SOLAREDGE TECHNOLOGIES, INC. - 1419612 - 2024
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
For
the fiscal year ended December
31, 2023
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:
☐ 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,
2023, 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 $269.05 per share as reported on the Nasdaq Global Select Market.
As of
February 1, 2024, there were 57,126,023
shares 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 2024, 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 14
Item 1B. Unresolved Staff Comments 35
Item 1C. Cybersecurity 35
Item 2. Properties 36
Item 3. Legal Proceedings 37
Item 4. Mine Safety Disclosures 37
PART II
Item 6. Reserved 39
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 61
Item 8. Financial Statements and Supplementary Data F - 1
Item 9A. Controls and Procedures 62
Item 9B. Other Information 63
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 63
PART III
Item 10. Directors, Executive Officers and Corporate Governance 64
Item 11. Executive Compensation 64
Item 14. Principal Accountant Fees and Services 64
PART IV
Item 15. Exhibits, Financial Statement Schedules 65
Signatures 67
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
inherently 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. Forward-looking and other statements regarding
our sustainability efforts and aspirations are not an indication that these statements are necessarily material to investors or requiring
disclosure in our filing with the Securities and Exchange Commission (“SEC”). In addition, historical, current and forward-looking
sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes
that continue to evolve and assumptions that are subject to change in the future, including future rule-making. 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;
• performance of distributors and large installers in selling our products;
• consolidation in the solar industry among our customers and distributors;
• Our ability to recognize expected benefits from restructuring plans
• our ability to integrate acquired businesses;
• fluctuations in global currency exchange rates;
• volatility of our stock price;
• our customers’ financial stability, creditworthiness and debt leverage ratio;
• our ability to retain, and events affecting, our major customers;
• 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 (“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 DC 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 and devices, such as EV chargers and load controllers. As part
of our hardware sales, we also provide the energy management software which controls, manages and optimizes the energy production, storage
and use of energy generated by our systems. Our solutions address a broad range of solar market segments, from residential solar installations
to commercial and small utility scale solar installations. Since we began commercial shipments in 2010, we have shipped approximately
52.6 gigawatts (“GW”) of our DC optimized inverter systems and our products have been installed in solar PV systems in over
140 countries.
Since
introducing the DC 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 that include primarily the hardware technology used in residential, commercial, and
small scale utility PV systems and also product offerings in the areas of energy storage systems, or ESS, including manufacturing of lithium-ion
cells and batteries, smart trackers for solar panels, EV chargers, home and commercial energy management software, grid services and software
platforms and applications that enable development of virtual power plants, or VPPs.
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 of
December 31, 2023, we have shipped in the aggregate approximately 125.1 million Power Optimizers and 5.6 million inverters. More than
3.7 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. The key advantages of our solution over a traditional string inverter PV system include:
1
Our
Product Offering
Our primary segment is
our solar business, which includes the following products:
SolarEdge
Power Optimizer. Our Power Optimizer which forms an integral part of our DC optimized inverter system is a highly reliable and
efficient DC-to-DC converter which is connected by installers to each PV module or embedded by PV module manufacturers into their modules
as part of the manufacturing process. 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 production point. The Power Optimizer’s ability to track
the MPP of each PV module and its ability to increase or decrease its output voltage enables the inverter’s input voltage to remain
fixed under a large variety of string configurations. This feature enhances the flexibility in PV system designs, 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 using varied PV module types 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. Each Power Optimizer is equipped with our proprietary safety mechanism which automatically reduces
the output voltage of each PV module to 1 volt unless the Power Optimizer receives a fail-safe signal from a functioning inverter. As
a result, if the inverter is shut down (e.g., for system maintenance, due to malfunction, in the event of a fire or otherwise), the system
is designed to reduce the DC voltage to a safe level.
2
Our
Power Optimizers are designed to withstand high temperatures and harsh environmental conditions and contain multiple bypass features that
localize failures and enable continued system operation in the vast majority of cases of Power Optimizer failure. Our Power Optimizers
are compatible with most modules on the market today and carry a 25-year product warranty. During the year ended December 31, 2023, the
year ended December 31, 2022 and the year ended December 31, 2021, revenues derived from the sale of Power Optimizers represented 30.3%,
36.5% and 42.2% of total revenues, respectively.
SolarEdge
Inverter. Our DC-to-AC inverters which form an integral part of our DC optimized inverter systems, 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 efficient 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. We currently offer single-phase inverters
designed to address the residential market (3 kilowatt (“kW”) to 11.4 kW) three-phase inverters designed to address the residential
and commercial markets (4 kW to 120 kW), and three-phase inverters designed to address the ground mount market (300kW to 330kW). In 2023,
SolarEdge released the 330kW inverter coupled with new H-Series Power Optimizers for distributed and centralized inverter configurations.
This inverter is designed for small-scale utility installations, agriculture or Agri-PV sites that harvest crops and solar energy on the
same farmland, and Community Solar installations which bring smart energy savings to households, businesses and public organizations.
Storage
Solutions. The SolarEdge Home Battery 400V, our DC-coupled, 10kWh, single phase battery integrates with our SolarEdge Home Hub
family of inverters. When connected with our SolarEdge Home Backup Interface (BUI), the SolarEdge Home Battery provides homeowners the
ability to power their homes even when the grid is off for anywhere from several hours to many days, depending on use of loads and available
sunlight during the outage. The battery also works in tandem with the SolarEdge ONE energy optimization system to optimize the use of
solar energy in places with different types of import and export tariffs scenarios (such as time of use, or TOU and dynamic rates).
With
the SolarEdge backup solution, power is stored in a battery and can be used during a power outage to power essential devices such as refrigerators,
communication devices, lighting, and AC outlets for anywhere from several hours to many days, depending on use of loads and available
sunlight during the outage.
EV
Chargers. SolarEdge sells EV chargers for residential applications which allow the homeowner to redirect excess PV energy to power
their electric vehicles. This enables consumer to increase their self-consumption of clean energy. The SolarEdge ONE smart energy optimization
system can be programmed to automatically charge the vehicle using the most advantageous and economical times and rates.
Smart
Energy Products. 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 for backup, backup interfaces
devices, smart meters, smart energy management devices (sockets, hot water controllers, wireless relay) and smart PV modules. This product
expansion has enabled us to increase average the revenue per installation, or ARPI.
Smart
Trackers. Our SolarGik smart PV tracker is optimized for installations on constrained and sloped terrains, eliminating the need
for costly grading and construction. Our trackers come with advanced software that is designed to optimize production, predict weather
changes, maximize bifacial gains and respond to remote commands. The tracker solutions are light weight, which allows them to be installed
not only in regular ground mount projects, but also on rooftops, greenhouses, carports and agricultural fields.
Smart
Energy Management. We have developed smart energy management software and capabilities that are offered with our hardware solutions
and enable system owners to store solar energy at cost-effective times, and also control the timing of their PV energy consumption in
order to increase their energy independence, take advantage of lower time-of-use rates, reduce electricity bills, and improve overall
system ROI.
In 2023,
we launched the SolarEdge Home smart energy ecosystem which enables homeowners to control and optimize their energy production, consumption
and storage with mySolarEdge app. SolarEdge Home manages the home’s production and usage 24 hours a day, 7 days a week through the
SolarEdge ONE energy optimization system which analyzes a variety of external and internal data to minimize electricity costs and maximize
savings. In addition to SolarEdge Power Optimizers, inverters and batteries, SolarEdge Home has capabilities enabling integration with
SolarEdge Home batteries, EV chargers, load controls and third party devices, to monitor and optimize the home energy production and usage.
The features are thus far available in the United States, in Germany and are being released elsewhere around the world over time.
3
In
addition, in April 2023, we completed the acquisition of all outstanding shares of Hark Systems Ltd. ("Hark"), a UK-based energy IoT company
for the commercial and industrial ("C&I") sector. Hark's platform is designed to enable commercial and industrial customers expanded
capabilities in energy management and connectivity, including identification of potential energy savings, detection of anomalies in assets’
energy consumption, and optimization of energy usage and carbon emissions through load orchestration and storage control.
SolarEdge
Software Solutions. We offer a variety of professional software tools to support the complete PV planning, installation, monitoring
and maintenance processes of our DC optimized inverter solutions:
Monitoring
Platform. The SolarEdge monitoring platform is a cloud-based monitoring platform which collects power, voltage, current and system
data sent from SolarEdge inverters and Power Optimizers and allows users to view the data for their SolarEdge site/s at the module level,
string level, inverter level and system level from most browsers and 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.
MySolarEdge
app. The mySolarEdge application enables system owners to 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 their mobile
phones.
Designer
platform. Our designer platform is a proprietary web-based tool that helps solar professionals plan, build and validate residential
and commercial systems from inception to installation.
Mapper
application. The mapper application provides SolarEdge installers with an efficient, streamlined process for registering the physical
layout of new PV sites installed with SolarEdge DC optimized inverter systems in the SolarEdge Monitoring Platform. Installers can use
the Mapper application to scan SolarEdge Power Optimizer and SolarEdge inverter barcodes, creating a virtual map of the PV site in the
monitoring platform which can later help facilitate remote diagnostics thereby enabling enhanced customer support and reducing maintenance
costs for installers and SolarEdge system owners.
SetApp
application.The SetApp application is used to activate and configure SolarEdge inverters
during commissioning directly through a smartphone, in order to simplify and expedite installations.
Grid
Services. As PV and storage continue 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 service
and reduction of grid infrastructure costs. SolarEdge grid services deliver near real-time aggregative control and data reporting, enabling
the pooling of distributed energy resources - photovoltaic systems, battery storage and electric vehicle chargers — in the cloud
for the creation of virtual power plants (VPP). The SolarEdge grid services and VPP solution provide management platforms to enable near
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
and participating in various electricity markets. In 2023, SolarEdge continued to sell grid services in the U.S., Europe and Australia,
including services provided to independent system operators, energy retailers, national installers and others.
Products
from Non-Solar businesses. The SolarEdge Energy Storage segment provides energy storage solutions which include battery cells,
modules, racks and containerized battery systems (BESS). The proprietary technology of our cells and batteries is manufactured and assembled
in our own facilities in South Korea, which have production capacity of 2GWh.
Our
lithium-ion technology packs high energy density into small footprints and supports high c-rate power throughputs, without compromising
the calendar and cycle life of the battery.
SolarEdge’s
ESS solutions are used in different fields, such as stationary energy storage (EV charging, utility, commercial or industrial), energy
storage in transportation (trains, trams and marine-based transportation), different engineering, procurement and construction projects
in the grid and C&I energy space, and more.
4
Product
Roadmap
Our
products in the solar segment 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 which supports our DC optimized inverter systems, batteries for PV applications, 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. We have launched H1300,
a Gen 4 based power optimizer, as a part of the SolarEdge 330kW inverter solution. This is our first optimizer equipped with high frequency
DC power line communications technology which allows communication with larger numbers of optimizers for ground mount applications as
well as improved remote software upgrade capabilities, allowing larger installations to support Ground Mount applications, as well as
improved remote upgrade. We are in the process of launching our fifth generation S1400 Series Power Optimizers. 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 Optimizer uses a single proprietary ASIC, thus reducing the total number of components in an electrical circuit and thereby
improving reliability.
Each
new ASIC generation reduces the number of components required for any given functionality, adds more functions to the Power Optimizer,
and meaningfully improves the efficiency of the Power Optimizer. 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 on further improving
our ASICs and releasing new generations of this improved 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 residential 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 with the introduction of new tools and features. This includes both professional web-based
software and system owner applications such as fleet management, the site designer tool, the mySolarEdge consumer applications, all of
which are offered to our install base as complimentary to the sales of our hardware solutions.
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 affect power
production in field systems. We further plan to add more capabilities through our public API to allow users to build and integrate our
system into their own systems and build and share useful applications based on monitoring data gathered by our software.
Batteries
for PV applications. 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. 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.We are developing new features and capabilities for the smart energy
management solutions, which are constantly evolving, such as our SolarEdge Home Local Controller, which will enable the homeowner to run
and manage their most energy-intensive devices on excess solar energy. We are also introducing smart energy management and fleet management
to 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.
5
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 over 140 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. Our products are carried and actively sold by most of the top solar PV distributors as well as the
largest electrical distribution companies. As of December 31, 2023, based on the number of installer accounts on our monitoring portal,
over 65,000 installers around the world have installed SolarEdge solar PV systems.
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.
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 2023, two of our customers, Memodo GmbH and Krannich Solar GmbH & Co. KG, represented 24.0% of our revenues. None of
our other customers accounted for more than ten percent of our revenues in the year ended December 31, 2023.
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 large installers and distributors
to help prioritize and track support issues, thereby enabling short cycle times for issue resolution.
In 2023,
we revamped our first level certification, SolarEdge Fundamentals Training, a comprehensive training course for installers, with up-to-date
installation methodologies and practices. During 2023, our training portal (Edge Academy) hosted over 222,000 learners.
Additionally,
in 2023, we enhanced our installer’s performance enablement by adding over 50 product-specific courses, as well as increasing accessibility
by creating a professional installation toolkit. During 2023, over 19,000 installers completed our certification programs.
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, Bulgaria, Brazil,
Taiwan, Thailand, South Africa, Philippines and Poland. 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, 2023, our customer support and training organization consisted
of 659 employees worldwide.
6
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 energy IoT 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 and control loops 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 real-time 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 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.
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 using scalable technology supporting a wide range of installation sizes, from
small residential to large commercial installations.
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.
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 the performance of 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.
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Our
DSP (ASIC) is also in charge of the power line communications ("PLC") networking link towards the optimizers. 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 several major passive components, such as magnetic
components, in order to decrease dependence on suppliers, improve component performance, reduce costs and have better control over our
production processes.
Batteries
for PV applications
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, or 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. Our power products, inverter, Power Optimizers and battery 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, thereby
reducing the rounding efficiency of PV generated power towards the AC loads.
Our
DC-coupled battery is designed to connect with our inverters, allowing 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.
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 “asset light” budget while
remaining flexible in our manufacturing operations and are able to enjoy the CM’s global reach and access to different manufacturing
regions. Our contract manufacturers are responsible for funding some of the the capital expenses incurred in connection with the manufacture
of our products, except with regard to some of the automated optimizer assembly lines, our proprietary 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 enjoy such manufacturers' global reach and access to different regions such as China and Vietnam,
where we are able to manufacture closer to target markets in Asia, as well as Hungary, closer to target markets in Europe, in each case,
potentially increasing responsiveness to customers while reducing costs and delivery times. 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 have begun manufacturing inverters in Texas and are currently establishing additional manufacturing capabilities in Florida for optimizers
and inverters. With the ramp-up of these new sites and due to a decrease in demand for our products, we have reduced capacity in our manufacturing
site in China and discontinued manufacturing of our products in Mexico.
In the
third quarter of 2020, we began commercial shipments from our own manufacturing facility in the North of Israel, “Sella 1". 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 expanded the manufacturing portfolio available for manufacturing in Sella 1.
In May
2022, we opened our own manufacturing facility, “Sella 2”, a 2GWh Li-Ion cell factory in Korea. “Sella 2” began
producing and shipping cells at the end of 2022 and is expected to gradually increase manufacturing capacity during 2024, slightly behind
the original plan. We also have an additional smaller lithium-ion cells and batteries facility in South Korea that has the capacity to
manufacture up to 150 MWh per annum.
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.
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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.
In light
of the Company’s decision to discontinue its LCV e-Mobility activity, we began ramping down manufacturing of e-Mobility components
in our facility in Umbertide, Italy, towards the end of 2023. We are still using this facility for Automation Machines, refurbishment
of batteries and support of the e-Mobility project.
Reliability
and Quality Control
Our
Power Optimizers are connected to each PV module by installers, and 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.
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, 2023 our research and development organization had a headcount of 1,525 employees.
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Intellectual
Property
The
success of our business depends, in part, on our ability to maintain and protect our proprietary technologies, information, processes,
and know-how. We rely primarily on patent, trademark, copyright and trade secrets laws in the U.S. and similar laws in other countries,
confidentiality agreements and procedures and other contractual arrangements to protect our technology. As of December 31, 2023, SolarEdge
had 602 issued patents worldwide and 528 patent applications pending for examination. A majority of our patents relate to DC power optimization
and DC to AC conversion for alternative energy power systems, power system monitoring and control, battery technology and management systems.
Our issued patents are scheduled to expire between 2024 and 2042.
We continually