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Item 1. Business

2021-02-19 compared with 2020-02-27 · 151 added, 167 removed, 284 unchanged (53% of the section changed)

Established in 2006, SolarEdge developed a DC optimized inverter solution that changed the way power is harvested and managed in photovoltaic, known as PV systems.

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 providing comprehensive and advanced safety features, improved design flexibility, and improved operating and maintenance, or O&M with module-level and remote monitoring.

The typical SolarEdge optimized inverter system consists of our inverters, power optimizers, a communication device which enables access to a cloud based monitoring platform and in many cases, additional smart energy management solutions.

Additional benefits of the DC optimized inverter system include comprehensive and advanced safety features, improved design flexibility, and improved operating and maintenance, or O&M, with module-level and remote monitoring.

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, additional smart energy management solutions.

Our solutions address a broad range of solar market segments, from residential solar installations to commercial and small utility‑scale solar installations.

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By leveraging world-class engineering capabilities and with a relentless focus on innovation, SolarEdge now offers energy solutions which include not only residential, commercial, and large scale PV systems but also product offerings in the areas of energy storage systems, or ESS, and backup, electric vehicle, or EV components and charging capabilities, home energy management, grid services and virtual power plants, lithium-ion batteries and uninterrupted power supply, known as UPS solutions.

Our technology and system architecture are protected by 179 awarded patents and 247 patent applications filed worldwide as of December 31, 2019.

We also have protection for some of our battery-related technology through Kokam with 151 awarded patents and 5 pending applications.

In addition, we have patents related to our e-mobility solutions through SMRE and its subsidiary I.E.T spa with 18 awarded patents and 14 patent applications world-wide.

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 (“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 with our power optimizer physically embedded into their modules.

The PV industry is surveyed by IHS, Market, an analytics company, that ranked SolarEdge as the top PV inverter supplier world-wide, by revenues and the top single phase PV inverter supplier world-wide based on MegaWatt shipments, as of their published “IHS PV Inverter Market Tracker Q3, 2019”.

The PV industry is surveyed by IHS Markit, an analytics company, that ranked SolarEdge as the top PV inverter supplier world-wide, by revenues, the top single phase PV inverter supplier world-wide based on MegaWatt shipments, and the top inverter supplier for the residential market world-wide as of their published “IHS PV Inverter Market Tracker - Fourth Quarter 2020”.

As of December 31, 2020, we have shipped in the aggregate approximately 65.3 million power optimizers and 2.7 million inverters.

More than 1.9 million PV installations, many of which may include multiple inverters, are currently connected to and monitored through, our cloud-based monitoring platform.

As part of our non-organic growth, we have completed three acquisitions during 2018 and 2019, each of which address our growth in the area of smart energy technology and power optimization.

In July 2018, we acquired the assets of a business for the development, manufacturing and sale of UPSs, for the aggregate amount of $12.1 million.

We purchased substantially all of the assets of Gamatronic Electronic Ltd.’s (“Gamatronic”), including its intellectual property, brand and tangible assets.

In October 2018, we also purchased the shares of Gamatronic (UK) Limited, a UK wholly owned subsidiary of Gamatronic responsible for the sale of these UPS products in the UK for approximately $1.0 million, net of cash acquired (jointly the “Gamatronic Acquisition”).

In October 2018, we closed an acquisition (the “Kokam Acquisition”) of 74.5% of Kokam Co., Ltd.

(“Kokam”), a provider of Lithium-ion cells, batteries and energy storage solutions for approximately $82.5 million USD, net of cash acquired.

Since the Kokam Acquisition and to date, we have increased our shareholdings in Kokam to 100% at a cost of approximately $21 million.

Headquartered in South Korea, Kokam was founded in 1989, and has been manufacturing lithium-ion cells and providing reliable, safe, high-performance solutions for the past twenty-nine years.

Kokam provides battery solutions for a wide-variety of industries, including ESS, UPS, EV, and the marine market.

In January 2019, we completed the acquisition (the “SMRE Acquisition”) of a majority stake (approximately 57%) of S.M.R.E.

Spa (“SMRE”) for a total of approximately $73 million, net of cash acquired, out of which approximately $42 million was paid in cash and approximately $35 million was paid in shares of SolarEdge common stock.

Since the SMRE Acquisition and as of December 31, 2019, we have increased our shareholdings in SMRE to approximately 99.9% at a cost of approximately $67 million.

Founded in 1999 and headquartered in Italy, SMRE provides innovative integrated powertrain technology and electronics for light goods vehicles and light commercial vehicles, as well as for e-motorcycles .

SMRE has more than fifteen years of experience developing end-to-end e-Mobility solutions for electric and hybrid vehicles used in motorcycles, commercial vehicles and trucks.

These solutions include integrated, high-performing powertrains with e-motor, motor drive, gearbox, battery, BMS, chargers, vehicle control unit sand software for electric vehicles.

Limitations of Traditional PV System Technologies and the Value Proposition of Our Optimized Inverter Technology

Historically, the solar PV industry used traditional string and central inverter architectures to harvest PV solar power.

However, traditional inverter architectures result in energy losses as well as systemic challenges in design flexibility, safety, and monitoring.

Over the years, microinverter technology was introduced in an attempt to resolve these challenges, but this technology has certain inherent limitations.

We believe that our DC optimized inverter system, consisting of an inverter and distributed power optimizers, best addresses all of these challenges.

Our system allows for superior power harvesting and module management relative to traditional inverter systems by deploying power optimizers at each PV module while maintaining a competitive system cost by keeping the AC inversion and grid interaction centralized using a simplified DC‑AC inverter.

The entire system is monitored through our cloud‑based monitoring platform that enables reduced system O&M costs.

Our system enables each PV module to operate at its own maximum power point, known as MPP, rather than a system‑wide average, enabling dynamic response to real‑world conditions, such as atmospheric conditions, PV module aging, soiling and shading and offering improved energy yield relative to traditional inverter systems.

In addition to higher efficiency, our system’s installed cost per watt is competitive with traditional inverter systems of leading manufacturers and generally, lower than comparable microinverter systems of leading manufacturers.

Furthermore, our architecture allows for complex rooftop system designs, reliability and enhanced safety capabilities which meets applicable safety regulations, known as rapid shutdown in the United States.

Traditional Inverter Architecture .

A solar PV system consists of PV modules, which produce direct current (“DC”) power when exposed to sunlight;

an inverter, which transforms the DC power into alternating current (“AC”) power that is required by the electricity grid;

and associated cabling, fuse boxes and mounting hardware.

Traditionally, solar PV systems connected strings of solar PV modules to one or more inverters for this energy conversion.

Traditional inverter architecture still constitutes the vast majority of the PV inverter market, especially for larger commercial and utility installations.

However, traditional inverter architecture suffers from significant inefficiencies leading to suboptimal power generation.

These challenges include:

Module mismatch.

Traditional inverter systems are unable to consistently produce maximum energy from PV modules.

Each PV module in a system has a unique power production profile driven by differences in manufacturing and installation parameters.

The architecture of traditional inverter systems does not allow each PV module to operate at its unique MPP.

When PV modules are wired in series in a traditional inverter architecture, the entire string’s output is reduced, sometimes correlated directly to the output of the lowest‑performing PV module on the string.

Output reduction can result from subtle variations in PV module composition, atmospheric conditions, soiling, individual PV module locations and orientations, or varying levels of PV module degradation over time.

Partial shading.

Many real‑world factors can cause a subset of the PV modules in a system to be partially shaded, which can significantly affect the power output of the entire string.

For instance, electric wires, a chimney or even adjacent solar panels may cast a shadow during particular hours of the day, or debris may accumulate.

This partial shading reduces the yield of a traditional solar PV system by decreasing, or in extreme cases eliminating, power output from the shaded modules.

Overall losses to system production from such partial shading can range from small to substantial.

Dynamic maximum power point tracking loss.

The MPP of a PV module shifts constantly throughout the day as a result of atmospheric conditions.

A traditional inverter system’s inability to coordinate output on a module‑by‑module basis makes it difficult for the system to respond dynamically to the shifting MPP.

This inability to respond to the shifting MPP can reduce the potential power output of a traditional solar PV system by 3‑10%.

In addition to power losses, the traditional inverter architecture also has system design, installation and operational challenges, including:

Rooftop system design complexities.

A traditional inverter system requires each string to be of the same length, use the same type of PV modules and be positioned at the same angle toward the sun.

Consequently, rooftop asymmetries and obstructions result in either wasted roof space or inefficient duplication of system components.

Safety hazards.

Traditional inverter systems cannot shut down the DC output voltage at the PV module level.

The DC cables from these modules carry high voltages as long as the sun is shining, even when the traditional inverter or the grid connection has been shut down.

This poses serious risks to installers, fire fighters and anyone else who performs work on or around the installation.

Such safety hazards have recently prompted heightened safety installation and operation procedures and regulations in a growing number of geographies, compliance with which increases the cost of traditional PV systems.

No module level monitoring.

A traditional inverter system cannot track power output, temperature or any other attribute of a single PV module.

Consequently, a system operator cannot perform remote diagnostics, track performance of PV system components or receive alerts about individual PV module status, and may be unaware of specific module‑level problems or breakdowns.

The first generation of module level power electronics (“MLPE”) was the microinverter.

This technology scaled down the traditional inverter to a size and power appropriate to a single PV module.

By creating control and monitoring at the module level, microinverters solved certain challenges of the traditional inverter system architecture.

However, microinverter architecture has its own limitations, such as:

Higher initial cost per watt and limited economies of scale.

Microinverters perform all the functionality of the traditional inverter, but at each PV module, and consequently a microinverter system has a higher initial upfront cost of components relative to traditional inverter architecture.

In addition, as every PV module must have its own microinverter, the cost per watt of a microinverter system does not decrease with scale.

As such, microinverters are generally more expensive than traditional inverter systems on a cost per watt basis for residential installations and not economically viable relative to traditional inverter systems for large commercial and utility installations.

Energy Storage.

PV solar energy systems are increasingly being paired with batteries either to offer backup functionalities due to grid instability or to provide increased self-consumption with the evolution of subsidies.

This is leading to the inverter becoming an important factor in managing and controlling energy storage.

Batteries store energy only in its DC form, but due to their architecture, standard string inverters and microinverters require multiple inversions from DC to AC and then back to DC power before storing energy into the battery.

This not only results in energy loss during the conversion process, but also means the inverter acts as a bottleneck and limiting factor for energy storage.

Grid Code Compliance.

With the growing penetration of solar energy, many utilities in individual U.S.

states and Europe have adopted new sets of grid codes to preserve the stability of the electric grid.

These grid codes require solar PV inverters to respond dynamically to variances in grid‑wide voltage, which typically requires inverter hardware and software to be reengineered.

In most cases, adaptation to these new grid codes would require added costs and complexities, limiting the ability of microinverters to address some markets.

The SolarEdge Solution.

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Additional smart energy features and hardware that can be added to our solution includes a battery pack for storage of energy and a home energy automation system which enables greater savings for the system owner.

The key advantages of our solution include:

The key advantages of our solution over a traditional string inverter PV system include:

Maximized PV module power output.

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One such example is inverter-enabled charging and discharging of batteries as part of a virtual power plant to help manage the load on the grid and grid stability.

Our PV Products Offering

Our PV Solar Products Offering

SolarEdge began its commercial sales with a product offering of a simplified inverter, 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 allow EV charging, smart meters, smart energy devices (sockets, water heater controllers, wireless relay) and smart PV modules.

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 allow EV charging, smart meters, smart energy devices (sockets, water heater controllers, wireless relay) and smart PV modules.

This product expansion has enabled us to increase average revenue per installation, or ARPI.

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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 as well as third party inverters to provide power optimization.

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, 2017, the year ended December 31, 2018 and the year ended December 31, 2019 revenues derived from the sale of power optimizers represented 47.3%, 46.1% and 44.5% of total revenues, respectively.

During the year ended December 31, 2019 and the year ended December 31, 2020, revenues derived from the sale of power optimizers represented 44.5% and 42.9% of total revenues, respectively.

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.

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.

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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 our second generation of inverters which come in two models:

a one‑phase inverter designed to address the residential market (1 kilowatt (“kW”) to 11.4 kW) which includes our HD-Wave technology and our newly introduced inverter-integrated electric vehicle (EV) charger and a three‑phase inverter designed to address the residential market in certain European countries and the commercial market (4 kW to 100 kW).

In June 2017, we introduced an extended commercial solution that consists of various inverters, sized 55kW, 82.5kW, and 100kW.

In 2019, we announced the development of a 120kW three phase inverter with synergy technology that is designed to enable quick and easy installation and inventory management.

These inverters are designed for commercial installations, reduce the number of required inverters and increase the system return on investment.

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 100 kW).

Our single-phase inverters support a range of smart energy capabilities.

In 2020, we launched our EnergyHub inverter and home backup solution for the U.S.

residential market.

The EnergyHub contains built in consumption monitoring, embedded revenue-grade production metering and integrated arc fault protection and rapid shutdown and is ready for a battery.

In Europe, we launched our three-phase grid-tied inverter with battery storage.

We also introduced our new commercial three-phase 120kw inverter with Synergy technology with 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, 2017, the year ended December 31, 2018 and the year ended December 31, 2019 revenues derived from the sale of inverters represented 47.9%, 44.5% and 43.9% of total revenues, respectively.

During the year ended December 31, 2019 and the year ended December 31, 2020 revenues derived from the sale of inverters represented 43.9% 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.

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.

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StorEdge Solutions.

Our StorEdge solution is a DC coupled solution that is used to increase energy independence and maximize self-consumption for homeowners by utilizing a battery which is sold separately by third party manufacturers, to store and supply power as needed.

Our StorEdge solution is an on-grid solution that is used to increase energy independence and maximize self-consumption and backup capabilities for homeowners by utilizing a battery to store and supply solar power as needed.

The solution is based on a single inverter for both solar PV and storage.

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Existing SolarEdge systems can be upgraded to our StorEdge solution.

We recently announced the upgrading of our StorEdge inverter by transitioning to HD-Wave technology and providing a new backup interface.

HD-Wave StorEdge is expected to launch by the end of the first quarter of 2020.

The new StorEdge inverter is designed to support connection to backup generators or up to three StorEdge inverters with each DC coupled to two batteries.

In the first quarter of 2020 SolarEdge launched a new backup StorEdge interface that raises available backup power and eliminates pre-defining loads for simplified energy management.

Our StorEdge inverter with HD-Wave technology and backup interface is designed to support connection to backup generators or up to three StorEdge inverters with each inverter DC coupled to two batteries.

In the first quarter of 2020, we launched a new backup StorEdge interface that raises available backup power and eliminates pre-defining loads for simplified energy management.

SolarEdge Software.

We offer a variety of professional software tools from system design to monitoring:

Our “Designer app”

Our “Designer platform”

is a free web-based tool that helps solar professionals to plan, build and validate our residential and commercial systems from inception to installation.

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is used to activate and configure SolarEdge inverters during commissioning directly through a smartphone.

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 any browser or from most smart phones and tablets.

In 2020 we launched the mySolarEdge application that enables system owners to easily track their real-time system production and household energy consumption, as well as view their inverter status for quick troubleshooting from their mobile phones.

The monitoring software continuously analyzes data and flags potential problems.

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This model creates an opportunity for new interconnected and decentralized energy networks offering improved grid reliability and stability, new energy services 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, electric vehicle chargers, and loads —

in the cloud for the creation of virtual power plants.

SolarEdge grid services deliver near real-time aggregative control and data reporting, enabling the pooling of distributed energy resources such as photovoltaic systems, battery storage, electric vehicle chargers, and loads, in the cloud for the creation of virtual power plants.

The SolarEdge grid services and VPP solution provides 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 APIs are used by utilities for countering peak demand events.

In 2020, SolarEdge generated 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.

Our core product roadmap is divided into five categories:

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.

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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.

In June 2017, we unveiled our fourth generation power optimizer which uses fourth generation ASIC and incorporates a new safety mechanism for PV systems.

In 2021, we expect to launch our fourth generation power optimizer which uses fourth generation ASIC that will provide higher efficiency and incorporates a new safety mechanism for PV systems including connector level fault detection.

In addition, we are also continuing to develop the necessary subsystems for the fifth generation ASIC which will be used in our fifth generation power optimizer.

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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 inverter roadmap includes both new products as well as additional capabilities for existing inverters.

Our inverter roadmap is intended to serve three purposes:

(i) expand addressable market 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 without changing the existing enclosure, thereby reducing the actual cost per watt and increasing economies of scale and (iii) improve ease of installation by integrating additional functionality required in certain installations in order to reduce costs of additional hardware and subcontractors’

(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 and (iii) improve ease of installation by integrating additional functionality required in certain installations in order to reduce costs of additional hardware and subcontractors’

We continue to expand our software offering with introduction of new tools and new features to our current tools.

This includes both professional web-based software and system owner applications such as the site designer application and the mapper application.

This includes both professional web-based software and system owner applications such as the fleet management, the site designer tool, 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.

Specifically, we plan to increase data compression in order to enable support for a rapidly increasing number of field systems while using low‑cost equipment.

In addition, we plan to improve our reporting systems and enable users to obtain self‑generated customized reports.

Specifically, we plan to improve our reporting systems and enable users to obtain self‑generated customized reports.

We also expect to expand algorithms that detect and pinpoint problems that can affect power production in field systems.

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Energy Storage.

We are working to continue to expand our third-party battery compatibility for the residential market, while also developing our own batteries for both the residential and C&I market segments.

We are working to continue to expand our on-grid and backup offering for the residential market including by introducing our own home battery which is expected to launch during the second quarter of 2021, while also developing our own battery for the commercial market segment.

Smart Energy Management

Our smart energy suite controls PV production, energy storage and grid interaction, and is designed to automatically use excess PV power to increase self-consumption of solar energy and reduce energy bills and carbon footprints.

The suite controls electrical loads such as, pool pumps, fans, lighting and other home appliances, is able to divert solar energy to heat water and also includes several accessories such as a smart energy socket and smart energy switch.

Our smart energy management offering manages and controls PV production, home consumption, storage, home generator and grid interaction, and 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 several accessories such as a smart socket, 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.

Products from Acquisitions

During the year ended December 31, 2018, we expanded our product offering by completing the Gamatronic Acquisition and the Kokam Acquisition and in January 2019, we further expanded our product offering by completing the SMRE Acquisition.

This allows us to offer a variety of products and solutions in addition to the SolarEdge solution, in adjacent markets.

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

During the year ended December 31, 2018, we expanded our product offering by completing the acquisition of the assets of a business for the development, manufacturing and sale of uninterrupted power supply or UPSs (“Critical Power”) as well as the acquisition of Kokam Co., Ltd.

(“Kokam”), a provider of Lithium-ion cells, batteries and energy storage solutions.

In January 2019, we further expanded our product offering by completing the acquisition of approximately 99.9% of SolarEdge Automation Machines SPA (“SolarEdge Automation Machines”) and its wholly owned subsidiary SolarEdge eMobility SPA (“SolarEdge e-Mobility”) (formerly S.M.R.E Spa and I.E.T Spa, respectively).

SolarEdge Automation Machines manufactures automated machinery for industrial applications and SolarEdge e-Mobility develops, manufactures and sells end-to-end e-Mobility solutions for electric and hybrid vehicles used in motorcycles and light commercial vehicles.

These acquisitions allow us to offer a variety of products and solutions in addition to the SolarEdge solution, in adjacent markets.

UPS products .

Our UPS business has offered power protection solutions for power dependent and critical applications around the world for almost five decades.

The UPS product offering includes a full range of UPS and power supply solutions for use in various applications including datacenters, communications, defense, healthcare, industrial, financial, marine, transportation, government and, retail.

The products include Modular UPS solutions ranging from 10 kW to 1.2 MW, modular power systems for the telecommunications market, modular DC/AC inverters, modular DC/DC converters and different control and management solutions.

Our Critical Power product offering includes a range of UPS and power supply solutions for use in various applications including datacenters, communications, defense, healthcare, industrial, financial, transportation, government and, retail.

The products include modular UPS solutions ranging from 10 kW to 1.2 MW, modular power systems for the telecommunications market, and different control and management solutions.

In the year ended December 31, 2020, we launched our advanced three-phase modular product family to the U.S.

market with an offering for both 208V and 480V targeting industrial, health and IT/data centers applications.

Lithium-ion batteries and related products .

Founded in 1989, Kokam, develops premium lithium-ion battery cells, batteries and energy storage solutions .

Kokam’s patented cell manufacturing technology allows us to provide energy solutions of improved performance, safety, and reliability which can integrate with a wide-variety of industries, including Energy Storage Systems known as ESS, UPS, EVs, aerospace and marine.

We have plans to expand our manufacturing capabilities of cells and batteries by building a new factory in South Korea.

Founded in 1989, Kokam, develops, manufactures and sells premium lithium-ion battery cells, batteries and energy storage solutions.

This year we began development of an additional factory in Korea for the manufacturing of 2GW of cells which is expected to be completed in the first half of 2022.

Products for e-Mobility .

Through the SMRE Acquisition, SolarEdge has added to its product offering e-Mobility, automated production machines and telematics software.

Through the acquisition of SolarEdge e-Mobility and SolarEdge Automation Machines, SolarEdge added to its product offering components for e-Mobility, automated production machines and telematics software.

These solutions include innovative powertrain technology integrated with the gearbox, engine, battery, BMS, software, electronics and batteries for light goods vehicles, light commercial vehicles and e-motorcycles.

In the year ended December 31, 2020, we delivered full electrical powertrain kits which consist of batteries, inverters, motor and a vehicle control unit for pre-production validation by an automotive manufacturer and expect to ramp delivery of additional powertrain kits in 2021.

We recently announced that we were selected and will begin to supply full electrical powertrain units and batteries for the production of the Fiat E-Ducato light commercial vehicle.

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 synergy opportunities.

Sales and Marketing Strategy

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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, including the U.S., Canada, Germany, Italy, Poland, Brazil, the Netherlands, the United Kingdom, Israel, Australia, Japan, Singapore, India, Taiwan, Korea, South Africa, Belgium, France, and China.

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.

In the U.S., Germany, Italy, the United Kingdom, and Australia, our products are carried and actively sold by most of the top solar PV distributors as well as the largest electrical distribution companies that are active in solar PV.

In the U.S., Germany, Italy, the Netherlands, Poland and Australia, our products are carried and actively sold by most of the top solar PV distributors as well as the largest electrical distribution companies that are active in solar PV.

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.

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We also sell our power optimizers pre-installed onto several PV modules for manufacturers that offer PV modules with our power optimizer physically embedded into their modules.

Additionally, 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 show them how best to design, sell, and implement our technology in their projects.

Our battery business strategy focuses on combining Kokam’s technology with our residential and commercial solar products and using any remaining manufacturing capacity for transactions that combine our batteries and solar products in the ESS market.

In the near future we intend to further integrate our batteries into the UPS market.

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 this activity was converted to on-line platforms during 2020 to enable continued training, education and marketing during the global pandemic such as the SolarEdge first Global Virtual Solar Show and additional virtual roadshows.

Our battery business strategy focuses on utilizing Kokam’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, e-mobility, marine and other applications.

In the future we intend to further integrate our batteries into the UPS products and our other applications.

Our Customers

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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 2019, we conducted approximately 308 training events in 26 countries, with an aggregate of approximately 7,851 attendees.

We offer a wide variety of training, including hands‑on and on‑demand video sessions and online product and training materials.

We support our commercial system customers with design consulting throughout their sales process and installation.

Our technical support organization includes local expert teams, call centers mainly in the U.S., Australia, Japan, India, Israel and Bulgaria, an online service portal and live chat service.

In 2020, as COVID-19 related lockdowns made in-person training events impractical in many countries, we adjusted our training methodologies to a hybrid approach combining hands-on and digital learning techniques.

As a result, we were able to significantly increase our overall training reach, with approximately 900 training events (both in-person and digital) attracting approximately 58,000 participants from 90 countries.

This year we introduced the EDGE Academy, an intuitive web-based learning portal that aims to help SolarEdge installers improve their installation skills and minimize installation time.

Using digital-learning, installers can complete a certification program in one of 12 available languages to become a certified SolarEdge installer.

Each program is valid for two years.

Since its launch in the fourth quarter of 2020, over 8,700 installers worldwide have successfully completed the training program, becoming certified SolarEdge installers.

In addition to over 200 new product training videos published on our YouTube channel in 2020 in multiple languages, we have also developed new mobile learning tools that improve the ability of our installers to quickly and efficiently install our products.

Over the past year, more than 11,000 SolarEdge installers have increased their technical know-how and enhanced their installation techniques by using these tools, which were designed to assist them specifically at the time of system installation.

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, call 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.

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Customer service and satisfaction continues to be a key component of our business and we consider it integral to our success in the future.

We maintain high levels of customer engagement through our call centers in California, Australia, Japan, Israel and Bulgaria.

We maintain high levels of customer engagement through our call centers in California, Australia, Japan, Israel, India and Bulgaria.

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.

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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.

Our inverter is 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 allowing for long, uneven, and multi‑faceted strings while also enabling custom, cost–efficient, and reliable inverter design and component selection.

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 allowing for long, uneven, and multi‑faceted strings 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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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.

In 2020, we developed and manufactured 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.

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.

Manufacturing

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(“Flex”).

By using contract manufacturers rather than building our own manufacturing infrastructure, we are able to access advanced manufacturing equipment, processes, skills and capacity on a “capital light”

By using contract manufacturers, we are able to access advanced manufacturing equipment, processes, skills and capacity on a “capital light”

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.

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, potentially increasing responsiveness to customers while reducing costs and delivery times.

During the year ended December 31, 2019 we opened a new manufacturing site in Vietnam which is expected to reach full production capacity in the second quarter of 2020.

In July 2017, we executed a long term lease agreement for 10,000 square meters in Israel, intended for the establishment of a manufacturing facility for the production of product prototypes, manufacturing and the development of proprietary manufacturing and testing equipment.

The facility is anticipated to reach full production capacity in the third quarter of 2020.

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 the third quarter of 2020, we began commercial shipments to the U.S.

of optimizers and inverters from our manufacturing facility located 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 world-wide.

We expect Sella 1 manufacturing levels to continue to increase until the second quarter of 2021 when we expect Sella 1 to reach full manufacturing capabilities.

We have developed propriety automated assembly lines for the manufacturing of our power optimizers.

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Our Korean subsidiary, 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 is being constructed to meet the growing global demand for Li-Ion batteries, specifically in the energy storage system (ESS) and e-mobility markets.

Sella 2 is expected to begin operation in the first half of 2022.

SolarEdge e-Mobility has a manufacturing and assembly facility in Umbertide, Italy for our e-Mobility division.

Reliability and Quality Control

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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, on-line reliability tests (ORT) are conducted on our optimizers and we test complete products in stress tests and in the field.

We also conduct out of box audits (OBA) on our finished products.

In addition, on-line 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.

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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, and software engineering.

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 team have expertise in solar technologies.

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As of December 31, 2020, SolarEdge had 363 issued patents, world-wide and 354 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, and management systems.

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 2021 and 2039.

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Our customers and business partners are required to enter into confidentiality agreements before we disclose any sensitive aspects of our technology or business plans.

The markets for our solar products are competitive, and we compete with manufacturers of traditional inverters and manufacturers of other MLPE.

The markets for our solar products are competitive, and we compete with manufacturers of traditional inverters, as well as manufacturers of other MLPE systems.

The principal areas in which we compete with other companies include:

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total cost of ownership;

PV module compatibility and interoperability;

reliability and duration of product warranty;

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size of installed base.

Recent market trends show an increased focus on safety features in rooftop installations, and the emergence of standards that are evolving to address such concerns.

In particular, the arc fault detection and interruption (AFCI) and rapid shutdown (RSD) standards in the US market, have led to the introduction of module-level rapid-shutdown devices from our competitors.

We believe the existence of rapid shutdown capabilities built into our optimizers positions us well in this regard, and could serve as a competitive advantage.

Additionally, in 2020 we have seen PV module manufacturers introduce larger PV modules with higher power levels reaching over 600W.

This market trend, which comes as a result of PV cell manufacturers introducing larger cell sizes such as M10 and M12 as well as different module build configurations, leads to market interest in higher power rating optimizers, micro inverters, and other MLPE devices.

The increasing demand for storage and battery solutions is an additional noteworthy market trend which is expected to increase the attachment rate of storage to PV installations in the coming years.

Our DC optimized inverter system competes principally with products from traditional inverter manufacturers, such as SMA Solar Technology AG, ABB Ltd.

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In the UPS market, our UPS products compete with products and solutions from global UPS providers such as Schneider Electric, Eaton and Vertiv.

The vehicle e-Mobility market is dominated primarily by significant manufacturers, such as Robert Bosch GmbH, ZF Friedrichshafen AG, Dana Incorporated and Magna International.

The vehicle e-Mobility component market is dominated primarily by manufacturers such as Robert Bosch GmbH, ZF Friedrichshafen AG, Dana Incorporated and Magna International.

As the global e-Mobility market expands, major automotive manufacturers, such as Toyota, Honda, Tesla, General Motors, and Ford, have increased their investments in the electric and hybrid vehicle components in order to increase their market share.

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government bodies, provide incentives to owners, end users, distributors, and manufacturers of solar PV systems to promote solar electricity in the form of rebates, tax credits, lower VAT rate and other financial incentives such as system performance payments, payments for renewable energy credits associated with renewable energy generation, and exclusion of solar PV systems from property tax assessments.

The market for on‑grid applications, where solar power is used to supplement a customer’s electricity purchased from the utility network or sold to a utility under tariff, often depends in large part on the availability and size of these government subsidies and economic incentives, which vary by geographic market and from time to time.

In general, the amount and availability of these incentives and subsidies to encourage the development of solar PV energy have been declining and are expected to continue to decline.

Import Tariffs

Escalating trade tensions between the United States and China have led to increased tariffs and trade restrictions, including tariffs applicable to some of our products.

In January 2018, a tariff on imported solar modules and cells was adopted in the United States.

The tariff, which does not apply directly to our products, except possibly with respect to power optimizers that are embedded onto solar panels in China, was initially set at 30%, with a gradual reduction over four years to 15%.

In addition, in July 2018, a 10% tariff on a long list of products imported from China, including inverters and power optimizers was adopted in the United States under Section 301 of the Trade Act of 1974, and became effective on September 24, 2018.

In June 2019, the U.S.

trade representative (“USTR”) increased the rate of such tariffs from 10% to 25%.

As of June 2019, the U.S.

trade representative (“USTR”) imposed import tariffs of 25% on a long list of products imported from China, including inverters and power optimizers.

On January 15, 2020, the United States and China entered into an initial trade deal, which preserves the 2018 tariffs and indicates additional sanctions may be imposed if China breaches the terms of the deal.

In order to mitigate the negative effect of increased tariffs, in the third quarter of 2019 we raised the price of our products sold in the U.S.

Despite the price increases, the tariffs had a net negative effect on our gross margins.

In response to the increased tariffs, we increased our manufacturing capabilities at our Vietnam manufacturing facility during the fourth quarter of 2019, and we expect to continue to increase the capacity during 2020.

In order to mitigate the negative effect of increased tariffs, we increased our manufacturing capabilities at our Vietnam manufacturing facility beginning in the fourth quarter of 2019 and throughout 2020.

We also began manufacturing in Sella 1.

As of December 31, 2020, the majority of our products being imported to the U.S.

are manufactured in Vietnam, Israel and Hungary and are therefore not subject to the aforementioned tariffs.

The solar energy market is subject to seasonal and quarterly fluctuations affected by weather.

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where the climate is particularly cold and snowy, it is typical to see a decline in PV installations and this decline can impact the timing of orders for our products.

Sustainable, Responsible and Transparent Business Practices

In 2020, we made significant progress in our Environmental, Social and Governance (ESG) performance and disclosure.

We published our newly articulated social purpose:

“To power the future of energy so we can all enjoy better living and a cleaner, greener future.”

This is supported by our social mission:

“Shaping the future of sustainable energy production, energy storage and e-mobility through innovation”, our core values of innovation, excellence and integrity and a comprehensive sustainability strategy with 2025 targets in several areas.

Our second annual Sustainability Report, published in 2020, meets the requirements of leading global sustainability disclosure standards, GRI (Global Reporting Initiative) and SASB (Sustainability Accounting Standards Board) aligning our disclosure with leading corporations around the world and with the expectations of investors and other stakeholders.

Our sustainability strategy, includes three pillars:

Powering Clean Energy :

Accelerating the uptake of clean energy, delivering new smart energy, innovative solutions and improving the lifecycle impacts of our products.

In 2020, we estimated that the cumulative sustainability impact of SolarEdge’s systems, based on 16.2 GW of optimized inverter systems shipped worldwide, translates into the prevention of 12.6 million metric tons of greenhouse gas emissions equivalent to powering 2.1 million homes with electricity for a full year, every year.

In 2019, we supplied PV inverter systems equivalent to supplying annual electricity consumption for more than 737,000 homes, delivering an estimated avoidance of 4.4 million metric tons of greenhouse gas emissions annually.

Powering People:

Maintaining leading responsible employment practices, upholding human rights and investing in communities.

In 2020, we increased our workforce to support SolarEdge’s business growth, and maintained responsible employment practices, including a focus on safety.

We published a new position on Human Rights and contributed to our communities in line with our commitment to donate to causes that support technology education and other social causes in areas in which we have a presence.

Powering Business:

Maintaining and reinforcing ethical conduct throughout our value chain, advancing climate resilience, improving the efficiency of our resource consumption and ethical sourcing of raw materials and components.

In 2020, we published our Approach to Environmental Stewardship and Climate Resilience and commenced the process of lifecycle analysis of our key products.

Our sustainability strategy aligns directly with 10 United Nations Sustainable Development Goals (SDGs), and our products and activities are most critical to achievement of SDG #7, Affordable Clean Energy.

Supporting our sustainability strategy are 10 measurable ESG targets that we commit to delivering by 2025.

Human Capital

We believe our success depends on our ability to attract and retain outstanding employees at all levels of our business.

As of December 31, 2020, we had 3,174 full‑time employees.

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Of our employees, 1,675 were based in Israel, 398 were based in Korea, 224 were based in the U.S., 180 were based in China, 235 were based in Italy, and an additional 462 were based elsewhere.

Except for our SMRE employees and the employees of its subsidiary IET, none of our employees are represented by a labor union.

Except for our SolarEdge Automation Machines employees and the employees of SolarEdge e-Mobility, none of our employees are represented by a labor union.

We have not experienced any employment-related work stoppages, and we consider relations with our employees to be good.

As a rapidly growing business, we rely on the success of our recruitment efforts to attract and retain technically skilled people who can support our ongoing innovation and expansion.

We aim to be inclusive in our hiring practices focusing on the best talent for the role, welcoming all genders, nationalities, ethnicities, abilities and other dimensions of diversity.

Employee benefits:

We aim to provide our employees with competitive salary and benefits that enable them to achieve a good quality of life and plan for the future.

Our benefits differ according to local norms and market preferences, but typically include all salary and social benefits required by local law (including retirement saving programs, paid vacation and sick leave) and many additional benefits that go beyond legal requirements in local markets.

Leadership, Training and Development:

We aim to provide our employees with advanced professional and development skills so that they can perform effectively in their roles and build their capabilities and career prospects for the future.

We maintain a leadership program for managers and team leaders and deliver advanced professional training for sales, research and development and other functional teams as part of our extensive training program each year.

Diversity, Equity and Inclusion:

During the past three years, we have more than doubled the total number of women in our organization, adding women at all levels.

We are striving to increase the presence of women in executive and management positions as part of our 2025 target to promote gender parity and equal pay.

Workplace safety:

We believe that all accidents and injuries at work are preventable and we aim to ensure a zero-injury culture across our offices and operations.

We comply with applicable occupational health and safety regulations and are certified to Occupational Health and Safety Quality Management Standard ISO 45001:2018.

Our injury rates are low.

Corporate Information

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What changed 10-K

Item 1. Business