927003--2/27/2009--ADVANCED_ENERGY_INDUSTRIES

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We are exposed to risks as a result of ongoing changes specific to the solar industry. The industries in which we compete are volatile and unpredictable, We have transferred and continue to transfer the production of substantially all of our product lines to our manufacturing facility in Shenzhen, China, and may experience unforeseen difficulties and challenges with these operations. We might not realize all of the intended benefits of transitioning our supply base to Asian suppliers. A significant portion of our sales is concentrated among a few customers. Market pressures may reduce or eliminate our profitability. Raw material, part, component and subassembly shortages, exacerbated by our dependence on sole and limited source suppliers, could affect our ability to manufacture products and systems and could delay our shipments. Our orders of raw materials, parts, components and subassemblies are based upon quarterly demand forecasts. We generally have no written long-term contracts with our customers requiring them to purchase any specified quantities from us. If we are unable to adjust our business strategy successfully for some of our product lines to reflect the increasing price sensitivity on the part of our customers, our business and financial condition could be harmed. The markets in which we operate are highly competitive. Our competitive position could be weakened if we are unable to convince end users to specify that our products be used in the equipment sold by our customers. Our products may suffer from defects or errors leading to damage or warranty claims. We must achieve design wins to retain our existing customers and to obtain new customers, although design wins achieved do not necessarily result in substantial sales. We are subject to risks inherent in international operations. We are subject to risks related to holding cash, cash equivalents and marketable securities in foreign countries. Unfavorable currency exchange rate fluctuations may lead to lower operating margins, or may cause us to raise prices, which could result in reduced sales. Changes in the value of the Chinese yuan could impact the cost of our operation in Shenzhen, China. We are highly dependent on our intellectual property. We have been, and in the future may again be, involved in litigation. Litigation is costly and could result in further restrictions on our ability to conduct business or an inability to prevent others from using technology or make use of market relationships we have developed. Funds associated with auction rate securities that we have traditionally held as short-term investments may not be liquid or readily available. Our goodwill and intangible assets may become impaired. Changes in tax rates, tax liabilities, or utilization of our deferred tax assets could materially affect our results. We are subject to numerous governmental regulations. The market price of our common stock has fluctuated and may continue to fluctuate for reasons over which we have no control. Our Chairman of the Board owns a significant percentage of our outstanding common stock, which could enable him to influence our business and affairs and future sales of our common stock by our Chairman of the Board may negatively affect the market price of our common stock. The loss of any of our key personnel could significantly harm our results of operations and competitive position.

Full 10-K form ▸

927003--2/27/2009--ADVANCED_ENERGY_INDUSTRIES_INC