Gamatronic has a relatively small revenue market share in the global UPS industry, but it has a strong presence in its home market of Israel. Gamatronic operates in many of the same markets as SolarEdge, including the United States, Europe, Latin America, and Africa. It is also active in China, where SolarEdge has historically had a limited presence.
Although the acquisition is expected to close by the end of the second quarter of 2018, SolarEdge indicated that the deal will have a limited positive impact on its revenue this year. However, future synergies between UPS, energy storage, and virtual power plant applications have the potential to generate long-term revenue growth for the company.

IHS Markit's analysis of
SolarEdge shows it continues to expand its solar inverter business as it accelerates diversification into new business models.
Historically, SolarEdge has focused primarily on residential and small commercial systems, which benefited from higher average inverter prices due to a smaller price premium compared to inverters servicing larger systems. In 2017, SolarEdge was the fourth-largest global solar inverter supplier by revenue and the 13th largest by shipment volume. While the company has a global presence, it has been particularly successful in becoming the leading supplier of residential systems in the United States, a key reason for its success to date.
From 2018 to 2022, inverter prices are forecast to decline at a compound annual growth rate (CAGR) of -6 percent. Competition is expected to increase globally in these segments as Huawei, Ginlong, Sungrow, Goodwe, and many other Chinese suppliers expand, and SMA, Fronius, Enphase, ABB, and other Western suppliers continue to upgrade their inverter portfolios.
Despite intense competition, SolarEdge has been able to increase its market share and expand into new territories, such as India. As it develops partnerships with leading inverter suppliers in Japan (e.g., Omron) and other conservative markets, the company knows it needs to diversify and create new growth opportunities. Although SolarEdge was one of the first companies to enter energy storage, electric vehicle (EV) charging, energy services, virtual power plant (VPP) development, and other high-potential markets, it is clear that some of these areas will take time to bear fruit.
The agreement to acquire Gamatronic marks the first time SolarEdge has tapped into its substantial cash reserves, which reached $400 million in the first quarter of 2018. Furthermore, SolarEdge has indicated its intention to expand into other industries, including smart meters and energy management.

The UPS market is ripe for disruption, as synergies abound.
With this in mind, SolarEdge's acquisition of Gamatronic has brought the company into the UPS industry, which has been a relatively stable market over the past decade. Its revenues are similar to the photovoltaic inverter market, and there is some overlap in terms of power conversion architecture. Many of the leading UPS vendors are also the same large multinational industrial players that SolarEdge has competed against since its inception.
Gamatronic's flagship product is its modular UPS topology (i.e., scalable, rack-based power modules), a rapidly growing sub-segment of the market, particularly in Europe and Asia. SolarEdge expects to increase its presence and market share in the UPS market by leveraging its sales and marketing capabilities and the scale of its existing power conversion business.
Furthermore, the UPS market has some overlap with the behind-the-meter energy storage market for residential systems, in which SolarEdge has been active for several years. While lead-acid batteries are currently the primary form of backup energy storage, lithium-ion batteries are now being used in UPS systems, a technology in which SolarEdge has expertise. As the adoption of this technology continues, the flexible chemistry of lithium-ion batteries will allow UPS systems to play a role in VPP applications, such as peak smoothing and frequency regulation. SolarEdge's history of technical innovation suggests that it has identified an opportunity to leverage these synergies.

SolarEdge Doubles Its Potential Market
Despite strong growth in PV inverter shipments, price pressures are slowing revenue growth, resulting in a relatively flat outlook. This situation has forced suppliers to seek ways to expand. UPS systems, likewise, represent a stable revenue market. Overall, the acquisition of Gamatronic will quickly double SolarEdge's total addressable market (TAM) to over $15 billion in 2018, enabling it to maintain its high growth rate as it seeks to replicate its success in the PV inverter market and apply it to the UPS market.

SolarEdge doubles its total addressable market

Despite strong growth in PV inverter shipments, price pressures are slowing revenue growth, resulting in a relatively flat outlook. This situation has prompted suppliers to explore ways to expand. UPS systems are also a stable revenue market. Overall, the acquisition of Gamatronic will quickly double SolarEdge's total addressable market (TAM) to over $15 billion in 2018, enabling it to maintain its high growth rate as it seeks to replicate its success in the PV inverter market and apply it to the UPS market.
SolarEdge doubles its total addressable market

By Cormac Gilligan, research manager, solar and energy storage for IHS Markit, and Lucas Beran, analyst, data center infrastructure for IHS Markit