Unless the context otherwise requires, as used in this Form 10-K, references to “Advanced Energy”, “the Company”, “we”, “us” or “our” refer to Advanced Energy Industries, Inc. and its consolidated subsidiaries.
Overview
We design, manufacture, sell, and support power conversion products that transform power into various usable forms. Our products enable manufacturing processes that use thin-film deposition for various products, such as semiconductor devices, flat panel displays, solar panels, and architectural glass. We also supply thermal instrumentation products for advanced temperature control in the thin-film process for these same markets. Our solar inverter products support renewable power generation solutions for residential, commercial, and utility-scale solar projects and installations. Our network of global service support centers provides a recurring revenue opportunity as we offer repair services, conversions, upgrades, and refurbishments to companies using our products. We also offer a wide variety of operations and maintenance service plans that can be tailored for individual photovoltaic ("PV") sites of all sizes.
On May 3, 2010, we acquired PV Powered, Inc. ("PV Powered"), a privately-held Oregon corporation based in Bend, Oregon. PV Powered is a leading manufacturer of grid-tied PV inverters in the residential, commercial, and utility-scale markets. As a result, the offerings of Advanced Energy now provide our customers with multiple solutions in a wider power range and increases the number of solar array opportunities where our products can be utilized.
On October 15, 2010, we sold our gas flow control business, which includes the Aera® mass flow control and related product lines, to Hitachi Metals Ltd. Accordingly, the results of operations from our gas flow control business have been excluded from our discussions relating to continuing operations. Note 2 - Business Acquisition and Disposition to our Consolidated Financial Statements describes the acquisition of PV Powered and the disposition of our gas flow control business.
We incorporated in Colorado in 1981 and reincorporated in Delaware in 1995. Our executive offices are located at 1625 Sharp Point Drive, Fort Collins, Colorado 80525, and our telephone number is 970-407-4670.
Products and Services
Our products are designed to enable new process technologies, improve productivity, and lower the cost of ownership for our customers. We also provide repair and maintenance services for all of our products.
The combination of PV Powered’s solar inverter product line with our Solaron inverter product line resulted in revenue growth, both in absolute dollars and as a percentage of our overall revenue. Serving the inverter market has proven to require management, marketing, sales, and engineering efforts that are unique from those of our traditional thin-film capital equipment market. As a result, management announced the creation of two focused business units within the Company effective January 1, 2011. The two business units, Thin Films Deposition Power Conversion and Thermal Instrumentation ("Thin Films") and Solar Energy, enable improved execution and a strategic focus on two distinct markets.
The Thin Films business unit principally serves original equipment manufacturers ("OEM") and end customers in the semiconductor, flat panel display, solar panel, and other capital equipment markets. The Solar Energy business unit focuses on residential, commercial, and utility-scale solar projects and installations selling primarily to distributors, Engineering, Procurement, and Construction contractors ("EPC"s ), developers, and utility companies. The creation of these two units enables greater focus on each business’ unique needs and requirements, allowing each to expand and accelerate our growth by better serving each of these very different industries. Note 20 - Segment, Geographic and Significant Customer Information to our Consolidated Financial Statements describes our business units and their related financial information.
Our products are used in diverse markets, applications, and processes including the manufacture of capital equipment for semiconductor devices, thin-film applications for solar panels and architectural glass, and for other thin-film applications including flat panel displays, data storage, and industrial coatings, as well as, the residential, commercial, and utility-scale solar inverter markets. These markets can be cyclical in nature. Therefore, demand for our products and our financial results can change as demand for manufacturing equipment, solar inverters, and services change in response to consumer demand. Other factors, such as global economic and market conditions and technological advances in fabrication
processes and renewable applications can also have an impact on our financial results, both positively and negatively.
THIN-FILMS
Our thin-film deposition power conversion systems include direct current ("DC"), pulsed DC mid frequency, and radio frequency ("RF") power supplies, matching networks, and RF instrumentation. These power conversion systems refine, modify, and control the raw electrical power from a utility and convert it into power that may be customized and is predictable and repeatable. Our power conversion systems are primarily used by semiconductor, solar panel, and similar thin-film manufacturers including flat panel display, data storage, and architectural glass manufacturers.
Our thermal instrumentation products are used in the semiconductor industry, as well as, the solar panel and LED industries, in order to provide temperature measurement solutions for applications in which time-temperature cycles affect material properties, productivity, and yield. These products are used in rapid thermal processing, chemical vapor deposition, and other semiconductor and solar applications requiring non-contact temperature measurement.
SOLAR ENERGY
Our solar power inverters offer a transformer-based or transformerless advanced grid-tied PV solution for residential, commercial, and utility-scale system installations. Our PV inverters are designed to convert renewable solar power, drawn from large and small scale solar arrays, into high-quality, reliable electrical power. We also offer integrated monitoring and performance measurement to minimize the cost of energy and enhance the value and reliability of PV installations.
GLOBAL SUPPORT SERVICES
Our global support services group offers in-warranty and out-of-warranty repair services in the regions in which we operate, providing us with preventive maintenance opportunities. As semiconductor device manufacturers have become increasingly sensitive to the significant costs of system downtime, they have required that suppliers offer comprehensive local repair service and customer support. To meet these market requirements, we maintain a worldwide support organization in the United States ("U.S."), the People’s Republic of China ("PRC"), Japan, South Korea, Taiwan, Germany, and Great Britian.
Markets
Our products compete in markets for high tech manufacturing capital equipment and renewable energy production. The inverter market has lower volume sales during the winter months due to reduced ability to install products. Our other markets are not subject to seasonality; however, these markets are cyclical due to sudden changes in customers’ manufacturing capacity requirements and spending, which depend in part on capacity utilization, demand for customers’ products, inventory levels relative to demand, government incentives and subsidies, and access to affordable capital. For more information related to the markets in which we compete and the current environment in those markets, please see Business Environment and Trends in Item 7. Management's Discussion and Analysis.
SEMICONDUCTOR CAPITAL EQUIPMENT
Customers in the semiconductor capital equipment market incorporate our products into equipment that make integrated circuits. Our power conversion systems provide the energy to enable thin-film processes, such as, deposition and etch. Our thermal instrumentation products measure the temperature of the process chamber. Precise control over the energy delivered to plasma-based processes enables the production of integrated circuits with reduced feature sizes and increased speed and performance.
SOLAR PANEL CAPITAL EQUIPMENT
We sell our products to OEMs and manufacturers of solar cells who use our products to produce thin-films using silicon substrates, as well as, glass or metal substrates. The majority of solar cell manufacturing currently uses a silicon wafer as the substrate and employs chemical vapor deposition ("CVD") thin-film processing. The solar cell industry has developed processes for manufacturing solar cells on non-silicon substrates, such as, glass and metal by using thin-film
processes that employ CVD tools. Our RF and DC power supply products are designed for use in these CVD and physical vapor deposition ("PVD") tools. Our products are used in leading thin-film solar cell technologies, including amorphous and microcrystalline silicon, copper, indium, gallium, selenide, and cadmium telluride.
FLAT PANEL DISPLAY CAPITAL EQUIPMENT
Manufacturers of flat panel displays use thin-film deposition processes similar to those employed in manufacturing semiconductor integrated circuits. Flat panel display technology produces bright, sharp, large, color-rich images on flat screens for products ranging from hand-held devices to laptop and desktop computer monitors. This technology is also used in manufacturing liquid crystal display, light emitting diode ("LED") backlit, and 3-dimensional ("3D") television screens. The transition to larger panel sizes and higher display resolution is driving the need for tighter process controls to reduce manufacturing costs and defects.
DATA STORAGE CAPITAL EQUIPMENT
Data storage equipment manufacturers use our products in their capital equipment which allows them to produce a variety of products, including optical disks, such as CDs, DVDs and Blu-ray, and magnetic storage, such as computer hard discs, including both magnetic media and thin-film heads. These products use a PVD process to produce optical and magnetic thin-film layers, as well as a protective-wear layer. In this market, the trend towards higher recording densities requires thinner and more precise films. The use of equipment incorporating optical and magnetic media to store digital data expands with the growth of the laptop, desktop and network server computer markets, and consumer electronics including audio, video, gaming, cell phone, and entertainment markets.
ARCHITECTURAL GLASS CAPITAL EQUIPMENT
Low Emissivity or Low-E architectural glass manufacturers use our tools in their production equipment. This glass is used in commercial and residential buildings to reflect heat and cold through the use of thin films coated directly on the glass which reduces the energy used in the building. The thin-film deposition process employs PVD tools which use our DC and mid-frequency power products. This market is driven by end market demand for glass related to the residential and commercial construction industry.
INDUSTRIAL PRODUCTS CAPITAL EQUIPMENT
The thin-film deposition processes are also used to produce products for a variety of industrial markets. Our solutions allow thin films to be applied to products in plasma-based processes to strengthen and harden surfaces on such diverse products as tools, automotive parts, and various other end products. The advanced thin-film production processes allow precise control of various optical and physical properties, including color, transparency, and electrical and thermal conductivity. The improved adhesion and specular surfaces resulting from plasma-based processing make it the preferred method of applying thin films.
We sell residential, commercial, and utility-grade solar inverters to distributors, contractors, developers, and utility companies who integrate our inverter products into solar array installations. Our solar inverters convert DC power, which is produced by the solar panels in the array, into alternating current ("AC") power for consumption on-site or to be sold back through the public utility grid. Our commercial and utility-grade inverters have power outputs from 35 kilowatts ("kW") to two megawatts and can be used in small-scale and utility-scale solar array installations. Our residential-grade inverters have power outputs from 1kW to 5kW and are designed for residential installations.