Note 3. Revenue

We design, manufacture and service ion implantation and other processing equipment used in the fabrication of semiconductor chips and sell our products to leading semiconductor chip manufacturers worldwide. We offer a complete line of high energy, high current and medium current implanters for all application requirements. In addition, we provide extensive aftermarket lifecycle products and services, including used tools, spare parts, equipment upgrades, maintenance service and customer training. Our revenue recognition policies are set forth in Section (i) of Note 2, Summary of Significant Accounting Policies.

(a)

Alternative Operational Revenue Categories used by Management

To reflect the organization of our business operations, management reviews revenue in two categories: revenue from sales of new systems and revenue arising from the sale of used systems, parts and labor to customers who own systems, which we refer to as “aftermarket.”

Below are the revenues by categories used by management for the periods covered in this report:


	Year ended
	December 31,
	2019		2018		2017
	(in thousands)
Systems	$	202,571	$	280,388	$	262,688
Aftermarket		140,387		162,187		147,873
	$	342,958	$	442,575	$	410,561

(b)

Economic Factors Affecting our Revenue: Geographic Breakdown of Revenue

Global economic conditions have a direct impact on our revenue. We are substantially dependent on sales of our products and services to customers outside the United States. Adverse economic conditions, political instability, potential adverse tax consequences and volatility in exchange rates pose a risk that our clients may reduce, postpone or cancel spending for our products and services, which would impact our revenue.

Revenue by geographic markets is determined based upon the location to which our products are shipped and where our services are performed. Revenue in our principal geographic markets is as follows:


	Year ended
	December 31,
	2019		2018		2017
	(in thousands)
North America	$	36,206	$	54,790	$	59,825
Asia Pacific		251,020		326,191		296,481
Europe		55,732		61,594		54,255
	$	342,958	$	442,575	$	410,561

(c)

Recognition of Deferred Revenue from Contract Liabilities

Contract assets and contract liabilities are as follows:


	Year ended
	December 31,
	2019		2018		2017
	(in thousands)
Balance, beginning of the period	$	22,584	$	18,145	$	11,009
Deferral of revenue		24,403		17,284		16,658
Recognition of deferred revenue		(17,736)		(12,845)		(9,522)
Balance, ending of the period	$	29,251	$	22,584	$	18,145

Contract liabilities are reflected as deferred revenue on the consolidated balance sheet. Contract liabilities relate to payments received or amounts invoiced in advance of completion of performance obligations under a contract. Contract liabilities are recognized as revenue upon the fulfillment of performance obligations.

As of December 31, 2019, we had deferred revenue of $29.3 million. This represents the portion of the transaction price for contracts with customers allocated to the performance obligations that remain unsatisfied or partially unsatisfied. Short-term deferred revenue of $24.6 million as of December 31, 2019 represents performance obligations that will be satisfied within the next 12 months. This amount relates primarily to prepayments made prior to system delivery as well as to installation and non-standard warranty performance obligations for system sales. Long-term deferred revenue of $4.7 million as of December 31, 2019 relates primarily to extended warranty performance obligations that we expect to be completed within the next 24 months.

The majority of our system transactions have payment terms that are 90% due upon shipment of the tool and 10% due upon installation. Aftermarket transaction payment terms are such that payment is due either within 30 or 60 days of service provided or delivery of parts.