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REVENUE

12 Months Ended

Dec. 31, 2020

NOTE 3. REVENUE

Revenue Recognition

We recognize revenue when we have satisfied our performance obligations which typically occurs when control of the products or services has been transferred to our customers. The transaction price is based upon the standalone selling price. In most transactions, we have no obligations to our customers after the date products are shipped, other than pursuant to warranty obligations. Shipping and handling fees billed to customers, if any, are recognized as revenue. The related shipping and handling costs are recognized in cost of sales. Support services include warranty and non-warranty repair services, upgrades, and refurbishments on the products we sell. Repairs that are covered under our standard warranty do not generate revenue.

Nature of goods and services

Products

Advanced Energy provides highly engineered, mission-critical, precision power conversion, measurement, and control solutions to our global customers. We design, manufacture, sell and support precision power products that transform electrical power into various usable forms. Our power conversion products refine, modify, and control the raw electrical power from a utility and convert it into power that is predictable, repeatable, and customizable.

Our products enable thin film manufacturing processes such as plasma enhanced chemical and physical deposition and etch for various semiconductor and industrial products, industrial thermal applications for material and chemical processes, and specialty power for critical industrial technology applications. We also supply thermal instrumentation products for advanced temperature measurement and control in these markets. As a result of the Artesyn acquisition, we now sell precision power conversion products into the Telecom and Networking, Data Center Computing (including hyperscale), and Industrial and Medical markets.

Our products are designed to enable new process technologies, improve productivity, and lower the cost of ownership for our customers. We also provide repair and maintenance services for all our products. We principally serve OEMs and end customers in the semiconductor, flat panel display, high voltage, solar panel, Telecom and Networking, Data Center Computing, Industrial and Medical markets. Our advanced power products are used in diverse markets, applications, and processes including the manufacture of capital equipment for semiconductor device manufacturing, thin film applications for thin film renewables and architectural glass, and for other thin film applications including flat panel displays, and industrial coatings. Our embedded power products are used in a wide range of applications, such as 5G, data center (including hyperscale) and other industrial and medical applications.

Services

Our services group offers warranty and after-market repair services in the regions in which we operate, providing us with preventive maintenance opportunities. Our customers continue to pursue low cost of ownership of their capital equipment and are increasingly sensitive to the costs of system downtime. They expect that suppliers offer comprehensive local repair service and customer support. To meet these market requirements, we maintain a worldwide support organization in ten countries, including the United States, the PRC, Japan, Korea, Taiwan, Germany, Ireland, Singapore, Israel, and Great Britain. Support services include warranty and non-warranty repair services, upgrades, and refurbishments on the products we sell.

As part of our ongoing service business, we satisfy our service obligations under preventative maintenance contracts and extended warranties which had previously been offered on our discontinued inverter products. Any up-front fees received for extended warranties or maintenance plans are deferred. Revenue under these arrangements is recognized ratably over the underlying terms as we do not have historical information which would allow us to project the estimated service usage pattern at this time.

In May 2019, we sold our grid-tied central inverter repair and service operation to a third party. In connection with this sale, approximately $22.0 million of deferred revenue related to extended warranties and service contracts, were transferred to the buyer. See Note 4. Disposed and Discontinued Operations for additional information in relation to this sale. We have deferred revenue related to our extended warranties and service contract totaling $8.7 million as of December 31, 2020 and $9.2 million as of December 31, 2019. We are expected to recognize this revenue ratably through year 2031.

Disaggregation of Revenue

The following table presents our sales by product line, inclusive of both products and services, which includes certain reclassification to prior comparative periods to conform to our current year presentation:


		Years Ended December 31,
		2020			2019			2018
Semiconductor Equipment		$	611,864		$	403,018		$	533,770
Industrial and Medical			313,646			245,992			185,122
Data Center Computing			322,539			91,438			—
Telecom and Networking			167,777			48,500			—
Total		$	1,415,826		$	788,948		$	718,892

The following table presents our sales by geographic region:


		Years Ended December 31,
		2020					2019					2018
North America		$	687,814		48.6	%	$	373,634		47.4	%	$	372,834		51.8	%
Asia			606,893		42.9			295,155		37.4			250,574		34.9
Europe			117,990		8.3			119,427		15.1			94,793		13.2
Other			3,129		0.2			732		0.1			691		0.1
Total		$	1,415,826		100.0	%	$	788,948		100.0	%	$	718,892		100.0	%

The following table presents our net sales by extended warranty and service contracts recognized over time and our product and service revenue recognized at a point in time:


		Years Ended December 31,
		2020			2019			2018
Product and service revenue recognized at point in time		$	1,414,982		$	786,918		$	715,055
Extended warranty and service contracts recognized over time			844			2,030			3,837
Total		$	1,415,826		$	788,948		$	718,892