AVX Corporation manufactures and distributes passive electronic components that are used in all types of electronic devices ranging from cell phones and computers to automobiles. Passive components operate without electricity, while active components require electricity to run. AVX's passive components, including capacitors, resistors and varistors, are used to store energy, regulate voltage and current, and filter frequencies^[1]. Founded in 1972, AVX is majority-owned by Kyocera (KYO), a giant in the Japanese electronics industry, and maintains distribution and resale agreements with Kyocera which provide roughly one-third of AVX's revenues. AVX's relationship with Kycocera gives it an advantage over its competitors, because it is able to sell a wider range of products while spending less on R&D.

AVX's business is dependent on the electronic goods market, with approximately half of its revenue coming from PCs and telecommunications. These markets are highly cyclical and depend on consumer spending^[2]. AVX does not sign many long-term contracts with its customers, and those it does sign can generally be canceled at any time by the customer with little or no penalty. As a result, AVX is fully exposed to upturns and downswings in the electronics goods market. The high fixed costs associated with the production of electronic components make AVX particularly vulnerable to changes in demand for its products. During the electronics boom, AVX's gross margins peaked in 2001 at 37.3% for the fiscal year ending March 31, 2001. During the subsequent recession, AVX's gross margins fell to 5.1% in 2004^[3].

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