Current Vulnerability Due to Certain Concentrations

12 Months Ended

Dec. 31, 2011

Current Vulnerability Due to Certain Concentrations Abstract

Current Vulnerability Due to Certain Concentrations

Note 14 – Current Vulnerability Due to Certain Concentrations

Market Concentrations

While no single customer comprises greater than 10% of net revenues, a material portion of the Company’s revenues are derived from the worldwide industrial, telecommunications, and computing markets. These markets have historically experienced wide variations in demand for end products.  If demand for these end products should decrease, the producers thereof could reduce their purchases of the Company’s products, which could have a material adverse effect on the Company’s results of operations and financial position.

Credit Risk Concentrations

Financial instruments with potential credit risk consist principally of cash and cash equivalents, short-term investments, accounts receivable, and notes receivable. Concentrations of credit risk with respect to receivables are generally limited due to the Company’s large number of customers and their dispersion across many countries and industries. As of December 31, 2011, one customer comprised 10.9% of the Company’s accounts receivable balance.   This customer comprised 8.7% of the accounts receivable balance as of December 31, 2010.  As of December 31, 2010, no customer comprised greater than 10% of the Company’s accounts receivable balance.  The Company continually monitors the credit risks associated with its accounts receivable and adjusts the allowance for uncollectible accounts accordingly.  The credit risk exposure associated with the accounts receivable is limited by the allowance and is not considered material to the financial statements.

The Company maintains cash and cash equivalents and short-term investments with various major financial institutions.  The Company is exposed to credit risk related to the potential inability to access liquidity in financial institutions where its cash and cash equivalents and short-term investments are concentrated.  As of December 31, 2011, the following financial institutions held over 10% of the Company’s combined cash and cash equivalents and short-term investments balance:

Bank Leumi*	21.5	%
UniCredit	14.4	%
KBC*	13.4	%
JP Morgan Chase*	11.9	%

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*Participant in Credit Facility

Sources of Supplies

Many of the Company’s products require the use of raw materials that are produced in only a limited number of regions around the world or are available from only a limited number of suppliers. The Company’s consolidated results of operations may be materially and adversely affected if there are significant price increases for these raw materials, the Company has difficulty obtaining these raw materials, or the quality of available raw materials deteriorates.  For periods in which the prices of these raw materials are rising, the Company may be unable to pass on the increased cost to the Company’s customers, which would result in decreased margins for the products in which they are used. For periods in which the prices are declining, the Company may be required to write down its inventory carrying cost of these raw materials which, depending on the extent of the difference between market price and its carrying cost, could have a material adverse effect on the Company’s net earnings.

Vishay is a major consumer of the world’s annual production of tantalum. Tantalum, a metal purchased in powder or wire form, is the principal material used in the manufacture of tantalum capacitors. There are few suppliers that process tantalum ore into capacitor grade tantalum powder.

From time to time, there have been short-term market shortages of raw materials utilized by the Company. While these shortages have not historically adversely affected the Company’s ability to increase production of products containing these raw materials, they have historically resulted in higher raw material costs for the Company.  The Company cannot assure that any of these market shortages in the future would not adversely affect the Company’s ability to increase production, particularly during periods of growing demand for the Company’s products.

Certain raw materials used in the manufacture of the Company’s products, such as gold, copper, palladium, and other metals, are traded on active markets and can be subject to significant price volatility.  To ensure adequate supply and to provide cost certainty, the Company’s policy is to enter into short-term commitments to purchase defined portions of annual consumption of the raw materials utilized by the Company if market prices decline below budget.  If after entering into these commitments, the market prices for these raw materials decline, the Company must recognize losses on these adverse purchase commitments.

Geographic Concentration

The Company has operations outside the United States, and approximately 78% of revenues earned during 2011 were derived from sales to customers outside the United States.  Additionally, as of December 31, 2011, $875,073 of the Company’s cash and cash equivalents and short-term investments were held in countries outside of the United States.  Some of the Company’s products are produced and cash and cash equivalents and short-term investments are held in countries which are subject to risks of political, economic, and military instability. This instability could result in wars, riots, nationalization of industry, currency fluctuations, and labor unrest. These conditions could have an adverse impact on the Company’s ability to operate in these regions and, depending on the extent and severity of these conditions, could materially and adversely affect the Company’s overall financial condition, operating results, and ability to access its liquidity when needed.  As of December 31, 2011 the Company’s cash and cash equivalents and short-term investments were concentrated in the following countries:

Israel	29.9	%
Germany	28.0	%
United States	12.4	%
Singapore	8.9	%
People's Republic of China	6.1	%
Other Europe	7.8	%
Other Asia	6.3	%
Other	0.6	%

Vishay has been in operation in Israel for 41 years. The Company has never experienced any material interruption in its operations attributable to these factors, in spite of several Middle East crises, including wars.