SOLAREDGE TECHNOLOGIES, INC. - 1419612 - 2023
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
For
the fiscal year ended December
31, 2022
OR
For
the transition period from _________ to __________
Commission
File Number: 001-36894
SOLAREDGE
TECHNOLOGIES, INC.
(Exact
name of registrant as specified in its charter)
1 HaMada Street
(Address of Principal Executive Offices) (Zip Code)
972(9)
957-6620
Registrant’s
telephone number, including area code
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, par value $0.0001 per share SEDG NASDAQ (Global Select Market)
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act
Yes ☒
No ☐
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐
No
☒
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes
☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files).
Yes
☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or “emerging growth company”. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):
☐ Emerging growth company
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐
No ☒
The
aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates of the registrant on June 30,
2022, the last business day of the registrant’s most recently completed second fiscal quarter was approximately
$15.1
billion (assuming that the registrant’s only affiliates are its officers, directors and non-institutional 10% stockholders)
based upon the closing market price on that date of $273.68 per share as reported on the Nasdaq
Global Select Market.
As
of February 10, 2023, there were 56,146,608shares
of the registrant’s common stock, par value of $0.0001 per share, outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
The
information required by Part III of this report, to the extent not set forth herein, is incorporated herein by reference from our definitive
proxy statement relating to the Annual Meeting of Stockholders to be held in 2023, which definitive proxy statement shall be filed with
the Securities and Exchange Commission within 120 days after the end of the annual period to which this report relates.
FISCAL YEAR FORM 10-K
TABLE OF CONTENTS
PART I
Item 1. Business 1
Item 1A. Risk Factors 17
Item 1B. Unresolved Staff Comments 37
Item 2. Properties 37
Item 3. Legal Proceedings 38
Item 4. Mine Safety Disclosures 38
PART II
Item 6. Reserved
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 58
Item 8. Financial Statements and Supplementary Data F - 1
Item 9A. Controls and Procedures 60
Item 9B. Other Information 61
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 61
PART III
Item 10. Directors, Executive Officers and Corporate Governance 62
Item 11. Executive Compensation 62
Item 14. Principal Accountant Fees and Services 62
PART IV
Item 15. Exhibits, Financial Statement Schedules 63
Signatures 65
SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K and the documents incorporated
herein by reference contain forward-looking statements that are based on our management’s expectations, estimates, projections,
beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally
in “Item 1. Business,” “Item 1A. Risk Factors” “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” and “Item 7A. Quantitative and Qualitative Disclosures About Market Risk”. This
discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include information concerning our possible
or assumed future results of operations, business strategies, technology developments, new products and services, financing and investment
plans, competitive position, industry and regulatory environment, effects of acquisitions, growth opportunities, and the effects of competition.
Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipate,”
“believe,” “could,” “seek,” “estimate,” “expect,” “intend,” “may,”
“plan,” “potential,” “predict,” “project,” “should,” “will,” “would,”
or similar expressions and the negatives of those terms.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future
results, performance or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not
place undue reliance on forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions
only as of the date of this filing. Important factors that could cause actual results to differ materially from our expectations include
those discussed in Item 1A, Risk Factors, as well as those discussed elsewhere in this Annual
Report on Form 10-K, including:
• future demand for renewable energy including solar energy solutions;
• historic cyclicality of the solar industry and periodic downturns;
• product quality or performance problems in our products;
• delays, disruptions, and quality control problems in manufacturing;
• existing and future responses to and effects of Covid-19;
• business practices and regulatory compliance of our raw material suppliers;
• performance of distributors and large installers in selling our products;
• our customers’ financial stability, creditworthiness and debt leverage ratio;
• our ability to retain, and events affecting, our major customers;
• our ability to integrate acquired businesses;
• fluctuations in global currency exchange rates;
• unrest, terrorism, or armed conflict in Israel;
• consolidation in the solar industry among our customers and distributors;
• our ability to service our debt; and
• the other factors set forth under “Item 1A. Risk Factors.”
The preceding list is not intended to be an exhaustive list of
all of our forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Although we
believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels
of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except
as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could
differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
i
PART I
ITEM 1.
Business
Introduction
We
are a leading provider of an optimized inverter solution that changed the way power is harvested and managed in photovoltaic (also known
as PV) systems. Our direct current, or DC, optimized inverter system maximizes power generation while lowering the cost of energy produced
by the PV system for improved return on investment, or ROI. Additional benefits of the DC optimized inverter system include: comprehensive
and advanced safety features, improved design flexibility, efficient integration (DC coupled) with SolarEdge storage solutions, and improved
operation and maintenance, or O&M, with remote monitoring at the module-level. The typical SolarEdge optimized inverter system consists
of inverters, Power Optimizers, a communication device which enables access to a cloud-based monitoring platform and, in many cases, a
battery and additional smart energy management solutions. Our solutions address a broad range of solar market segments, from residential
to commercial and small utility scale solar installations. Since we began commercial shipments in 2010, we have shipped approximately
40.0 gigawatts (“GW”) of our DC optimized inverter systems and our products have
been installed in solar PV systems in 133 countries.
Since introducing the optimized inverter solution
in 2010, SolarEdge has expanded its activity to other areas of smart energy technology, both through organic growth and through acquisitions.
By leveraging world-class engineering capabilities and with a relentless focus on innovation, SolarEdge now offers energy solutions which
also include energy storage systems, or ESS, home backup systems, electric vehicle, or EV, components and charging capabilities,
home energy management, grid services and virtual power plants, or VPPs, and lithium-ion batteries.
We primarily sell our products indirectly
to thousands of solar installers through large distributors and electrical equipment wholesalers and directly to large solar installers
and engineering, procurement, and construction firms, or EPCs. Our customers include leading providers of solar PV systems to residential
and commercial end users, key solar distributors, and electrical equipment wholesalers, as well as several PV module manufacturers that
offer PV modules integrated with our Power Optimizers referred to as "smart modules".
The PV industry is surveyed by IHS Markit
(S&P Global), an analytics company that ranked SolarEdge as the top PV inverter supplier world-wide by revenues, as of their published
“IHS PV Inverter Market Tracker - Fourth Quarter 2022”. As of December 31, 2022,
we have shipped in the aggregate approximately 107.6 million power optimizers and 4.5
million inverters. More than 3.1 million PV installations, many of which may include multiple inverters, are currently connected
to and monitored through our cloud-based monitoring platform.
The
SolarEdge Solution. Our DC optimized inverter system maximizes power generation
at the individual PV module level while lowering the cost of energy produced by the solar PV system, providing module-level visibility,
and enabling advanced, multilayer safety features. Our solution consists of inverters, Power Optimizers, a communication device
which enables access to our cloud-based monitoring platform to address a broad range of solar market segments, from residential solar
to commercial and small utility-scale solar installations. Additional smart energy features and hardware that can be added to our solution
include a battery pack for energy storage and a home energy automation system, which enables greater savings for the system owner.
The key advantages of our solution over a
traditional string inverter PV system include:
1
2
Our PV Solar Products
Offering
SolarEdge began its commercial sales with
a product offering of simplified inverters, Power Optimizers, and cloud-based monitoring platform. As the solar energy industry has evolved,
SolarEdge has developed innovative solutions to further enhance smart energy technology, including inverters that include compatibility
with batteries for increased self-consumption and storage, inverters that support EV charging, smart meters, smart energy devices (sockets,
water heater controllers, load controllers, wireless relay) and smart PV modules. This product expansion has enabled us to increase average
revenue per installation, or ARPI.
SolarEdge
Power Optimizer. Our DC Power Optimizer is a highly reliable and efficient
DC-to-DC converter which is either connected by installers to each PV module or embedded by PV module manufacturers into their modules
as part of the manufacturing process of Smart Modules. Our Power Optimizer increases energy output from the PV module to which it is connected
by continuously tracking the Maximum Power Point or MPP of each module and controlling its output voltage enabling the inverter’s
input voltage to remain fixed under a large variety of string configurations. This feature enhances flexibility in PV system design, enabling
use of different string lengths in a single PV system connected to the same inverter, use of PV modules situated on multiple orientations
connected to the same inverter and mixing different PV module types and brands in the same string. In addition, our Power Optimizers monitor
the performance of each PV module and communicate this data to our inverter using our proprietary power line communication. In turn, the
inverter transmits this information to our monitoring server.
Our Power Optimizers are designed to withstand
high temperatures and harsh environmental conditions and contain multiple bypass features that localize faults and enable continued system
operation in the vast majority of cases of Power Optimizer failure. Our Power Optimizers are compatible with the vast majority of modules
on the market today and carry a 25-year product warranty. Our Power Optimizers are designed to be used with our inverters to provide power
optimization. Monitoring and safety features can also be achieved with third party inverters by adding supplemental communications hardware.
During the year ended December 31, 2022, the year ended December 31,
2021 and the year ended December 31, 2020, revenues derived from the sale of power
optimizers represented 36.5%, 42.2% and 42.9% of total revenues, respectively.
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SolarEdge
Inverter. Our DC-to-AC inverters contain sophisticated digital control
technology with efficient power conversion architecture resulting in superior solar power harvesting and high reliability, and are designed
to work exclusively with our DC Power Optimizers. A proprietary power line communication receiver is integrated into each inverter, receiving
data from our power optimizers, storing this data and transmitting it to our monitoring server when an internet connection exists. Since
each string which is equipped with our power optimizers provides fixed input voltage to our inverter, the inverter is able to operate
at its highest efficiency at all times and therefore is more cost effective, energy efficient and reliable.
Like our power optimizers, our inverters are
designed to withstand harsh environmental conditions. Since the power rating of an inverter determines how many PV modules it can serve,
larger installations require inverters with higher power ratings. We currently offer a single-phase inverter designed to address the residential
market (1 kilowatt (“kW”) to 11.4 kW) which is based on our HD-Wave technology and a three-phase inverter designed to address
the residential market in certain European countries and Australia, as well as the commercial market (4 kW to 120 kW). Our single-phase
inverters support a range of smart energy capabilities. In 2020, we launched the SolarEdge Energy Hub inverter and home backup solution
for the U.S. residential market. The SolarEdge Energy Hub inverter contains built-in consumption monitoring, embedded revenue-grade production metering,
integrated arc fault protection, rapid shutdown and is battery ready. In 2021, we launched the new SolarEdge Energy Hub inverter models
ranging from 7.6 kW up to 11.4 kW PV power and 10.3 kW backup power. Both the SolarEdge Energy Hub inverter and the SolarEdge Home Battery,
described below, are part of the new SolarEdge full residential solution, the “SolarEdge Home”, an intelligent smart energy
management system that allows homeowners to better manage and monitor solar energy production, consumption and backup storage in real
time.
Our product offering also includes our commercial
three-phase up to 120kw inverter with Synergy technology and enhanced power capabilities, which is designed to enable quick and easy installation
and inventory management for the commercial market.
The vast majority of our inverters are sold
with a 12 year warranty that is extendable to 20 or 25 years for an additional cost. During the year ended December 31,
2022, the year ended December 31, 2021 and the year ended December 31,
2020 revenues derived from the sale of inverters represented 36.6%, 42.2% and 44.0% of
total revenues, respectively.
EV
Charging Inverter. SolarEdge’s EV charging inverter offers homeowners
the ability to charge electric vehicles up to six times faster than a standard Level 1 charger through an innovative solar boost mode
that utilizes grid and PV charging simultaneously. This inverter is the world’s first EV charger with an integrated PV inverter. Reducing the
burden of installing separately a standalone EV charger and a PV inverter, the EV charging inverter eliminates the need for additional
wiring, conduit and a breaker installation. By installing an inverter that has an integrated EV charge, no additional dedicated circuit
breaker is needed, saving space and eliminating the need for a potential upgrade to the main distribution panel.
Storage
Solutions. In 2021, we launched our residential battery, the SolarEdge Home
Battery a 10 kW single phase battery and, in 2022, we launched the 5 kW, three phase Home Battery. Both batteries integrate with our SolarEdge
Home Hub family of inverters. The SolarEdge Home Battery gives homeowners the ability to power their homes even when the grid is off.
The battery also works in tandem with the SolarEdge energy management system to optimize the use of solar energy in places where the feed-in
tariffs are less favorable, maximizing self-consumption. The SolarEdge Home Battery connects with the SolarEdge inverter through DC-coupling,
which minimizes the number of DC to AC conversions which are typical in competing technologies, saving energy and enabling higher efficiency.
The solution is based on a single inverter for both solar PV and storage. To optimize self-consumption, the battery is charged and discharged
to meet consumption needs and reduce the amount of power acquired from the grid. Also, with the SolarEdge backup solution, unused solar
PV power is stored in a battery and used during a power outage, powering essential sources such as refrigerators and freezers, communication
devices, lighting, and AC outlets. Our proprietary monitoring platform provides visibility into the battery's status, solar PV production,
and self-consumption, while offering easy maintenance with remote access to inverter and battery software. Multiple batteries can be connected
to a single SolarEdge Home Hub inverter, adding more available power to backup additional significant loads, such as air-conditioners,
water heaters and EV chargers. In addition, SolarEdge inverters can be connected to third party batteries via the SolarEdge StorEdge solution,
where batteries can perform both maximum self- consumption and backup functions.
4
Some existing SolarEdge systems can be upgraded
with a storage solution for both backup or on-grid maximum self-consumption use.
SolarEdge
Software. We offer a variety of professional software tools to support the
complete PV planning, installation, monitoring and maintenance processes:
Our Designer platform is a free web-based
tool that helps solar professionals plan, build and validate our residential and commercial systems from inception to installation.
Our “Mapper app” provides SolarEdge
installers with an efficient, streamlined process for registering the physical layout of new PV sites in the SolarEdge monitoring platform.
Installers use the Mapper app to scan SolarEdge Power Optimizer and inverter barcodes, creating a virtual map of the PV site in the monitoring
platform to help facilitate remote diagnostics.
Making installations quick and simple, our
“SetApp” is used to activate and configure SolarEdge inverters during commissioning directly through a smartphone.
In 2021, we launched
the mySolarEdge application version 2.0 which enables system owners to easily track their real-time system production and household energy
consumption, view their inverter and battery status for quick troubleshooting, and control the battery's back-up capabilities, all from
the convenience of their mobile phones.
Our cloud-based monitoring platform collects
power, voltage, current and system data sent from our inverters and Power Optimizers and allows users to view the data at the module level,
string level, inverter level and system level from most browsers or from most smart phones and tablets. The monitoring software continuously
analyzes data and flags potential problems. The monitoring software includes features which are used on a routine basis by integrators,
installers, maintenance staff, and system owners to improve a solar PV system’s performance by maximizing solar power harvesting
and reducing O&M costs by increasing system up-time and detecting PV module performance issues more effectively. Connection to the
monitoring server is completed during installation by the installer. The installer then receives full access to system data through the
monitoring software and can select the amount of data to be shared with the system owner.
Smart
Energy Management.There
are two separate energy technology industries that exist today: solar energy production and automation technology. Inverters are taking
on an expanded role in energy management and automation and to address these market needs, we are developing and providing automation
products. This line of products, when used with the SolarEdge PV solution, is designed to allow system owners to increase self-consumption
by shifting energy usage to match peak solar PV production as well as offer a convenient, wireless control option over various building
and/or home devices. An example of this solution would be using excess solar PV energy to heat water or the ability to remotely turn on/off
certain power sources such as lighting or electrical appliances. The introduction of these products is dependent upon certification and
region-specific needs and as such, these products are not yet available in all of the regions in which SolarEdge operates.
5
Grid
Services. As the use of PV and storage continues to proliferate around the
world, energy production is transitioning from a centralized system to a distributed network model, where energy is produced close to
the location in which it is consumed and stored. This model creates an opportunity for new interconnected and decentralized energy networks
offering improved grid reliability and stability, new energy services, and the reduction of grid infrastructure costs. SolarEdge grid
services deliver near real-time aggregative control and data reporting, enabling the pooling of distributed energy resources — PV
systems, battery storage, electric vehicle chargers, and loads — in the cloud for the creation of virtual power plants ("VPP").
SolarEdge grid services and VPP solution provide sophisticated management platforms to enable real-time, aggregated control of available
energy resources to meet ever-changing supply needs and demand. Our distributed energy resources management system or DERMS application
and application program interfaces ("APIs") are used by utilities for countering peak demand events. In 2022, SolarEdge continued to generate
revenues from selling grid services in the U.S., Europe and Australia, including services provided to independent system operators, energy
retailers, national installers and others.
Product Roadmap
Our products reflect the innovation focus
and capabilities of our technology departments as well as the importance we place on creating value for our customers. Our core solar
product roadmap is divided into five categories: Power Optimizers, inverters, software, energy storage, and smart energy management.
Power
Optimizers. We currently sell our third and fourth generations of
Power Optimizers (P-Series and S-Series, respectively) which were designed for fully automated assembly and are based on our third and
fourth generation ASICs, respectively. A key element of our reliability strategy and a significant differentiator relative to our competitors,
is our use of proprietary ASICs to control, among other things, our Power Optimizer’s power conversion, safety features, and PV
module monitoring. Instead of using large numbers of discrete components, our Power Optimizers uses a single proprietary ASIC, reducing
the total number of components in an electrical circuit and improving reliability. In 2021, we launched our fourth generation Power Optimizers
which uses fourth generation ASIC that provides higher efficiency and incorporates a new safety mechanism for PV systems called "the SolarEdge
Sense Connect", that provides connector level fault detection. In 2022, we announced the launch of our next generation Commercial
S-series Power Optimizers. Each new ASIC generation reduces the number of components required for any given functionality, adds more functions
to the Power Optimizers, and meaningfully improves its efficiency. The efficiency improvement reduces the energy losses which in turn
reduces the amount of heat dissipation. This enables design of a more cost-effective and usually smaller enclosure and also keeps the
electronics cooler, thereby improving the Power Optimizer’s reliability. Our research and development teams continuously work to
further improve our ASICs and release new generations of this innovative technology.
Inverters.
Our inverter roadmap includes both new products as well as additional capabilities for existing inverters. Our inverter roadmap is intended
to serve four purposes: (i) expand addressable markets by developing new and larger inverters designed specifically for larger commercial
installations and utility-scale projects; (ii) improve the electronics to increase the total power throughput while minimally changing
the existing enclosure, thereby reducing the actual cost per watt and increasing economies of scale; (iii) improve ease of installation
by integrating additional functionality required in certain installations in order to reduce costs of additional hardware and subcontractors’
labor costs; and (iv) improve the inverter's functionality to serve as a hub for home energy management, integrating, controlling and
optimizing the main home energy sources and loads.
Software.
We continue to expand our software offering by introducing new tools and features. This includes both professional web-based software
and system owner applications such as the fleet management platform, the site designer tool, the mySolarEdge consumer app, and installer
applications.
Our cloud-based monitoring platform is continuously
growing by the amount of data aggregated. We are continuously developing tools to accommodate our growth and further enhance our service
offering. We plan to continue developing algorithms that detect and pinpoint problems that can impact power production in installed systems.
We further plan to add more capabilities through our public API to allow users to integrate our system into their own systems and build
and share useful applications based on monitoring data gathered by our software.
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Energy
Storage. Our residential storage solution, launched in 2021, is designed
to integrate with our single-phase and three-phase inverters to provide optimal energy management, maximum efficiency, longer backup times
and ease of use for the homeowners. Our DC-coupled SolarEdge Home Battery are currently available in North America, Europe and Australia
and are expected to be introduced to additional global markets. We expect to continue to expand our
storage solutions to cover more applications, improve battery management, efficiency and integration with energy management systems.
Smart
Energy Management. Our smart energy management offering manages and controls
PV production, home consumption, storage, and home generator and grid interaction. It is designed to automatically use excess PV power
to increase self-consumption of solar energy, and reduce energy bills and carbon footprints. The offering controls electrical loads such
as, pool pumps, fans, lighting and other home appliances by using our smart energy devices such as smart sockets, smart switch relays
and more, and is able to divert excess solar energy to heat water. We are developing new features and capabilities for the smart energy
suite which is constantly evolving. Specifically, we have current plans to add the ability to control additional energy loads and are
developing capabilities for the commercial segment. We also plan on expanding the availability of our smart energy products, including
smart energy management devices, to new geographies and use cases.
Products from Non-Solar
Businesses
Since introducing our DC optimized inverter
solution in 2010, we have expanded our activity to other areas of smart energy solutions, both through organic growth and through acquisitions.
These include product offerings in the areas of energy storage systems or ESS and backup including our own lithium-ion cells and electric
vehicle also knows as EV components. More specifically, in 2022, we continued to supply
full electrical powertrain units and batteries for the production of the "E-Ducato" light commercial vehicle in Europe. In addition, we
began producing and shipping cells from Sella 2, our own Li-Ion cell and battery factory in Korea in the end of 2022. The factory is expected
to reach full manufacturing capacity during 2023. Our non-solar businesses allow us to offer a variety of products and solutions in addition
to the SolarEdge solution, in adjacent markets.
New
Products or Product Categories
We
continuously evaluate opportunities to expand our product offerings and services to our customers. We may from time to time develop new
products or services that are a natural extension of our existing business, or may engage in acquisitions of businesses or product lines
with the potential to strengthen our market position, enable us to enter attractive markets, expand our technological capabilities, or
provide synergistic opportunities.
Sales and Marketing Strategy
Our solar business strategy is to focus on
penetrating new geographic regions and increasing our market share. More specifically, we focus on markets where electricity prices, irradiance
and government policies make solar PV installations economically viable. Our solar products have been installed in 133
countries.
We target our sales and marketing efforts
to the largest distributors, electrical equipment wholesalers, EPC contractors and installers in each of the countries where we operate.
We anticipate that an increasing percentage of solar PV equipment sales will also occur through electrical equipment wholesalers who sell
to a broad range of electrical contractors, and we are focused on cultivating these global relationships. As of December 31,
2022, based on the number of installer accounts on our monitoring portal, over 53,000 installers around the world have installed
SolarEdge solar PV systems. We also sell our Power Optimizers pre-installed onto several PV modules
for manufacturers that offer Smart Modules to ease and accelerate installation.
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Additionally, as further detailed below, we
have a number of programs focused on educating installers and other industry professionals about our technology, and we use a combination
of road shows, webinars, and partner trainings to educate them how best to design, sell, and implement our technology in their projects.
Most of these activities were converted to online platforms since the start of the Covid-19 pandemic
to enable continued training, education and marketing.
Our battery business
strategy focuses on utilizing our storage division's ’s battery technology in our residential and commercial solar products and
using any remaining manufacturing capacity for generating revenues from the sale of battery cells, modules and systems to other applications
including ESS, UPS, marine and other applications. In the future we intend to further integrate our batteries into other applications.
Our Customers
We derive a significant portion of our revenues
from key solar distributors, electrical equipment wholesalers and large installers in the U.S. and worldwide. In 2022,
one of our customers, Consolidated Electrical Distributors Inc. (CED)
represented 18.5% of our revenues. None of our other customers accounted for more than ten percent
of our revenues in the year ended December 31, 2022.
Training and Customer Support
We offer our installer base a comprehensive
package of customer support and training services which include pre-sales support, ongoing trainings, and technical support before, during,
and after installation. We also provide customized support programs to PV module manufacturers, large installers and distributors to help
prioritize and track support issues, thereby enabling short cycle times for issue resolution.
In 2022 we launched our new online customer
training platform, Edge Academy. The platform is an advanced Learning Management System, capable of hosting thousands of online training
sessions each month, allowing a self-paced, training approach. During 2022, the Edge Academy hosted over 124,000 learners.
In 2022, we also enhanced our installer certification
by allowing more installers to access the certification program on the new Edge Academy platform, as well as increasing accessibility
by adding more languages for the content such that installers in more regions in which we operate can benefit from the content. During
2022, over 13,000 installers completed our certification program. We also launched the SolarEdge battery
certification program which was completed by more than 2,900 installers world-wide.
In addition to the above, we support our commercial
system customers with design consulting throughout their sales process and installation.
Our technical support organization includes
local expert teams, tech centers, an online service portal and live chat service. Our toll-free call and live chat centers are open Monday
through Friday at least from 9:00 a.m. to 6:00 p.m. in every region in which we sell our products. In addition, customers can
open and track support cases 24/7 utilizing our online portal. All support cases are monitored via a customer relationship management
system in order to provide service, track closure of all customer issues and further improve our customer service. Our call centers have
access to our cloud-based monitoring platform database, which enables real-time remote diagnostics.
Customer
service and satisfaction continues to be a key component of our business offering and we consider it integral to our continued success.
We maintain high levels of customer engagement through our call centers in California, Australia, Japan, Israel, India and Bulgaria. During
2022, we added additional call centers in Brazil, Taiwan, Thailandand
South Africa.In
addition to our call centers, we have field service engineers located in the geographies where we are active, and support our customers
with commissioning of large projects, introduction of new technologies and features and on-the-job training of new installers. As of December 31,
2022, our customer support and training organization consisted
of 609
employees worldwide.
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Our Technology
We have drawn on our expertise in the fields
of power electronics, magnetic design, mechanical and heat dissipation, control loops and algorithms, power line communications and lithium-ion
battery technology to design and develop what we believe to be the most advanced commercial solutions for harvesting power from solar
PV, storage and energy management solutions for residential and commercial applications. These technologies are explained in more detail
below.
As part of our growth strategy, we have acquired
companies that have technologies that can leverage our expertise in power electronics and power optimization. By combining acquired resources
with our current research and development teams, we are expanding our activities into other areas such as e-Mobility, and energy storage
systems.
Power
Optimizers
Our Power Optimizers are DC/DC step up/step
down (buck boost) converters designed and developed to operate in harsh outdoor environments at very high conversion efficiency. Our Power
Optimizers include proprietary power electronics customized to efficiently convert power from the PV module to the inverter.
A key factor in the performance of our Power
Optimizer is determined by the digital control algorithms and closed-loop control mechanism. The Power Optimizer’s control is built
into our advanced ASIC which is responsible for all critical digital control functions of the power optimizer, including detailed power
analysis, digital control of the power conversion subsystem, power line communications and networking. Since each Power Optimizer handles
the power and voltage of either a single or two modules, we are able to reach a high degree of semiconductor integration by leveraging
low cost silicon in standard semiconductor packages. As a result, much of the of our Power Optimizer functionality can be integrated into
a standard ASIC instead of requiring discrete electronic components, resulting in lower costs and higher reliability.
The ASIC performs the critical power analysis
and power conversion control functions of the Power Optimizer. The power analysis functions process the state and working parameters at
the Power Optimizer’s input and output and, together with advanced digital control and state machine logic, control the power conversion
function. In addition, our digital control system uses technology that allows the solar PV installation to anticipate and adapt to changing
operating conditions, and to protect itself against system anomalies. In 2021, we incorporated our fourth generation ASIC in our new generation
of Power Optimizers (S-series). In addition, we added cable temperature monitoring functionality, called the Sense Connect, to this new
generation to improve their safety capabilities.
Each Power Optimizer in the array is connected
to the inverter by a power line communications networking link. Our power line communications link uses a proprietary networking technology
that we developed, utilizing the existing DC wiring between the Power Optimizers and the inverter to transmit and receive data between
these devices.
Inverters
Most of our inverters are designed for single-stage DC/AC
conversion. Using our inverter in combination with the Power Optimizers allows the inverter control loop to maintain a regulated DC voltage
level at its input, thereby enabling the inclusion of long, uneven, and multi-faceted strings of solar modules while also enabling custom,
cost efficient, and reliable inverter design and component selection. All of the power components, as well as the main magnetic components
for our inverters, can then be optimized for DC/AC inversion at high efficiency.
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Our inverters’ digital control algorithms
are implemented using programmable digital signal processors which allow for flexibility and adaptation of control loops for various grids
and for the requirements and standards of different grid operators across geographies. We have already implemented the control mechanisms
necessary to support advanced grid codes and standards that are required to support high penetration of solar energy into utility grids.
We continue to develop and manufacture our own DSP (ASIC) in our inverters which enables us to improve our control loops, increase our
cost savings and be less dependent on third party suppliers in our manufacturing process. The DSP (ASIC) performs the critical power analysis
and power conversion control functions of the inverter. The power analysis functions process the state and working parameters at the power
inverter’s input and output, and together with advanced digital control and state machine logic controls the power conversion function.
In addition, our digital control system uses technology that allows the inverter to anticipate and adapt to changing operating conditions,
and to protect itself against system anomalies as well as comply with applicable regulations in the different regions in which we operate.
Our DSP (ASIC) is also in charge of the power
line communications ("PLC") networking link. Our PLC uses a proprietary networking technology that we developed, utilizing the existing
DC wiring between the Power Optimizers and the inverter to transmit and receive data between these devices.
We have developed and continue to develop
in-house design and manufacturing capabilities for magnetic components in order to decrease dependence on suppliers, reduce costs and
have better control over our production processes.
Batteries
In 2021, we released our first lithium-ion residential batteries for sale in the U.S. and Europe through our solar distribution channels.
Our batteries are composed of lithium cells, a battery management system ("BMS"), bi-directional DC/DC high efficiency converter that
allows charge and discharge of the battery, as well as user interface. Our DC/DC converter uses digital control algorithms, which are
implemented using a programmable digital signal processor. Therefore, both the battery and Power Optimizers are connected to the
same DC bus, allowing the battery to be directly charged by the DC current generated by the Power Optimizers and bypassing the AC conversion.
Our efficient DC-coupled battery is designed
to connect with our inverters (up to three batteries per inverter). Our batteries can be connected to our cloud‐based monitoring
platform, reporting information on the battery status, solar production, and self-consumption data.
In 2022, we launched the 5 kW three phase
Home Battery for the European market.
Manufacturing
We have designed our manufacturing processes
to produce high quality products at competitive costs. The strategy is threefold: outsource, automate, and localize. We currently contract
to have our solar products manufactured by two of the world’s leading global electronics manufacturing service providers, Jabil
Circuit, Inc. (“Jabil”) and Flex Ltd. (“Flex”). By using contract manufacturers, we are able to access advanced
manufacturing equipment, processes, skills and capacity on a relatively “capital light”
budget. Our contract manufacturers are responsible for funding the capital expenses incurred in connection with the manufacture of our
products, except with regard to end-of-line testing equipment and other specific manufacturing equipment utilized in assembling our products
or sub-components which are financed and owned by the Company. We expect to continue this funding arrangement in the future, with respect
to any expansions to such existing lines save for circumstances where the direct purchase by us of non-specific manufacturing equipment
will result in a substantial reduction in costs in which case we will consider financing such non-specific manufacturing equipment ourselves.
Further, contracting with global providers, such as Jabil and Flex, gives us added flexibility to manufacture certain products in China
and Vietnam, closer to target markets in Asia and the North American west coast, as well as other products in Hungary, closer to target
markets in Europe and the North American east coast, in each case, potentially increasing responsiveness to customers while reducing costs
and delivery times. In addition, as part of our manufacturing regionalization efforts, we are expanding our manufacturing capabilities
with a new manufacturing site in Mexico, which is expected to finalize its ramp-up phase in the first half of 2023. Once ramped, we believe
this site will significantly increase our capacity and give us further flexibility to manage growing demand.
In light of recent Inflation Reduction Act legislation in the United States which incentivizes the local manufacturing of
renewable energy products by providing benefits to installers for the purchase and installation of US-manufactured products, as well as
by incentivizing manufacturers of such products domestically, we are planning to establish manufacturing capabilities in the United
States either by using contract manufacturers or by establishing our own manufacturing facility or a combination of both.
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During 2021, we reached full manufacturing
capacity in our manufacturing facility located in the North of Israel “Sella 1”, from which we began commercial shipments
to the U.S. of optimizers and inverters in 2020. The proximity of Sella 1 to our R&D team and labs enables us to accelerate new product
development cycles as well as define equipment and manufacturing processes of newly developed products which can then be adopted by our
contract manufacturers worldwide.
During 2023, we plan to expand the manufacturing capacity of
Sella 1 to add an additional inverter line.
We have developed propriety automated assembly
lines for the manufacturing of our power optimizers. These assembly lines, currently operating in all of our manufacturing facilities,
enable the manufacturing of more than 6,000 optimizers per manufacturing line per day. We invest
resources in additional automated assembly lines as well as in automated machinery for subassembly and self-manufacturing of certain components
used in our products, and we own and are responsible for funding all of the capital expenses related thereto. The current and expected
capital expenses associated with these automated assembly lines and other machinery is funded out of our cash flows.
We source our raw materials through various
component manufacturers and invest resources in continued cost-reduction efforts as well as verifying second and third sources so as to
limit dependence on sole suppliers.
Our Korean subsidiary (formerly Kokam), has
a manufacturing facility for lithium-ion cells and batteries that has the capacity to manufacture up
to 150 MWh per annum. In 2020, we began construction of “Sella 2”, a 2GWh Li-Ion battery factory in Korea. The new
factory was constructed to meet the growing global demand for Li-Ion batteries, specifically in the energy storage system (ESS)
market. Sella 2 began producing and shipping cells in the end of 2022 and is expected to reach full
manufacturing capacity during 2023.
SolarEdge e-Mobility has a manufacturing and
assembly facility in Umbertide, Italy, for our e-Mobility division.
Reliability and Quality Control
Our power optimizers are either connected
to each PV module by installers, or embedded in each PV module by PV module manufacturers. Our power optimizers are designed to be as
reliable as the PV module itself and capable of withstanding the same operating and environmental conditions.
Our reliability methodology includes a multi-level
plan with design analysis, sub-system testing of critical components by Accelerated Life Testing, and integrative testing of design prototypes
by Highly Accelerated Life Testing and large sample groups. As part of our reliability efforts, we subject components to industry standard
conditions and tests including in accelerated life chambers that simulate burn-in, thermal cycling, damp-heat, and other stresses. We
also conduct out of box audits (OBA) on our finished products. In addition, online reliability tests (ORT) are conducted on our optimizers
and we test complete products in stress tests and in the field. Our rigorous testing processes have helped us to develop highly reliable
products.
In order to verify the quality of each of
our products when it leaves the manufacturing plant, each component, sub-assembly, and final product are tested multiple times during
production. These tests include Automatic Optical Inspection, In-Circuit Testing, Board- Functional Testing, Safety Testing, and Integrative
Stress Testing. We employ a serial number-driven manufacturing process auditing and traceability system that allows us to control production
line activities, verify correct manufacturing processes and to achieve item-specific traceability.
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As a part of our quality and reliability approach,
failed products from the field are returned and subjected to root cause analysis, the results of which are used to improve our product
and manufacturing processes and design and further reduce our field failure rate.
Certifications
Our products and systems comply with the applicable
regulatory requirements of the jurisdictions in which they are sold as well as all other major markets around the world. These include
safety regulations, electromagnetic compatibility standards and grid compliance.
Research and Development
We devote substantial resources to research
and development with the objective of developing new products and systems, adding new features and reducing unit costs of our products
and systems. Our development strategy is to identify software and hardware features, products, and systems that reduce the cost and improve
the effectiveness of our solutions for our customers. We measure the effectiveness of our research and development by metrics including
product unit cost, efficiency, reliability, power output, and ease of use.
We have a strong research and development
team with wide ranging experience in power electronics, semiconductors, power line communications and networking, chemical, mechanical
and software engineering. In addition, many members of our research and development team have expertise in solar technologies. As of December 31,
2022 our research and development organization had a headcount of 1,428 employees.