing. It's a big backlog. A lot of product here. I've talked to a number of aerospace and more defense companies. They talk about these two wars.
They said, Joel, in five days we shot seven years of inventory in missiles in one of these wars. There's a lot of replenishment that has to happen. So we're excited about our position in military. And then the other, the other are those that I talked about, the consumer, the computer, and the telecom. Historically, this didn't have much growth here. We're saying 6%-8% at this point. We have design activity. We've got to go in and win the volume business. So you're seeing across these segments, double-digit growth in auto, nearly double-digit in industrial, medical starting small but expecting to improve, aerospace defense at the rate of 7%-9% and other as well, broadening the focus.
If we look at by channel, which we started this conversation, OEM, because of the automotive OEM wanting to be direct to the supplier, we're saying 9%-11% here. That's what's driving the OEM. Automotive was high. OEM direct is high. EMS, where I mentioned we're now having access to their technical teams, we're going to be designing programs to help them go into production, which we didn't have before. We're showing 13%-15%. CAGR. And finally, distribution, 8%-10%. This is adding SKU count again. This is making sure we have product on the shelf and we don't leave. We're there as a long-term supplier, plus helping them look at their entire warehouse to decide how many suppliers do they truly need if they have the strength of Vishay supporting their demand? So if we look at growth, we talked about percentages.
Historically, 2018 to 2022, the CAGR was about 3.6% with a big year here. We know what this year was. This was ASP, a singularity year. Everybody raised ASPs in 2022 and that lifted 22. We're showing 9%-11% here, almost three times the rate of growth of what we historically have had. It's not I hope you understand, it's not just throwing money at capacity. It is engaging the customer. It is repositioning the company. It's having the technical people in front of the customer. I'm an engineer. I grew up in this company being in front of the customer and speaking about their long term demand and what they're going to need. We aggregate this across all of the customer interactions to build our business plan, decide where we're going to manufacture. Jeff talked about two sites in Mexico.
We're really putting a very cross functional analysis of the business and how our initiatives are prepared so we can support the customer in a much more positive way for growth than we have in the past. So that's the first sections this morning. Jeff, if you want to come up. If you have any questions for Jeff or myself about the operations, about the customer facing, about the business plan, after the break, you're going to hear about R&D and you're going to hear the finances. So if you have any questions for Jeff and I about what you heard, please let us know.
Hi, Josh Buchalter from TD Cowen. Thanks for hosting the informative presentations. So you spend a lot of time talking about the capacity investments, both internally and with external partners.
Historically, that we're just coming off the shortages makes total sense to invest for growth. But that's historically also led to some element of cyclicality. Could you maybe spend a few minutes talking about sort of what actions you're taking place? Is that something that you're prepared for and fully understand and appreciate, or actions you're taking to protect for when periods aren't as good as they were in 2022 and 2021?
Thank you. Yeah. So qualifying the external partner is very important because it gives us capacity. As Jeff said, we don't have to invest in. That's a benefit. Now managing that capacity, we have flexibility in our planning, when to use the outsource, when to use the internal Vishay.
As the cycles move up and down, Jeff's team will have the flexibility to decide, is it capacity of Vishay and the Vishay headcount at risk, or do we move in some of that was outsourced into Vishay to keep our factories moving? Jeff, you want to comment further on that?
Yeah, exactly. This is a nice thing. It's not 100% flexibility. Of course, you can't shut them off, but that ability to take and say, now our factories are underutilized, and then be able to utilize that business and bring it in-house provides us a lot of flexibility to ensure that our operations are running at the levels we want them to.
Are there any figures you have of how much is portable between your internal sites and external?
Yeah. Yeah, it depends on product line, so it varies.
There is an element, like we said, there are some products that we will only produce externally, but if that business goes down, then it goes down and it's separate. But the majority of our business, especially when we talk about in the semiconductor side, is things that we can bring in and out, not a problem.
Thank you. Now, he mentioned resistors as one of the passive products that was built in-house, and we didn't have enough capacity. We were significantly low at capacity, where we're adding a new subcon, even if the market would go softer or very high peak and come back down. The volume that we're able to get out of this subcon far exceeds what we were able to manufacture.
So it's really a plus plus in this case, even if it got softer, we're still well ahead of what we were historically able to supply.
Yeah. In the product line that Joel is specifically talking about, I think we're even in allocation in a down market, to be quite frank.
So we have been.
Yeah. So for products line like this, it's not a problem. We actually need that external capacity. Thank you. Yep.
Yeah, thank you. Good morning, Matt Sheerin with Stifel. Just a question on the capacity expansion plans. You put percentage numbers on it, but doing the math, it looks like you're talking about 2.8, what, $4.4 billion-$4.5 billion in revenue if everything plays out in terms of that growth rate. Is that right?
It'll be higher. Higher than that.
Closer to $5 billion, or?
Yes, it'll be closer. I mean, you have to look at the range of the CAGR, of course, but.
Okay. And what is it? It sounds like you're expanding both passives and actives, but a lot more on the MOSFET and the silicon carbide. So what does the mix look like in 2028 passives versus actives?
Yeah. So I think we'll have that in the slide, but I can just give you just some roughly about the capacity. So about two thirds of our investment is going to be on the semiconductor side, and it's going to generate about two thirds of the capacity expansion as well. So based on those numbers, you can make the calculation.
Okay. In terms of getting to that point where lead times are normal, even in a hot environment, does that mean that you're willing to invest in your own inventory and add some inventory buffers and maybe control that a little bit better? Like we're seeing a lot of semiconductor companies now are controlling that inventory or even in the channel. So how should we think about that?
Yeah. So thanks. This is a very good point. Historically, we have swung our inventory up and down quite significantly. We are trying to be that customer first. So we're managing inventory much better than we did in the past so that we are ready for the upcycles, so we prebuild them. We don't cut our factory so dramatic now that we reduce them in slow times.
We build inventory as needed, not excessively, but in the areas where we see, especially in areas like automotive where we see the scheduling agreements, so you can see out six, nine, 12 months. So we have the ability to look there and we know that they're going to take the product. So we've been more flexible in our inventory management now.
I think another part of that answer is if you look historically, when I say we were a cash flow managed company, it was the cash for that given calendar year. So Jeff talks about the inventory adjustments that were made within the calendar, inventory lower at the end of the year to provide for a greater cash at year end. But the business didn't stop. The business keeps rolling.
So the customer is looking for that Q1 delivery and Q2 delivery, which we then would ramp up inventory to start the next calendar year. It's a dynamic business. The customer doesn't run on calendar year. They run on programs. So this is what he talks about, where we're going to run it differently. We're going to make sure we're supporting the demand based on the agreements we have with the customer and the volume they need.
Hi, Greg Williams from Mountaineer Partners. Just a few questions. I guess first off, for clarification, especially given the prior, the guide is 9%-11% CAGR from 2023 through 2025, right? Yes. So 2023 to 2028. 2023 to 2028. Through 2028. Apologies. So that translates to 61% revenue growth over the period, or roughly from $3.4 to $5.47 revenue is the midpoint of the guide in 2028, right?
In that range, yes.
Yeah. Just for clarity's sake. And then on slide 20, I think you showed CapEx as it relates to revenue. And in there, in 2025, I believe the implied growth rate is roughly 20% revenue growth from 2024 to 2025. Did I misread that slide?
I would have to look. No. So we were talking about only capacity at that point?
I believe that slide was CapEx, and then there was a line as a percent of revenue, right?
As a percent of revenue.
Right. And so since the CapEx remains flat and the change in percent of revenue, I believe it works out to roughly 20% revenue growth in 2025. Yes. Okay. Just wanted to make sure I was clear on that.
And then stepping back, I think, correct me if I'm wrong, that the midpoint of the guide on EBITDA implies roughly 1.42 or so of EBITDA in 2028 from today's roughly 700. Is that a fair assessment or 100% growth over the five year period? I just want to make sure I'm not missing the. Yeah, you're going to see it in these numbers, but your math is quite good. Yes. Your math is quite good. Just for clarity's sake, thank you. And then I guess more operationally focused, one thing that strikes me as unusual is I'm used to seeing capacity utilization going down and margins going down, yet you show margins expanding. How confident are you that you can deliver margin expansion while utilization is coming down?
Yeah. So we are quite confident. We have lots of elements in our program, cost reduction type things, efficiency type improvements.
We have mixed improvements as well, newer products. So we have a whole slew of things. As Joel likes to say, we look under every rock here to find the opportunities. And where in the past we talked about it's only cash flow. That's what we talked about. But now it's really we're focusing on margins and looking at multiple ways of improving those margins. And of course, the external capacity as well also helps because in some cases, there are lower cost options than what we can do internally.
And then for the external capacity, can you help me understand what the impact is on the financials? Is that how you structure the agreements from a rev share or margin impact? I'm just trying to understand the stability that it might add to performance going forward. Yeah.
So we have lots of different types of agreements with our customers.
So it depends if it's an assembly one, it depends if it's a wafer foundry, it depends if it's a buy resale. And if I take, for example, in the resistor category, buy resale, we've worked very closely with them to identify it's sort of a cost plus a fixed margin number for them. And then we look at what the market rates are going to be on top of that. But it's fixed pricing, which of course helps us. It's a positive market. We can increase our ASPs and these type of things. So it's a mixture of different ways, but it is going to help improve our profitability. This is for sure.
So Greg, go expand on his comment. Jeff came to you with the operational answer of efficiencies, locations, external, but it's also the channel management. Distribution margins are higher.
When we were underserved, we participated in lower margin business. EMS margins typically are higher than could be a long-term agreement with the OEM. So having the capacity, he's working very diligently, he and his team on the cost side to position us, but also having the capacity for the higher margin markets as well is a plus.
That's very helpful. Thank you. And one additional question, especially in the OEM side, when you're spec'd into a device or a car, how long should we think about the typical life of that agreement where you're on that bill of goods? Is that a five-year?
We're on the bill of material for the program. It could be five years. But every year we have to negotiate the award. They don't necessarily get multi-year awards. It's a 12-month award.
So that's where the productivity and the improvements that he can make and the cost continue to position us for greater share as we bid the second year of a program, the third year, the fourth year of a program. Industrial, by the way, those are typically seven-year projects. It runs much longer. And the industrial companies, they take a little different approach. They're looking at the high quality of the product. Automotive is too, but typically get a longer term award for industrial.
In aerospace, they can be up to 30 years.
30-year program.
Yeah. Hello, Nick Todorov at Jefferies. Thanks for the presentation. You gave some very robust revenue growth targets, and you talked about the capacity expansion. I think it makes a lot of sense. The question really is how much visibility you have from a design pipeline in terms of whens.
If you think about a typical design cycle of anywhere from 1-3 years in industrial and automotive, you should have some visibility. But sitting today, obviously you don't have 5-year visibility. But looking into for the next 1-3 years, how much visibility you have in terms of design wins to hit your revenue targets?
Okay. Every year we log design new and design win. Each of our engineers, the FAEs, have this as their initiative in their bonus program, design new, design win. Roy, do you want to comment, step up and comment about the percentage? I think it's near 50, isn't it?
So yes, certainly, Joel. So for industrial, we are able to convert almost 50% of our design wins, design new to design wins. And from that perspective, when we go to industrial and automotive, we have a longer view.
So typically between the design new to the production, I would say 2-3 years, depends on the programs. When we go to computing, telecom, and so forth, it's much, much shorter. But we do have a good visibility. As Joel mentioned, we expanded by more than 75% our design new in 2023. For 2024, we believe we will continue in this rate. So we feel quite confident that we have a robust pipeline supporting us moving forward.
Okay. A separate question I have is on automotive market. I think you made a comment recently that EVs is a relatively small percentage of your business today. But I think on the slide you highlighted the 800-volt architecture in the e-mobility. So maybe can you talk about how much do you see of your business coming from EV and automotive specifically over the next 5 years?
Do you want to take that one from the business development side?
Yes, certainly. So you're absolutely right. So today, automotive and the electrification is a large business for us, but it's mainly coming from a 12-volt and a 48-volt type of business. Our designing into 400-volt and 800-volt is enormous. So we do see that as the largest growth moving forward for us. So I would prefer not to put specific numbers, but certainly I would say that's the number one application.
Any other questions? Okay. Peter, you have a question?
Yeah, we have one online question. Given the capacity expansion, could you please elaborate more about the competition in your key categories such as MOSFETs and passive components? What is the implication on the pricing in the next couple of years?
So for MOSFETs, of course, there are other people that are expanding as well. I mean, you see a lot of news reports indicating people building wafer fabs as well. We have built in ASP in our model. Overall for the company, it's around 2.4% ASP decline year-over-year. You'll hear the number. It is higher in the semiconductor market. So we have taken that into account. There is going to be much more demand for sure. There is going to be more capacity. But we look at that in our modeling and we look at that in our projections. Obviously, overall, we're going to see our mix improve because we're going to be moving more to things like silicon carbide that's going to have a better profitability. So this also helps.
If I may add on the MOSFET side.
So unfortunately, we were not able to go as fast as some of our competition in the last two or three years because of the capacity constraint. But again, from a customer's perspective, we feel that we have a very strong foothold. We have a great technology. We have a great relationship and our quality is excellent. So from that perspective, we were penalized and we believe we will be able to catch up on some of that, not all. But plus with the increase in market, we do see the customers is asking Vishay to take more to participate. They don't like to have one or two suppliers getting too large. But we do think that with our technologies, we'll be able to continue and compete. And from the ASP, I think it will just continue in the same normal way as we saw that until now.
We don't have any other concerns on that.
Any other questions? All right, let's take a break and then we'll come back with silicon carbide.
We're looking for Roy. Oh, here he comes. All right. Roy will talk to us about silicon carbide, the strategy that's put together. You remember Max Power in 2022, the end of 2022, the acquisition of technology, and then Newport to bring it into scale. Roy, welcome to the stage. Roy Shoshani, CTO, Chief Technology Officer, is going to present silicon carbide strategy.
Thank you, Joel. Good morning, everyone. Thank you very much for coming today. And I'm excited to try to present to you in the next 30 or 45 minutes, our silicon carbide strategy, but also our overall technology and product roadmap. So before that, Joel already introduced me, but let me just give a quick overview.
We had some discussions a few minutes ago. So I'm located in Northern California, in San Jose. I joined Vishay in 2004. I had some management and R&D experience, and I did some increasing responsibility positions until in late 2008. I got my position as managing the IC business unit. As you guys know, the end of 2008 wasn't a great time to be in the business, and that was quite an experience. What I can tell you is that what I took out of it is that we went through tough times. We laid off a lot of guys. We streamlined the entire operations. I can say that in 2022, when I finished with my job, after 14 years, we grew 15% CAGR to a very high, also with a very high profitability.
But we changed 95% of our products, and we changed 100% of our operations. Now, of course, coming to my new position in 2023 for the CTO, it's not the same thing. We have a great company. We have great products. But what I'm saying, we are up to the task to make the changes, and we understand it's not an easy one. But I think we are all, as a management here, we all did our things. You know, we made those changes in a smaller scale. Now we have the ability to drive it forward. So what I would like to do is, when we, before I discuss the silicon carbide strategy, is basically to talk about my team and the responsibilities and how we're going to drive innovation, because that's the main responsibility.
Jeff mentioned earlier that we are a manufacturing company, which is true, but we are also a technological company, and we need to put a focus on that. From that perspective, we're going to have a lot of capacity. It means that now we need to have great products, and we should be able to be competitive on those products in order to get the right margins, because you don't want to just fill the products with a low margin. Our capacity is with low margin products. The way how we start, driving the innovation, it starts with the technical customer engagement with the customers. Coming back again to the three pillars, think customer first. The business development, or what we call the field application engineers, is a team that we are focusing now to higher engage with the customers on a daily basis.
It starts from a higher level with myself. Joel was also with me in last CES. Honestly, two CES, we met consistently with the same customers. First CES, I can tell you, was quite tough, meeting with the CTOs and the management of our key OEMs and tier ones, because, you know, we got tough comments. Where were you until now? What are you leading in? And so forth. In January, it was better. We met with the same guys, and we were able to execute. So we had some credibility. Next one, I think we really need to be able to beat the. But along the course of the year, I spend most of my time meeting with customers. And from that perspective, the expectation is also with the rest of the FAEs and also some of our R&D as well.
The goal is to better understand the pain points of our customers and better understand their needs. Also what they don't know, we need to try to provide them the solution. We need to understand where the competition is and trying to provide a better solution. It all starts with thinking customer first. The second one is about the solution focus. We are selling components, but in the past, we came to the market. Our approach was we are selling a component. Now we are saying, no, we are selling a component, but we are coming with a solution. The added value goes in both ways. Number one, from a customer perspective, we offer them a wide range of products. We are helping the design engineers to get to the end point where he needs to be.
When you make an IC or you have something which is controlling the architect or defining the architecture, it's easier for you to do so because you define everything. For us, we are a discrete company or a passive component company. So it was hard to come with a product that potentially can be replaced. So we are trying to help the design engineers understanding the pain needs, bringing them a better solution. It also comes back to us that we understand where is the competition, what do they need. It goes back to our R&D team. We define the roadmap. We define what do we need to do? How do we need to make it in such a way that we'll be able to grow profitably in the future? The second thing that we are doing is enhancing the R&D execution.
So, of course, we need to execute better on the R&D. Honestly, having the capacity makes a big difference on our R&D execution. Most of our R&D is done on the production lines. So you can imagine that if you're under allocation, it's hard to get a priority or to move, you know, the research and certainly the development fast enough. So just, you know, by the fact that we are investing capacities, make it much, much easier. But on top of that, we are implementing many strategies and methodologies to improve on our execution of the new product development. New product development is critical for us in order to change the mix and in order to enrich the mix moving forward. A part of it, in order to accelerate that, we started working with more universities and R&D institutes.
The goal is to bring more technologies internally and also to work on more future technologies in such a way that we will not be a follower, but we will be a leader. We heavily started that a year ago. We already signed two MOUs with two universities and mentioned that also later on as a part of the silicon carbide, not only silicon carbide, also gallium nitride. We are working on other things as well. The last point will be on the increased investment. In order to grow, we will invest more in R&D. But of course, we need to be thoughtful of the P&L so we can really afford to go overboard. But at the same time, we are also putting a big effort of getting external funding.
We built a team working with the local governments, with the local institutes, and trying to get more research and development funding so we can help also to drive our R&D. So quite a few changes from the way how we did that before. And with that, let me, please, I'll go to the silicon carbide portion, and afterwards we'll have a chance to go back to the global Vishay from a development perspective. So I'm sure most of you already heard about silicon carbide. But just to recap and to give an overview for some of you that maybe are not as familiar. So the power silicon carbide device market is a very large market today. But what I would say, and again, it's hard to see out of the graph because it looks like a linear graph, but I still call that that it grew exponentially.
So you can see that in 10 years, the growth was phenomenal, or it is expected to be phenomenal, I would say. It will do more than what the silicon grew for power silicon in 30 years. That's the reason why, of course, we need to be there. We can say that, you know, we are late to the market, and I will try to convince you that we will be successful, although we are a bit late. We understand that. But at the same time, you can see that the big market is indeed coming in the future. That's the reason why we had to run fast implementing our strategy moving forward. So why is the market going so fast? It's mainly because of electrification. Electrification is coming from two megatrends. One is the e-mobility, and the second one is from sustainability.
On the e-mobility side, the application that was driving silicon carbide growth is basically EV. It starts with the charger and the traction inverter and basically goes to other peripheral like the heat pumps. So in order to get our EV cars, you know, having them able to drive for a longer distance or faster charge time, that's exactly what the silicon carbide is able to provide us. When we go to the industrial side on the sustainability, the green energy is helping us to drive with silicon carbide to a much more efficient power conversion. So silicon carbide is a great technology when we go to high voltage, high power. That's where its characteristic versus the silicon excels. Now, from a Vishay perspective, we go back to the basics. We are starting and we are focusing on the device side.
The device side starts from a Schottky diode to a MOSFET to a wide range of voltages, 650-volt going up to 1700-volt. We do have the intention later on to take it further to 3300-volt and so forth. That's where we focus today. This is like the same things as we do today on silicon. Now we are moving to do that on silicon carbide. Because these are power devices, the innovation in the device itself is not good enough because there is still, even with the improvement in efficiencies, there is a lot of, I would say, power and energy that needs to be managed. In order to keep the thermals, it really goes to the package innovation, or if we sell that as a die in order to go to a power module.
So the package design and the innovation is extremely important in order to be able to get the right quality, the right cost. But I would say mainly it's because of the quality and the reliability. It's critical. The last point is really about that integration or solution. Bringing it all together helps us to provide a better solution for the customer. Either it's from a size perspective, ease of use, but also power density and reliability. Now, we did power modules for quite a few years already, and we are, you know, we have successful business on both chargers and in other e-mobility applications. But in the past, we didn't use our own semiconductors because we didn't manufacture our own semiconductors in our own fabs. We had to buy it from third parties, mainly our competitors.
And you can imagine that now when we bring everything in-house internally, first we can get much better products because we can design the products to fit the customer needs, but we will be much more competitive. And when you look on the power module today, the three main competitors on the top are semiconductor guys. And we believe now we'll be able to finally move much faster on the power module itself. So with these three, the way how we plan to execute it, we started through the acquisition of Max Power. So to be honest, we started earlier research and development on silicon carbide, but we started late. We started roughly in 2018.
One of the first things that we did as a new executive team already in 2022, when we went through the transition period, was to identify this opportunity to say, hey, we are late, we need to move fast. So what we did, we identified a company which is Max Power, which we were able to acquire late in 2022. We started to work with them earlier. We knew those guys quite well. Some of them used to work for us. So it was all local and also close to where I sit. That was very easy. But the best thing is that it was 100% complementary to Vishay. It's a great company because it has a very highly skilled and experienced team.
It had a great IP and it still has a great IP on both technologies, on MOSFET, which I will explain in a minute, on planar trench technologies. And they also had that proven. So it was really good. But it was even better from that perspective because the valuation wasn't so high because they were not able to manufacture that. They didn't have the manufacturing capability. They didn't have the customer reach. And that's where exactly Vishay comes in. So it's a perfect fit for both companies, bringing their own strengths altogether. And I would say that until now, 18 months after completing the acquisition, it still continued to exceed our expectations. And that's great. Now the future is still far and we still need to work hard. But until now, we are very happy.
So what we acquired from Max Power is basically you will see here the technologies in white are the technologies that are using planar technology. And the first one they released already in production in 2018. The second one we released basically at the end of last year and we are going now to production. Now what we did, because as I mentioned, the technologies were already proven, but they were not produced in the right manufacturing facilities. So we decided to say, okay, let's stop. Let's bring those technologies to our foundry partners, to the guys that we have a strategic relationship with, where we trust them on the quality, on the capacity, and also later on to support us on the right cost to be able to scale. And that's what we did. And that's the reason why it took slightly longer.
But we have already this technology now going to production. The third generation is already a trench technology. And that's where really the IP comes into play. Max Power is a trench company. And by the way, also Vishay and Siliconix, which was acquired by Vishay, is a trench company. We were the first trench company to or first MOSFET company to be able to produce trench MOSFETs in the 1990s. So from that perspective, we move this technology again to additional two foundries. We plan to sample the products by the end of the year, release it by the end of the year and go to production next year. But we are extremely excited also from our fourth generation, which will be produced in our own new fab. Now we mentioned the fab and also Jeff mentioned how we're going to run operations between our external partners to internal.
So it certainly helps a lot from the operation perspective to balance and also to not to spend all the capital doing that internally. But it also helps a lot on the capability when we want to develop the new products. And it also helps us when we want to keep the IP, especially at this point in time. So overall, Max Power is really carrying us forward. We are heavily investing in supporting them. And from that perspective, I like to take the next few slides slightly more technical, but I will try to make it relatively fast to explain to you why we think the technology that we own now is better and superior to our competitors. So in essence, basically there are two technologies, main technologies for MOSFETs, a Planar Technology on the left side and a Trench Technology on the right side.
With Ma xPower, we have both. But the key IP that we feel that we can excel is really on the trench. So let me start first on the planar. The main difference between the two, you will see we put the structure, not that you need to totally understand it, but the base will be that the substrate on the bottom, the epi and the structure coming from the bottom is very similar between the two. Not too much difference. So the difference comes basically in the structure of the device itself. Now I'll discuss later on Silicon Carbide from a substrate perspective because that's extremely important, but we'll focus at this point only on the device. So from a device perspective, on a planar, we have the gate here in red and we have the source on the side.
So basically when the channel we need to run the current, the electrons, they will go basically down all this way. But basically that's the structure. Everything is on the surface of the device. When we go to a trench device, now the source is here. Sorry, the gate is in the middle. The sources are on the side. And basically now we can shrink the device because we are using the additional dimension. So when we look now again on the planar device, typical planar device go from a 6 micron best in class can go 4.8 micron and maybe below. We don't think it can be shrink much more than 3 micron just because of the structure itself, as I mentioned, to all being on the surface. But this is a single device.
When we want to make a larger device that can carry high current, we need to go for a low resistance. So we put them in parallel. And that's where you can see many devices go in parallel. At the end of the day, we have a die, a die, for example, for a traction inverter, which is very common today, is 5 by 5 mm, 25 mm square. So it's quite a large die. And at the end of the day, that's how many dies we can get per wafer. When we go to the Trench, you will see that Trench today goes from 3.2-1.8. And we think that we can take it even further to be smaller. We think that Trench can be dramatically smaller just because of this structure.
Now you will see that when we make the device again to try to match the same resistance in order to minimize the conduction losses, it will be much smaller than the planar device, leading us to a smaller die and we can get more dies per wafer. So from that perspective, we believe that's the future. Now, if the history is not going to lead us strong in the nineties, sorry, in the 1980s, planar MOSFETs were leading the technology. But late in the nineties, almost the planar technology, you know, went all to trench. And certainly today, all the low voltage MOSFETs and moving up to the medium voltage and so forth are trench technologies. So we don't see too much of a difference in this case from a device perspective. As we said, we are doing that for the last 30 years.
We were the first company to do that. Now when we go to Silicon Carbide, within the top five, still most of the companies are doing Planar devices today. There are already big competitors doing Trench, but even those that are doing Planar are looking and are indicating very publicly that they're going to move towards Trench. So from that perspective, we think that our approach is the right approach. And what I would like to show you here is one of the metrics of how we measure the performance of the device, which is the resistance per area. In this case, it's milliohms per square centimeter. And this is a key metric because as I mentioned earlier, we want to get a large device in order to get a low resistance in order to minimize our conduction losses.
But in order to do so, it costs us money. So we would like to shrink it. And shrinking the pitch of the device is the key way today how to be able. It's not the only way, but it's still the main way how to be able to get a device to be more effective and more competitive. So if I go back to 2011, Cree was the first company to release a silicon carbide device, a planar device, and they were here. And you will see that along the years and here in red, we have many of the competitors. It's done by this. This map was done by a third party and the competitors, you know, the technology started to excel and certainly accelerate with the last few years because the business is coming and the potential is huge.
But what you will see as well is that where we are coming from a Vishay perspective, with our three generations that I mentioned earlier, we are coming at the top of the back. Now, as I mentioned, yeah, we are slightly late and that's true. Now we are shifting it to our own production. But you will see that our generation two is already very, very competitive and our generation three also fits with the best in class. Now we do acknowledge that our competitors are working on their new technologies and they're not standing still. But at the same time, as we mentioned, we have our generation four and we already have a good understanding of how we're going to take it forward in our new fab.
So, having the fab and having the ability to get the latest equipment where we need that helps us a lot, so we can utilize it in order to take it to the next step and be at the top of the pack from a performance perspective. Now, I mentioned shrinking the dies and I talked a lot about resistance, but it's not all about resistance. These devices are switching and silicon carbide is switching much better than silicon. And that's the reason why we are running that at higher switching frequencies, typically at the mid-kilohertz level. So, from that perspective, the switching losses are very critical. And from that perspective, also it relates to the capacitance that is coming from the device and that goes linear to the size of the device.
So shrinking the device helps us also on the capacitance, lowering the capacitance is getting a better switching performance device. Everyone likes it because at the end of the day we have a if we go higher frequency, we have a smaller systems, less capacitance, less inductance, more cost effective for the system companies and also lower cost and lower weight. So with that said, I'll try to summarize that. We believe that not only we can provide a good performance, we can also enhance the reliability and our products are more rugged. Our gate is shielded and we think that we can get a better protection on the gate. We have a lower electric field. We think that that will help us also. So we think our silicon carbide will excel from a ruggedness perspective, which is extremely important in these high temperature, high reliability applications.
As I mentioned, we can improve the performance and also scale that moving forward. And the last but certainly not least, we believe that versus the other trench competitors, we have a simplified process. So we believe we'll be able to take it moving forward with our operations and we'll be able to be also very competitive on the cost. Now let me try to touch on the operation side. That's extremely important. And I will do that on the next slide. But just to explain to you our strategy, our strategy on operations, which starts first by having the starting material, which is the silicon or silicon carbide substrate, moving to the EPI and then getting the wafers to the fab, packaging test and up to whether it's a package device or a power module. So we believe on having a hybrid model.
What does a hybrid model mean? It means that we are running a diversified supply chain in our partners and foundry partners, as well as we're going to run that in-house. One of the reasons why we are forced to do so, because as I mentioned, Max Power didn't have the right capability to produce. So we understood that number one for us is to the time to market in order not to miss the design in windows. So if we can capture the design in window, we can capture a more significant business in the later years when the business ramps up. So we focused on that and our foundry partners and our subcontractors were the right way how to do so.
Now we intend to keep it also moving forward while we are bringing our own operations because we want to have the resilience, we want to have the redundancy and we do expect that we will need to get more capacities. And as Jeff mentioned, that will be our way how to balance things. So from that perspective, you will see that we from a power module test and packaging, we already have everything in-house. We are already running the same power levels, the same voltage levels internally. And now we're just expanding it and extending it to silicon carbide from a fab. Now we have a Newport and we'll do also the EPI. And I will mention on the silicon substrate in the middle. And that's the reason why it's a hybrid. Also because we intend to do both.
So I'll focus a bit about Newport and its importance and what's the various phases that we are going to address moving forward with Newport. So we started in last year. As we mentioned, we just closed the deal exactly four weeks ago. But last year we did a planning stage. We analyzed the capabilities of the fab, understanding all their equipment. We thought that Newport is a jewel for us. And the main reason why we thought so, because it's a brownfield, it was a discrete fab. It was already ready for our products, whether it's MOSFET, whether it's diodes. So the equipment was the right equipment for us. We got a lot of new equipment investment, which was done by the previous owner. And that's equipment that is less than two years designated exactly for these applications.
So we got the equipment, we got the fab, we got a highly skilled operation team. That was the fastest way for us how to ramp up the production, how to transition versus, you know, going on a greenfield that we believe would have cost us 2-3 times higher. Because again, we can reuse most of the equipment. Now we can't use all the equipment and we need dedicated equipment. And that's also what we did. We went and we selected carefully the equipment last year. And honestly, that was a big plus for us because we are a latecomer and we enjoy the benefits of our peers suffer for so many years going through that cycle. So our goal was to leapfrog. Okay, we are not going to leapfrog all the suffer, but certainly hopefully the big portion of it.
So we selected the newest and greatest equipment to the specific processes that we think that will bring us the extra value and will carry us forward in the development of the technology. And the last thing we did, we took the risk and we already ordered the equipment last year. So we were able to close on the deal and we have started already a few months ago the phase two where we are developing the module development. In this case, it's not the power module. This is the silicon carbide technology module development. It means that by every machine, every process, whether it's, you know, the photolithography, the implant and so forth, the trench, we are starting to do the process integration. We are working with third parties.
So as I mentioned, we increased our collaborations with universities, with some of our departments that we are buying equipment there from. That will help us to expedite the process because we want to be aggressive. Time is of an essence and we are installing equipment in these coming months. So moving forward, we'll focus on qualifying the process in our fab with our equipment and starting the production ramp up. With that said, we do plan to start at a 6-inch, but the 6-inch is running in an 8-inch fab under an 8-inch equipment. From that perspective, we will start an 8-inch pilot line at the same time, one month delayed from the 6-inch.
So basically we are sacrificing some of our capacity instead of allocating the tools 100% for 8-inch to be able to also to run the 6-inch, sorry, 6-inch, also to be able to run the 8-inch in parallel. So while we are doing so and optimizing the yields, our goal will be in the year 2028 running full 8-inch with the yield optimized in our fab. And here we think that we'll be highly competitive versus our other peers today. Now when we when we look on the other aspects, so I go back to the fab, not only that we have today an available, you know, 30,000 8-inch fab, which for Silicon Carbide, again, you guys are good in math, you can calculate it is a big potential for the business. We have three additional phases that we can expand.
By the way, we can also decide to expand if we want in silicon for 300 mm. But certainly we are looking more on the compound side and we can do 3 additional capacity increases that will carry us at least up to 100,000 wafers. Of course, we are not going to invest before we make sure that we have the business and we have a leading position. But we have, as Jeff mentioned, we have the ability to do so. These are the things that we didn't have before. So now it's really how we want to execute and when we want to execute on it. The second thing as a part of the campus is trying to make the EPI in the same place. So EPI is an important process for silicon carbide and also for gallium nitride. And it's also an expensive, expensive process.
We hire the right talent and we selected the right tools and we are going to start and do so already this year. That will help us not only to run the products or the wafers in our fab, but also in the subcontractor or the foundry fabs in order to start to lower our cost before we can fully utilize that as a part of our own fab. Now going to the substrate, substrate is extremely important and most of the issues year to date came because of the substrate. And that's something that in Vishay, that's not basically our strength. You look on companies like Wolfspeed today, that's the strength. But what we see today, and without diminishing that importance of the substrate, we see the cost of the substrate dropping. We see many, many suppliers coming.
We see many, many opportunities and we see the improvement in quality of the substrate. So the first thing we did, we engaged with multiple suppliers in North America, in Asia, and we are working to sign long-term agreement in order to make sure that we guarantee our supply and making sure that we'll be cost effective. At the same time, we are engaged with multiple companies on various technologies to be able to license the technology if we decide to produce the substrate internally. Now it's, I think it's too early for us to say anything. And, you know, we are engaged already for quite some time. But the first goal was really to close on the fab. Once we close on the fab, we close on the EPI. Now we're working on the execution of both and we are focusing on the substrate side.
The good thing is that there is many emerging technologies that maybe someone that invested a few years ago plenty of billions of dollars maybe looking forward would have thought differently. That's the advantage of a late comer. There is plenty of disadvantages from a market perspective that you guys know very well. But at least I can tell you what our advantages and that's what we exactly expect to use. Okay. Last but not least is the module line, module going for the integration. 80% today of the silicon carbide is sold as a die and that goes into power modules. We intend to sell it to everyone else and also to our basically customers, OEM or tier ones. But we also intend to strengthen and to grow our module line.
We already built and we opened a new facility in Borgaro, Italy, which is a nice place, 30 minutes from Torino. A facility that is running today our automotive products, but not only automotive, also industrial and focused on solar applications. So this facility today, we already invested in the new lines like a new molding line for the transfer mold. So now we are shifting it gradually to support more and more on the silicon carbide. And here we think that we can achieve a big growth. But in the next slides, when I talk later about the technologies, you will see the other technologies that we are bringing. And we do think that bringing it all together and making that integration can bring more value for our customers and certainly bring more value for Vishay.
So not only that we hired the Max Power team and we brought additional technical team, silicon carbide, there is a lot of expertise there. So we also positioned a very strong support from the academic side. So on the reliability on the silicon carbide device and reliability, we have a leading professor with more than 30 years experience in silicon carbide, the same on another university with another professor, more than 20 years experience and focus on silicon carbide. On the EPI, we were able eventually to bring internally a very capable person with more than 25 years focusing on development of silicon carbide EPI reactors. And finally, on the substrate, another very strong professor with more than 30 years or 35 years focus on silicon carbide.
So just to say, yes, we are new to silicon carbide, but we think that we gathered a good team with the Max Power and the efforts that we have in Vishay and with our focus, you know, on the same customers, same type of devices and packages, we think we will be able to ramp up quite fast. Last and not least, I mentioned two MOUs that we signed. So we are working on the third one. Basically, we are establishing a strategic relationship with the UK universities. We think that will be a great benefit for Vishay. Great cooperation, having the fab, having the capabilities, trying to push it to the future. These are things that we haven't done in the past and we are really now trying to transition.
Our competitors are doing so and we think that we can learn and we can certainly improve on that. So trying to summarize everything that I mentioned on silicon carbide, we're starting from a low point, but we are starting from somewhere and we do have an ambitious growth plan. It's a big market, but again, we think that the potential is there and it's all about us executing. Last year, as Joel mentioned, we already achieved a very large pipeline of design new opportunities. We are working with key OEMs, we are working with key tier ones on designs moving forward. The design cycle here is quite long, I would say. So we are looking at 2027, 2028, up to 2030. Our customers were very happy with our execution because we were able to get the fab. We were able to make the first steps.
It's a long journey, but we do see the opportunities. We do plan to hold to those opportunities and execute and hopefully to be able to achieve or I would say supersede our targets. So with that, I'll finish my portion on the silicon carbide and I will go to the next session, which is on the overall Vishay product development and technology roadmap. So the way how I wanted to take it this time in order, you know, not to overwhelm you. And I know it's already quite a long session today and quite a lot of information to digest. So I go back to the same slide as we started and I want to focus on the solution focus first.
So we mentioned that earlier how important it is for us to engage with the customers, trying to provide them a solution, trying not to sell one component, but to sell the entire breadth of components that we have in Vishay. But as I mentioned, it's also for us to understand, you know, how do we impact the entire application of the customers? How do we help them not on the component level to improve improving the cost or delivery and so forth and maybe performance on the component level, but to bring that type of an added value? And from that perspective, we established our first application lab also in the Polytechnic of Turin, where we opened our e-mobility lab, which now we are growing.
It was important for us to position it close to our customers and also to be able to bring very highly technical team members on our side, technical not only on the device, but mainly on the application, because these guys need to engage with our key customers and to be able to talk to them and help them on finding solutions on their own applications. But in return, of course, we expect that we'll be able to design many more Vishay products. So in the next slides, I would like to take the opportunity to use our reference designs, which started originally by Joel when he in his previous position as a sponsor for the business developing, starting that change in state of mind in Vishay of selling solutions, presenting solutions. That started, as I mentioned, 2021, 2022.
Now I'm trying to take it together with the team to the next phase. So the first application that I would like to show you here, and honestly, I will focus mainly on the e-mobility side today. And I apologize if I'm not focused on other applications such as, you know, AI or industrial. But just for the sake of time, I would like to show you the breadth of our products and where we excel from the Vishay product perspective. So I start with an 11 kW onboard charger, which is typically on most of the EVs today, not on the high end, but I would say more on the mainstream perspective. So onboard charger is a key component.
Every EV has it because it takes basically the charging station, alternating current, and convert that to a DC current in order to charge the battery. And just having here looking here on the components, I will start and I acknowledge that maybe it's hard to see on the back. So, I will read that our Vishay content is more than 90% of the total bill of material for this onboard charger. Now, again, we are not saying we're going to sell 90% of the products, but just to explain to you the breadth of the products that we have in Vishay. Now, you also need to understand we are a power company. There is one key common thing between all of our product lines, some with a greater extent than others.
In general, I can say that we are more than 75% of our products goes to power applications. So when you look on an application like that, you can see how it all comes together from a customer perspective and also from the value that we can provide them. So if I start with a resonant transformer, this is a key element in helping to convert that AC AC current. And from that perspective, this transformer is patented by Vishay, integrating also the inductor inside and providing a much lower losses, basically improving the efficiency and less heat and also less smaller size and lower weight for our customers. That's the key magnetic that you can see here. But we have our output filter, our IHDM family, which has the best-in-class performance. And you will see that we have also here a common mode choke.
That's basically for the common mode. We have here additional filters with our IHLP, which is also the best in class and patented inductor for multiple years. So you can see here the content, the large content that we have on inductors. Now, inductors for us for many years was the fastest growing business unit. It grew, you know, to the highest stage. And in this case, we still think that it will continue and grow fast in the next years, exceeding 10%. The second product that I would like to show you is on the capacitor side. You can see here a resonant film capacitor. You can see here the DC link capacitor. These are also a film capacitor, the same as the safety caps. And here we have additional safety caps.
So from a capacitor perspective and specifically from a DC link or a film cap, for the last five years, we grew 24% CAGR. We do expect that we can continue and go another 24% for the next five years as well. This type of applications are really driving the capacitor. And between the capacitor in the magnetics and the power semiconductor that incorporates from a cost perspective, again, more than 75% of the total cost of the bill of material that goes there. And Vishay can supply it to all. We do think again from a magnetic perspective, for many years we were missing capacities and the team did a great job now investing in the capacities. You saw the new factory. So we think that we have the ability to expand fast.
We are adding more new families, new products to our inductors. The same as I'll show you in a minute on the shunts on the current sensing. We think that will help us to carry us forward. I mentioned now the shunts. You can see here. It's a bit maybe hard to see, but there are six shunts here. There is also three shunts on the other board. You will see shunt or a current sense resistor, high current sense resistor on all of these high power applications because they are required in order to make sure that the systems are regulated, you know, properly and to keep them safely. From that perspective, the shunts coming off out of the Vishay Dale division are the best in class for the last 25 years.
We are a leader in the low-ohmic with our low-ohmic shunts. We are adding a lot of capacity in the same factories. We are adding a lot of new technologies and new products in this coming year. So you will see in the next application how it all comes together. But we think it's not only about the semiconductor. Now, what you don't see here is that under this board or connected to this metal plate, there are four power modules, Vishay power modules using an EMIPAK package. These power modules for this reference design, they use a 650-volt Superj unction technology and also our fast-recovery diodes technology. When we go to a 22-kW design, which we are working now with our key customers, that would be silicon carbide modules. Now.
For a 22 kW design, we see an opportunity in Vishay for $230 per onboard charger just to try to quantify the size of the opportunities. Now, another onboard charger which has a very similar topology that we just recently released and we worked a part of our e-mobility lab together with a key customer is for a low-speed 48 V in Southeast Asia. It's mainly for a three-wheeler, but we can see that also coming in the large cities for a four-wheeler or for vehicles that needs maybe up to 30 mph, you know, speed and certainly, you know, maybe 80 miles of a range. And they don't have the ability, you know, to charge high power fast. And that can be a very cost-effective solution.
The reason why I wanted to show you here is that again, very same topology. But now we're using different components, different technologies. For the DC link, we have our aluminum technology and safety caps, the same shunts, inductors, different technologies, but still same best performance from Vishay. Now, what I would like also to emphasize here is coming back on the current sense resistors. There is a small component here. It's a family of basically a divider. It's an SMD family of a thick film resistor. We have a great success designing it into our key customers. Very high accuracy, very high performance, lower temperature coefficient. So plenty of products. It's hard to see here, but on this board we have more than 70%, which correlates to 310 Vishay products into this type of an onboard charger.
And the last product I would like to mention is basically this PTC, the positive temperature coefficient. That's a resistor that we use for protection. It is a very fast-paced growing line for us. Also a double-digit CAGR moving forward. We see great potential for that. Our products are highly reliable. They can support up to a very high energy to protect the circuit. And from that perspective, we do intend to heavily invest also into the protection market moving forward. So I just wanted to show you different products and how it comes all together on this type of boards. Now, one of the key applications is really the traction inverter. That's what takes now the DC current out of the battery and convert that to an AC in order to drive the motors that we have in a car.
Typically in an EV, you know, we can have between one, two and even three motors. Depends on whether it's a high-end or not. In this case, I show you a reference design that we just did to one of our, again, key customers. Again, going back to the low speed. So you can see here our aluminum hybrid polymer capacitors, 64 capacitors for board. You can see we have an eFuse, a power IC eFuse, a programmable eFuse, and we have our MOSFETs. These are 80-volt, basically dual-side cooling MOSFET with our advanced packaging to the 2 MOSFET per board. And the last one, again, coming back is the shunt, as I mentioned, that we can see that everywhere. In this case, more than 60% of the products are Vishay products that relates to 390 components on the bill of material.
Now, when we go to the higher power traction inverter, which we are working with our, again, customers and we'll introduce later in the year, we are moving to silicon carbide. On these boards, we are already looking at around $340 per board content for Vishay. Now, the last reference board that I'll show you today is the heat pump. In this case, it can be used for both e-mobility or for commercial or industrial buildings. Basically, the goal is to improve the heat conversion between a traditional, I would say, more energy wasting conversion to this efficient heat pump, where in this case the key element is our silicon carbide MOSFET. That's the first time that we are using it on our reference board. We introduced that at the end of 2022. You can see here our film capacitor with the lowest profile.
You can see again the shunts, the safety capacitors, and again the magnetics, the filter. In this case, on the power stage, we have 100% of the Vishay components on these boards. The goal was just to show you how Vishay all comes into power and it's not different business units. Certainly it excels in the e-mobility. I think and the next time that we'll have the opportunity, I will be able to present also the other market segment and other application that we are focusing on. Now, we talked about power a lot and I will come to power in the next slide. On this one, I would like to focus on our optical sensors. Our optoelectronics division is a very important division for us. We are heavily investing in that.
When again we focus on the e-mobility side, we see a lot of opportunities. So you can see sensors, as you know, goes everywhere and you can find our also sensors everywhere in the automotive. So 25% of the specific sensors that we support today, we believe we have a market share that again is growing double-digit for us moving forward. So some of the applications that I can share with you is like on the force sensing. When you want to touch your touch panel, right? Everything now moves to a touch panel. So you identify or the system will identify that you are approaching it. It will basically, with the proximity sensor and the ambient light sensor, adjust the right intensity whether it's evening or whether it's daylight. So that's also for the dimming, but also for the turn-offs.
Our optical sensor, transmissive optical sensor is heavily used in many OEMs today and it's keep growing on the driver monitoring side. We have our high power infrared LEDs. On the LiDAR, in order to position the LiDAR system itself, this will be an emerging application, mainly coming later on the late, I would say, Level 3, Level 4 type of systems. We have our reflective optical sensors and also with the fixes embedded inside in order to help to position that on an air quality. We have a UV emitting diodes. We have our photo diodes for the detectors. So quite a lot of content. In this case, we started a few years ago to produce and design again with all the IC design tools internally. We are fabricating that in some cases in a foundry.
But when we go into the gallium arsenide, which I will show you in the next slide, many of the products we just built a new fab that we started the production earlier or sorry, a year ago, and we are still in a ramp-up phase. So from that perspective, I would like to mention that our optoelectronics are not only about the sensors, although sensor is going very, very fast; it's also coming back to power, and it all comes together to our solid-state relay and to our MOSFETs for drivers. So typically they help to provide a very high isolation when there is high voltage. We go to silicon carbide; we go to the applications where the isolation is required.
So you can find them whether it's on the charger, either, you know, on the outside, on the wall box or in car, whether it's a part of the cell balancing, the cell balancing, the battery cell balancing. There is a battery that sits on the bottom of our EVs with plenty of cells. We use our solid state relays there. So plenty of opportunities from that perspective. Now, the last line that I would like to focus on for the e-mobility is MOSFETs. MOSFET line is not only important for us, we're going to double the revenues in these 5 years. So of course we built a 300 mm fab or it's ongoing and we are heavily investing also in Newport at the same time also with our foundry partners. So.
These new factories will help us also to keep the leadership from a technology perspective, which we believe we already have on many of our products. So we think we have the best P-channel MOSFET technology with a very wide range of voltages from 40-volt to 100-volt, mainly supporting load switches. We have a leading switching and low resistance Gen 5 as a technology that we are just now releasing and extending the voltage from 40-volt to 150-volt to support a very wide range of application. And I wanted to list here the key applications that we support. And here we're not talking about EVs. We're talking about everything 48-volt and whether it is a hybrid car or any variations.
The electrification is everywhere and you can find our MOSFET, whether it's on the battery management, whether it's on the starter generator, whether it's on the power steering, everywhere. So we see the content keep increasing and even with a delay on EVs or whatsoever, the demand is still extremely strong. But the future for us is very, I would say, very rosy here. Again, you can see our solution based and not only that we are heavily investing in the silicon technology, we are also heavily investing into our packaging solutions because as I mentioned earlier on the silicon carbide, it helps us to basically dissipate the heat. It's a part of getting the performance, keeping the reliability and also our cost together.
I missed also one more technology and new technology that we are bringing out to automotive with improvement is our 650-volt Super Junction. That technology was released last year and we are ramping it to production soon. So with that said, I'll try to summarize the technologies that I mentioned and looking also on the newer technologies. So silicon, we are working for many, many years and we will be able to excel now with the capacities and the capabilities and with the new research and development that we are driving Super Junction. I just mentioned to you, we are bringing more and more technologies now and silicon carbide. We also mentioned that already gives us a big breadth of products that again, we didn't have before. I would say with the silicon carbide, it doubles almost our total available market.
IGBT is very interesting because it's a technology that we used to have in our fab and we used to basically use it for our own power modules. But because we were so constrained, we had to decide to cut the production and focus on our key customers. Now, when we acquired the new fab in Newport, we are coming back to an IGBT. Now, we haven't made a decision whether we want to continue and invest in IGBT or not. We are very sensitive, you know, to be focused, not to diversify too much. So we really want to execute, but we see a big potential again. So we have the tools, we have the capabilities and we are producing in this fab high volume IGBTs. Now we need to decide whether we want to do that or not.
That's something that we are going to review in the course of this year and we'll come to a conclusion. We still see IGBT market growing until the end of this decade. Of course, silicon carbide at the end of the day is eating a part of it, but it is still a growing market. The last technology that I would like to mention today is the gallium nitride. Gallium nitride is there already for a few years, but it is still relatively a small business today. We believe it will be a significant business moving forward. That's a key element in order to continue and increase the switching frequency, support low voltage and high voltage. We already are working on gallium nitride research and development for more than six years.
We're going to come and basically sample the first product 650-volt by the end of this year. We plan to be in production next year. We are putting big efforts into our Newport fab and also with our, as I mentioned, research and development partners to drive hard on the gallium nitride. With that said, we believe that we have in our arsenal moving forward the full range of technologies. Now, again, we need to be focused and it doesn't mean that we're going to put all the efforts in the same way, but we want to be business minded and we want to be able to drive it fast and to take a leadership position also from a technological perspective. At the end of the day, it all comes together with our customers, with application that we are supporting.
So this is a new Vishay and that's totally different than where we were before. Now it's about our execution. So just before the end, I mentioned briefly about the M&A. So as Joel mentioned, so once you understand the customer needs and we know where we want to drive from a strategy perspective, our products, our best way is to do is to do the organic growth and to drive it internally. But we do need also to complement that with M&As and the way how we want to treat M&As. And you can see how we did that for Max Power and also for Newport. First of all, is focusing on our profitable growth. We want to use that as a tool to accelerate our profitable growth. We want to have strategic acquisitions that will enhance our organic growth.
We want to see innovation, technology being our portfolio expansion, which again, we did that with silicon carbide and we think that, you know, there are others that we can do in order to make sure that we don't do only what we do today, but we can also capture the future trends. We are also focusing on vertical integration. This can be smaller acquisitions that will help us to improve our either cost or basically the supply chain and supply guarantee synergies. But most importantly, it all needs to be highly accretive. So what we did basically this year and last year, we created a team. So myself and Michael Sullivan, which is the Chief Legal Officer and Administrative Officer, are working on that. We have now, you know, a dedicated finance. We have a project manager.
We start to align the way how we treat our M&As before that, doing the due diligence and also doing the transition to make sure that we can effectively execute on it and making sure that effectively we'll integrate it and we'll make it successful. So just to summarize, and I'm sorry, the last two slides that the two sessions that we took. So basically we are enhancing the technical customer engagement. We are increasing the design opportunities. We want to see more design new and we want to translate that to a higher percentage of design wins. We're accelerating our research and development programs, basically driving our organic growth and at the same time we'll focus on strategic acquisitions. Thank you very much. Thank you.
All right. What you saw with Roy there was the technology Vishay Intertechnology. We are a technology company.
The new Vishay is digging inside applications. We're inside the customers' discussions. You saw just a sample of a few reference designs of key applications that we're seeing common across automotive and mobility. So we use these tools now to show our sales team, our marketing team, our distributor FAEs, our rep FAEs to go into the customer and drive this design activity. Dave, let's talk about financials. We're going to hand it over to you. Dave McConnell, our Chief Financial Officer. Okay. I just want to thank you.
Morning everyone. My name is Dave McConnell. I have been in the job for 30 days as Chief Financial Officer, as Joel said earlier. But I have been with the company for a long time, 32 years. I've had just about every financial job in the company that you can have.
I'm here today to talk to you about financial targets and capital allocation. Okay. Everybody's been asking, what are we getting? Some people stole a thunder already earlier. What we're getting is we're spending our money on accelerating our revenue growth. Today, Vishay is a $3.4 billion company. Last five years, CAGR 2.3%. It's not good enough. It's not good enough for us. It's not good enough for you. It's not good enough for our customers. Turn the page. Vishay 3.0. New plan CAGR 9%-11%. So split it down between semis and passives. Last five years, CAGR for semiconductors is 2.0%. Once again, not good enough. The new target next five years, CAGR 10%-12%. Passives today, approximately $1.7 billion as well. CAGR 8%-10% from 2.6%.
So once again, 2.0 to 9 to 11, 2.3 to 9 to 11, 2.0 to 10 to 12 and 2.6 to 8 to 10. We're investing in accelerating growth, revenue growth. So some of you were asking for a deeper dive earlier. Got a brief slide here for the segments. We operate in six segments, three for the semis and three for the passives. As you would expect, what we just got done speaking about from Roy and Jeff, MOSFETs has the highest CAGR goal, 12%-14%. Opto also though, 10%-12%. As Roy just presented, they're moved to auto. And the rest are coming into the 8%-10% range. What's important here is that the growth is across all business segments. There's not one plant, one factory, one plan, one product line, one project. It's across all business segments. Okay. So we're expanding.
We're investing in accelerated revenue. We're also investing in improving our gross margins. Today, Vishay was 28.6% last year. 5-year average before that's 27.3%. The new target based on the 5-year plan is 31%-33%. That's 400 basis points improvement on average. How do we get there? As most of you would guess, with all the expansion, volume gets us there 640 basis points. We leak a little bit of that back. ASPs, as Jeff mentioned earlier, 240 basis points ASPs, ASP declines. But we gain a lot of that back with cost efficiencies and cost reductions. Automation moved to subcon, some consolidation of similar tech in locations. The depreciation is new for our waterfall. Obviously, if you're going to spend the amount of money we're saying we're going to spend on CapEx, your depreciation is going to go up.
That's about 70 basis points loss on the margin. That leaves other approximately 120 basis points, mostly labor, other costs that are susceptible to inflationary pressures. At the end, 31%-33%, 400 basis points increase. Okay. Managing our SG&A. Overall, SG&A is going to decrease its percentage of sales, 14%-12%. But within the 12%, we have baked in increases. For instance, we're increasing R&D headcount related spending. We're increasing customer facing positions and tech staff. 2023, we introduced a new broad based stock compensation plan for the employees. We feel this will allow us to attract new talent and keep existing skilled quality employees that we have today. That's all baked into the 12%. Okay. We're investing for accelerated revenue growth. We're investing for gross margin improvement and we're also investing for higher cash generation. Start with operating cash flow.
$366 million in 2023. Approximately 11% of revenue. Reach over to 2028, we're approaching 19% revenue. Now we're going to need that operating cash flow in order to pay for our expansion programs. Last year was the first year our CapEx has increased significantly, $329 million. You can see for the next three years, we're projecting $500 million of CapEx spending in each of the next three years before it tails back down to a normal sustainable range. We talked about the depreciation earlier, $184 million of depreciation expense in 2023. You can see that number is going to track up as Joel indicated earlier today. Eventually, the two will come to a point around $300 million and level off. The two will match each other. Okay. So what does that give us for free cash? That's what everybody's interested for. Last year, Vishay had $37 million free cash.
It's not a typical year. We had already started the capital expansion program 329 and we paid some large taxes to move money back to the U.S. 2024, 2025, you can see we're basically slightly negative to flat. We're well positioned to manage that given our existing liquidity. We have over $1 billion on the balance sheet. We have a $750 million revolving credit facility that's untapped at the moment. So we're very comfortable with these two years. But then the story is you can see what happens in 2026, 2027 and 2028. Typically over here in those years, Vishay is 4%-5% free cash of revenue. This is closer to 12%. Okay. Capital allocation strategy. Our strategy remains consistent. First up, we've talked quite a bit today about the CapEx.
Part one, $1.4 billion worth of spending from 2023 to 2025, including the additional $200 million for Newport, $200 million for Newport, total $2.6 billion from 2023 to 2028. Stockholder returns, very important to us. Target to distribute, we remain committed to distributing 70% of our free cash flow to shareholders in the form of dividends and share buybacks. And then M&A, obviously we're active to having just completed the Newport acquisition. We will remain active. As Roy just listed out, we're looking for innovation, technology, portfolio expansion, market reach, vertical integration. Now if we're generating 12% free cash flow revenue, we may be able to expand our opportunities in the M&A area in the future. I think it's important to note as well in the context of this of the capital allocation strategy, we're predicting in 2028 we should be at $2 billion of total liquidity.
Compliance net leverage ratio less than one. We should be able to keep our ratings BB+ and Ba2 . Okay. Okay. Tax strategy. Not my favorite subject, but we get a lot of questions from people to understand why our tax strategy is what it is. We think this is a good form to discuss it and bring it out. So Vishay operates in many countries. If we paid tax in the countries where we make earnings, our tax rate would only be 22.9%. Okay. In order to execute though our strategy, especially the shareholder returns and the M&A, we have to bring money back to the U.S. Okay. To bring money back to the U.S., we have to pay additional taxes, withholding taxes, specifically two countries where we do business, Israel and Germany. In 2023, we paid approximately 8%.
Well, our tax rate was impacted by roughly 8% because of the ability to bring back money from those countries to the U.S. This year going forward, we think it'll be slightly less. It depends on how much of the earnings are in Israel and how much the earnings are in Germany specifically. So like I said, 8%. It can, it's going to fluctuate from year to year depending on what the earnings are for those divisions who are operating in those two countries. Okay. Just a recap briefly since we've already talked about most of these. But financial goals, Joel had the same slide up there earlier today. Revenue $3.4 billion, 9%-11% CAGR we just discussed. Gross margin 28.6%-31%-33%, 400 basis point improvement. Operating margin 14.3%-19%-21%. Adjusted EBITDA 19.5%-25%-27%. Greg, you were right earlier.
The doubles in absolute dollars. Okay. Return on invested capital 11.2%-14% or greater. This is a gross ROIC calculation. If anybody's modeling, if we were doing net debt, it would be closer to 17%-18%. And finally, capital intensity 9.7% with a soft landing at 6%-7%. Okay. That's it. Okay. Thank you.
In January 2023, when I did the first earnings call of the new Vishay, I made a statement about the company. I said, "Vishay is a sleeping giant. The giant's awake. We've got a lot of opportunity as a company. You've heard from our operations leader. You've heard from our technology leader. There's a lot we can do with this company. This team sees it. Guys, why don't you come on up? We're going to take some questions, but first there's initiatives.
This entire company, it's a technology company, but there's significant initiatives that each leader is responsible for. Mike, you want to come up as well? And Peter. We meet often. We speak often as a leadership team. We strategize, and we've got a strategic plan which is quite broad. We've given you a view of it and the product and the operation and the technology side and how we're going to move forward financially. It's a great team. We work together quite well. We are cohesive. We collaborate, and we're going to take this company to a new level. This is the plan we have for you today. It's our plan through 2028. We're going to work very hard to beat it. This is where we are today.
The customers have given us positive feedback and we're quite confident in where we're going to go and what we're going to do. I'm going to close it there and we're going to open it up for questions. We're all available to field the answers. Who would like to answer the first question or ask the first question?
Thank you. Josh Buchalter from TD Cowen again. First of all, I was hoping to ask on silicon carbide. So you mentioned that you've I think there's four substrate suppliers. Any more details you can give us on confidence in your visibility to volumes there because silicon carbide has been so constrained? And also I think you also mentioned potentially doing some outsourced on the front end for device business. I'd just be curious if you could share any details there because we haven't seen that model really develop yet as that industry has been, again, so constrained the last several years. Thank you. And I have a follow up.
Yeah. So let me take that. So just to start with the substrate question. So for the shorter term, for the next two years, indeed we are using our foundry partners. So the substrate and the EPI is mainly coming from their perspective. So it's already, I would say, secured by long term agreements on their side. Now moving forward, we don't see today a big constraint. If we look from 2027, 2028, we see plenty of suppliers and we see also all the existing suppliers are willing to install enough capacity with the long term agreements. That's the reason why we are still in the final details, reviewing the technical performance and negotiating the price because things are moving relatively fast in this specific arena.
So we do see enough suppliers to be able to support both on 6-inch to 8-inch because mainly focus will be on 8-inch. 8-inch today is not really available today in a high volume, but we see that moving forward. Now, as I mentioned, we are also working on engineering substrate, so where we see potential to license the technology and install that internally, which is another funnel. But we don't have today a big concern from moving forward 2027, 2028. Now to answer your second question related to the foundry-based, you're right. None of the big top competitors today are doing so because they already installed their own capacity. And of course, they could be much more cost effective running internally. So we are forced to do so because of the Max Power acquisition, as I mentioned in our catch up.
But it works well for us because the focus for us today is not really the high volume type of automotive business. We are starting from a lower volume, mainly coming from industrial and Tier 3, Tier 2. So it works well for us to use the foundry for that. We have an agreement on capacity. We believe we can manage it and it really helps us to move forward. Once we bring our fab, of course, we'll be able to take the big customers, the big volume in our fab and expand it. But we do think that we can keep it like that, having a second and a third source just from a supply guarantee. Now how it will evolve for the next few years, we need to see. But we think for Vishay, it's the best solution for us at this point.
Thank you for all the detail. As a follow up, I wanted to ask about the gross margin target. It looks like volume is the biggest swing factor there. Any details you can give us on sensitivity in particular? We're entering the year. I think the first quarter guidance is 24%. The long-term model is 31%-33%, I guess. How should we think about in the shorter term, how gross margin will move around with volumes as you're investing for capacity for the back half of the decade? Thank you.
You want to take the back half or?
Sure. So as was already calculated, 2025 is going to be a significant growth year for us. So we're going to have a little boost there. We're having Newport that's coming on. We're having some foundries that Joel has mentioned in his previous conversations that are coming on. So you'll start to see that the gross margins are ticking up. We get big impacts later in the year though, later in the five-year cycle. We bring on our 12-inch wafer fab, which is a big cost reduction for us. So you'll see more improvements going along there. Silicon Carbide is starting to come on that has higher margins than our typical products. So the bigger jumps will start coming in the later year.
Short term, there's a challenge with Newport. As you can imagine, we're transferring our technologies. We've got eight transfers to do. So in the interim, we're running a fab at partial capacity. So there's going to be some margin impact because we have Nexperia, the previous owner transitioning out. We're still running some volume there. We had a couple of other customers that they had, which have continued their volume in that fab. But we're running a fab not at scale. We're running a fab that is diminishing volume from the previous ownership and Vishay transferring in. So there will be a gross margin impact. Any comments you want to make further on that in the short term?
Right as we see it now, of course, everything depends on the timing. We may have a 1%-2% gross margin impact this year quarter by quarter, but it depends on how we can ramp up, how slow they ramp down. But it's around 1%-2% negative, of course.
All right. That's already embedded in the first quarter guidance, correct?
Our first quarter guidance?
Yeah.
I don't think we did embedment. I don't think we had known Newport at the.
Newport was not in this year.
Yeah. We didn't know when we were going to close specifically at targets. It's really not in the first quarter guidance, no.
Yeah. We'll have more information on the earnings call for the first quarter about the year and what it looks like with Newport.
Yep.
Thank you.
Hi. Greg Williams from Mountaineer Partners. Joel and Dave, the financial outlook that you provided is a significant departure from what Vishay looked like over the last several years and is well in excess of what most analyst models have Vishay doing over the next few years. From what I know in Vishay corporate culture, is it fair to say that there was a lot of rigor put into those estimates and that in a distribution of outcomes that there's more opportunity on the upside than down, albeit the future is uncertain?
Go ahead. Well, first, I'll come in first. I've been here 32 years, Greg. This is the first time I feel like we have a real 5-year plan at a very detailed level thanks to this team over here. Okay. So from that point of view, I'll let Jeff talk about the upside. There is certainly some upside in that.
There is some upside. I would say our older models are extremely conservative, as you might guess. This is, I would say, achievable. There is upside. We talked about the capacity that we invested. There is upside to that capacity. So if the market is hot at that point, there is that upside. Obviously, if there's any price adjustments that occur at that time. There is upside in our projections.
Okay. Great. And then as a follow up to Joel and David, when I look at your outlook, I mean, you're looking at almost $700 million of free cash flow in 2028 and only one year of negative $100 million. You've got a revolver that's $750 million. In the revolver, you have unlimited restricted payments up to roughly $2 billion that you could put out to equity if you wanted. What's the thought on the capitalization? Because it seems like you're massively over capitalized and could use that cash pretty productively to reduce your share count?
You want Dave to or you want Dave?
Go ahead.
I'll follow up after you.
So we don't necessarily disagree with you. Okay. So I think what we're trying to do is get the input from today and after we present our plan and our story, and then we'll go back to the board and imagine we'll have discussions.
So there's new conversations, I can tell you. This is a new company. We call it the new Vishay. The board has seen this plan. The board has approved this plan, excited about where we're taking the company. And this brings a different type of discussion now. What is the total shareholder return? What is the capital allocation that we want to bring forward? So I appreciate your question. It is in discussion. There's been many scenarios discussed. I think you'll see us working very positively in how we're using this cash, whether it's further investment, M&A, greater M&A, or as well as return to the shareholders. I think you'll see some different things.
Okay. Good question. And then I'm curious, and maybe this is more David or Joel or anyone else, but it seems like there's a significant return to the CapEx that you're putting out there. Can you help characterize the hurdle rates you're targeting when you underwrite new growth CapEx?
Too, I don't really want to talk about exactly the rate, but.
We don't want to talk about the rate?
Well, you can do it. Okay. We use a high rate.
Yeah. We use a very high rate. Obviously, we calculate frequently, the finance team. I would say our rate is higher than other companies based on how our structure, our capital and stuff is. And when we look at investments, one of the key things is our NPV has to be greater than zero, which means the internal rate of return. We have to exceed the internal rate of return or the hurdle rate that you talk about. So this is one of our key elements. But even before that.
So are you saying that an investment has to generate a return greater than your ROIC that you're talking about?
Yes.
Closer to our WACC. Yeah. Close to our WACC is what we used to say. Yeah.
Okay. Are you looking at on the for the ROIC comparison, the net or gross number when you're thinking about that?
The ROIC out there was gross. Are you talking about when we're doing the internal?
Yeah. Just as a comparison for a hurdle rate.
Yeah. Yeah. I would say it's the net. It'd be the net, I'd say. Yeah. It'd be the net. It's not one that we focused on as much as we do the WACC. I mean, we know what our WACC is. And then you got to look at it sometimes. That's not purely just a number, as you know, right? Yeah. Net would be the way I'd say we look at it. FCF's exactly the same metrics, but yeah, equivalent to net.
Okay. And then just at a high level, it sounds like, and correct me if I'm wrong, that you're expecting sort of share gains across the board, not just in silicon carbide. Obviously, significant share gains are what you're targeting in silicon carbide, but are you taking share across the product portfolio, you think, as you look out over the next five years?
Definitely.
For sure.
With the intention of covering the channels plus the market segments that we talked about, reengaging the others, the market segments known as others, yes, gaining share across all. Those six business segments we talked to, three semiconductor and three passives, all showing significant growth over historical, we intend to take share, yes.
Finally, can you characterize a little bit the benefit to Vishay of pushing on the reference design side? That's something that's relatively new and expanding, and I think it's of significant value, but if you could help characterize that a little bit.
The reference designs, if you first go back to reference design, when I first started calling on the reference design companies, the Linear Techs, the Micro Linear, I was in California in the 1990s, promoting a product and getting the Vishay part number on a reference design, which goes to the customer for them to sell their IC, their chipset. This continues, but we didn't have a concentrated effort on those IC fabs, those IC houses. We've added headcount over the last two years. We have an IC reference design engineer in California. We have another one in Dresden, Germany. We're concentrating on those somewhat competitors in a way that are developing ICs so Vishay can populate their reference designs. That's one.
We've got a library database in our internal system with over 1,500 reference designs, which our FAEs, our sales force, our marketing people can latch onto and go to customer, speaking about current IC part numbers and the Vishay products that populate that reference design. Now, third is our own solutions. Coming forward with what you saw, Vishay populating 80%, sometimes 90% of the parts in a design. This is another step of reference design. Why does the customer engineer want this? They're under the gun. They have speed. They need speed to design. They need someone who is resourceful. So we come at them three ways. It could be the IC house reference design. It could be our own reference design library or our solutions. It accelerates. And it promotes Vishay beyond what some people have said. We only buy Vishay for the inductors.
We only buy Vishay for resistors. This is what Vishay is, an inductor company. Vishay is beyond that. So it helps to cast a broader net and broadcast the strength of the company, the power of the portfolio. Okay. Nick?
Yeah. First, I wanted to get back on Newport, maybe a clarification if I missed it. Have you guys given a timeline on when we should expect Newport to become margin neutral?
Yeah.
It'll be the second half of next year.
A question on the profitability from an operating margin standpoint. Can you talk about the linearity of progression? How should we think about those next five years? Is there any puts and takes that will allow you to maybe get to the 19%-21% target earlier than 2028? And, is also that? Do you see that target as an intermediate goal or maybe as a long-term margin target that's sustainable?
I think we refer to the margin target as the 2028 goal, right? Because a lot of the capacity, especially with Itzehoe, is back-ended on the five-year plan. So I don't think we would get there in years two, three, or two or three, certainly plan.
Lastly, on silicon carbide, maybe just wondering if you can share how much CapEx or a percentage of what you're planning to spend is going to go into silicon carbide and how much growth do you anticipate from silicon carbide? It doesn't sound like you have extremely high goals, I think, from the chart of where you're targeting less than 5% market share in 2028. So it is accretive to the business, but it's not kind of the major driver. I just want to make sure that's the key takeaway there.
Roy?
No, we want to take it first on the.
Capex.
Capex side.
Yeah, sure. So there is CapEx, but I think what Roy said, one of the key points is there is a lot of the tools that we could use in Newport. So we're not having to invest as much as other areas. We've done, I would say, a significant investment already this year, early this year, to buy the equipment. But it's not as much as others. There will be stages of it as well. So our initial investment now is sort of the capability, low quantity. And then in later years, starting in 2027, 2028, there'll be other investments to get the higher volumes.
Yeah. Let me add on that. So we have basically a four-step plan. So as Jeff mentioned, capability, capability is already now, and that's really for the shorter term. You're going to see that coming basically this year, maybe early Q1 next year. The next steps are really also working with our customers, defining how much we're going to grow. Now, you're right. You saw on our slides roughly 4% market share. And it's easy to calculate it because you also presented how do we see the market. Now, we have competitors that are saying they're going to get 30% and 40%. We plan to eat out of that. Now, how much we'll be able to do, we don't want to commit more.
As I mentioned, we do have plenty of capacity or potential for capacity, and we're going to execute a part of these four steps. Every step that we will basically invest, we'll make sure that we have the customers there. I think that will follow that methodology. Certainly, we are not even using, I would say, less than half of the capacity. I don't have the exact number in my mind, but we have much more that we can go if we see that we are successful or the market is going faster.
I can confirm what Roy says. It'll be 50% capacity.
So I think it's also related to the timing for the customer project to go into volume. He's going to have samples available in 2025 on the trench. Samples will go to the customer engineer. They'll start looking at the benefit that they're receiving in the particular program. Does it help to reach the longer range, the reduced charge time? Do they see the benefit in the circuit, which then is going to determine, is this a 2026 program for volume? Is this a 2027? And many of the customers I've talked to, they all say, we need another supplier for 2026 and 2027. Not having the capacity running and just closing the Newport acquisition, we're now ready to have a much more serious discussion. At this point, based on a small set of customers, we're showing you 4%.
It's going to grow at significant volume, like Roy talked about. We're going to accelerate with samples when available. We're going to try and get into projects earlier. It's going to come down to the feedback from the customer engineer. If he says, this is really a benefit, a true benefit, and he can accelerate us into earlier programs, we can grow at a faster rate. Any other questions?
Yeah. Roy, could you talk about the opportunities, or Joel, that other category, particularly around IT, data center, AI, obviously a lot of needs for power management. So could you talk about any opportunities there or anything you're doing there?
We are participating in the servers. We are in the high end servers. AI is another opportunity now for us. We are reaching out because we have the capacity. We're speaking to the AI servers. I was just in Taiwan two weeks ago. They were talking about an AI server. It costs $200,000, the end product. It's very expensive, but the number of server farms that are going to come into play for AI is big. We're now able to have those discussions. We've always participated in the server market. These are products that are high temperature. They have to be able to handle high temperatures. There's a lot of high current as well in servers. So we've always been there. We just didn't have the volume of capacity to really support it at a high rate. Roy, you got any other comments?
Yeah, sure. So we have short-term program and long-term programs. On the shorter term, we see, as Joel said, with the capacity coming, we have opportunities on the resistor side, on the current sensing. We have opportunities on the tantalum caps. We have a big effort from an inductor perspective, where in the past, we didn't participate because of the capacities, and now we believe we have a leading position. So certainly, this will be the short-term things that we will try to start and take later this year and the following years. Now, we have for the longer term also opportunities that we are working more from a power perspective, whether it's MOSFET power ICs, controllers, and so forth, focusing specifically on AI, on the large OEMs.
These are larger opportunities, but they are slightly further away, so we prefer at this point not to go too much details. But there is a lot of investment as well going into this type of computer application. As Joel mentioned, that was our bread and butter, at least in MOSFET for many, many years. We had to maybe emphasize it, and now we are reengaged.
Any other questions?
Just curious on the capital side, there's no risk to the dividend with your capital plan, right? That's something you're committed to?
No. For 2024, we're still committed to the $100 million shareholder return, $50-some million dividend, and additional share buybacks of $50-some million.
Okay. Just for clarity again, I mean, if you hit your targets, you're trading at 2x 2028 EBITDA, and you're going to generate. You're going to return $500 million of cash to shareholders in 2028 under the current plan. Is that the right punchline summary?
It's a possibility, but.
Well, no, at the 70% commitment.
Based on that guideline.
Yeah, yeah, yeah. Based on that guideline. Yeah, yeah, yeah.
The math is good. But based on that guideline, yeah.
Right. Okay. Thank you.
Any other questions? Yep.
Bob Johnston with Herald Investment Management. Thank you very much. I had to do it right at the end, but maybe just talk a little bit more on your six segments, just high level competition. I mean, you made some references here and there, particularly on the silicon carbide, but I mean, do you see yourselves going where others are leaving, or what? I mean, how are you looking at where to stay, where to invest on the competitive front?
MOSFET competitors, you're asking the names, who they are. ST Micro.
Not who they are, but.
Who they are.
How do you fit in? What are they doing? How are you reacting to that?
That's an interesting one. What are they doing today is a different story than what they were doing a year ago. There's a lot of inventory in the channel that has to move. This is a challenge that we're seeing in the particular business climate with semiconductors, is the inventory at the OEM is high. We didn't stuff the channel. Many of our competitors had NCNR in their supply agreements, and there's inventory there that has to be digested. What are we doing? We're talking with these OEMs. They appreciated how Vishay was a flexible supplier. We allowed cancellations. We allowed them to adjust their demand last year. Vishay's inventory is relatively healthy, healthy being good, and we're trying to move Vishay ahead of the pack. This is a key message to our sales and marketing team.
We can't stand around and wait for the inventory to be digested that's there from what our peers had stuffed the channel with. We have to get out and get ahead. And customers appreciate what we're saying. We're trying to find those spots where we can get out and get ahead. From a technology point of view, do you want to comment at all about technology comparison, semis versus Vishay? I think you did a great job of speaking about best in class and what we're doing to show a better than technology in silicon carbide.
Certainly. I think on the MOSFET and on diode side, we feel that we have a leading position. Now, great competition, and it's always head to head, but we do think now with the capabilities that we are putting together, we should be able to compete with them. And typically, for them, it's a very high margin business. So I think that's a great place for us to compete against.
Yeah. Maybe I'll add on the resistor side as well. I think we're also a leader. We're the largest resistor supplier in the world in terms of dollars. We play in almost every major segment. There's one that we're going to attack that we have left, and this is the commodity resistor world based on our buy resale. We have a very strong position in the resistor area.
Now, capacitors, we see a lot of opportunity on high energy storage. And also with the redesign of the grid, we're seeing great opportunity for the very large capacitive products, the highest energy. So we're not the commodity MLCC player like Murata. We're not that guy. But we do find the specialty of our capacitors in many new programs is quite desired. So the passives are quite well. The inductors, we're a leader in inductors, hold much of the IP on the power inductor technology, plus a leading supplier of custom magnetics to military, to automotive, as well as medical. So we're seeing opportunities there. In many cases, we're the leader. We're the leader in technology. We weren't the leader in supply.
So by winning the print position and now backing it up with the investment in capacity, we'll be able to enjoy the volume business where before we had to choose customer by customer. Any other questions?
We have online questions. That, I guess, is how do we select external capacity vendors? What is the decision making selecting external vendors?
Sure. Let me take that one. So first of all, we have a brand name to protect. So when we select vendors, they have to meet our quality requirements and our technical requirements. This is number one. We look in a term of long term partnerships that we can work together, that it's not going to be a vendor who's going to take advantage of us and increase the prices in very difficult years. And of course, they must be technically capable to handle our products because a lot of our products that we give to some of these vendors are our designs, and we're having them make them. So they have to be able to meet this capability requirement as well.
With aerospace and defense being a growing market, will there be a focus on investments made in space applications?
Yep.
I think the investments cover all market segments. When we invest line by line, it isn't specifically for automotive only or for industrial only. It's for the product which serves across the market segments.
Yes.
Last, do you see more revenue growth from Asia, Europe, or North America? Do you have enough field application engineers? Do you need to hire more staff to support revenue growth, the revenue growth you are expecting?
Do you want to talk about the engineers?
Yeah, sure. So yeah, certainly, we need to hire more field application engineers. We are in the midst of doing so. We started to do that last year, and we do have a strong plan for the next two years to strengthen our position with all the three regions. We see opportunities, I would say, in all regions, but certainly big opportunities also coming from Asia.
We'll see growth in all regions, as Roy said. What we watch very closely is what's being nearshored to Mexico, whether it's companies moving out of China coming to Mexico or European companies coming to Mexico. We're very closely watching this. We've got the factories there. We've got a staff of sales and marketing people in Mexico. It's a quite close watch for us. Europe, we see things moving into Southeastern Europe where we see some manufacturing. But Asia is always a very focused point of growth for us. We have a very strong team. We're seeing growth in India as well as in Vietnam and other countries. So we're staffing accordingly based on how we see the customers move to make sure we have the right technical people on the ground to engage the customer and the engineers.
I think we're going to see the growth across all regions. Most interestingly, what is going to happen with Mexico and how fast it will accelerate? Anything else, Peter, from online?
No, that's it.
Any other questions from the audience here? We want to thank you again. We really appreciate you joining our first ever Investor Day. We're excited about where we're going as a company. We have these three items on the screen, which you've heard many times today. First and foremost, it's think about the customer and guide our business to support the customer, both in service, technology, and operational placement. Business minded, we were an operationally strong company. We're going to run this business. It's a business of electronic components. We're a technology leader, and we're going to capitalize on being a technology leader and show that all the way through the revenue to the margins and further innovation and M&A. Growth driven, it sums it all up. We're going to grow at a rate greater than we have historically. It's a main point as we talk and decide our initiatives.
We're excited about where we're going. Again, we thank you for joining us today, and we'll see you again soon. Appreciate your time.