PART I ITEM 1. BUSINESS Vicor Corporation designs, develops, manufactures, and markets modular power components and systems, specializing in electrical power conversion, with a strategy focused on product differentiation Overview - Vicor designs, develops, manufactures, and markets modular power components and power systems for electrical power conversion9 - Products are categorized as 'Advanced Products' (proprietary Factorized Power Architecture, FPA) and 'Brick Products' (conventional power systems architectures)11 - Competition varies by market segment; Advanced Products compete with integrated circuits/semiconductor-based modules, while Brick Products compete with integrated power supply manufacturers12 Our Strategy The company's strategy emphasizes product differentiation, superior performance, design flexibility, and compelling total cost of ownership - Strategy focuses on product differentiation, superior performance, design flexibility, and compelling total cost of ownership (TCO)20 - Core competencies are associated with 48V DC distribution, offering cost and performance advantages24 - Strategic shift towards investing in Advanced Products for high-growth, low-mix, high-volume markets, while maintaining Brick Products in mature, high-mix, low-volume markets27 Our Products Vicor's product portfolio includes Advanced Products for high-performance computing and Brick Products for conventional power architectures Advanced Products - Advanced Products target high-performance computing, especially AI (GPUs, ASICs), focusing on high conversion efficiency, density, and power delivery2933 - Proprietary Factorized Power Architecture (FPA) improves efficiency and density by factorizing power conversion, particularly for 48V DC distribution3031 | Year | Percentage | | :--- | :--- | | 2021 | 47.4% | | 2020 | 35.8% | | 2019 | 28.6% | Brick Products - Brick Products are integrated power converters for conventional power architectures, emphasizing 'mass customization' for specialized applications3941 | Year | Percentage | | :--- | :--- | | 2021 | 52.6% | | 2020 | 64.2% | | 2019 | 71.4% | Customers and Backlog Advanced Products customers are concentrated in data center and hyperscaler segments, with a significant increase in backlog - Advanced Products customers are concentrated in data center and hyperscaler segments, particularly for AI applications44 - Strategic emphasis on larger, high-volume customers is expected to lead to greater sales concentration among relatively fewer customers44 | Year | Backlog (in thousands) | | :--- | :--- | | Dec 31, 2021 | $345,594 | | Dec 31, 2020 | $147,550 | Competition and Market Characteristics Vicor competes with large IDMs in Advanced Products and in a fragmented market for Brick Products, holding a significant share in 48V power distribution - Advanced Products compete with large integrated device manufacturers (IDMs) on performance differentiation, while Brick Products compete in a fragmented market on mass customization49 - Exports to China and Hong Kong were approximately $98.7 million (27.5% of total revenue) in 2021, an increase of 6.1% over 2020, partly due to Chinese government stimulus51 - Vicor believes it holds the largest share of 48V power distribution opportunities within the computing market segments it serves52 Marketing and Sales Sales channels include direct sales, independent representatives, and distributors, with direct sales focusing on high-volume Advanced Products opportunities - Sales channels include a direct sales force, independent sales representative organizations, and authorized distributors, supported by regional Technical Support Centers (TSCs)54 - Direct sales focus on higher-volume opportunities involving Advanced Products with global OEMs, often experiencing extended design cycles57 | Year | Amount (in thousands) | % of Revenues | | :--- | :--- | :--- | | 2021 | $46,602 | 13.0% | | 2020 | $43,396 | 14.6% | | 2019 | $43,387 | 16.5% | Manufacturing, Quality Assurance, and Supply Chain Management Manufacturing is primarily at the Andover, Massachusetts facility, which is expanding for Advanced Products, while the global supply chain faced COVID-19 impacts - Manufacturing primarily occurs at the Andover, Massachusetts facility, which is undergoing a 90,000 square foot expansion for Advanced Products production, including vertical integration of proprietary electroplating processes62636465 - The global electronics supply chain was impacted by the COVID-19 pandemic in 2021, leading to extended lead times and increased component pricing, which prompted the company to increase its own prices4668 | Year | Amount (in thousands) | Change YoY | | :--- | :--- | :--- | | 2021 | $6,678 | -8% | | 2020 | $7,259 | - | Intellectual Property Intellectual property is protected by patents covering fundamental technologies, converter architectures, product packaging, and manufacturing processes - Intellectual property is protected by patents covering fundamental switching topologies, converter architectures, product packaging, and manufacturing processes72 - As of December 31, 2021, the company held 121 issued U.S. patents with expirations scheduled between 2022 and 203873 | Year | Amount (in thousands) | % of Revenues | | :--- | :--- | :--- | | 2021 | $53,114 | 14.8% | | 2020 | $50,916 | 17.2% | | 2019 | $46,588 | 17.7% | Human Capital Management Vicor employs over 1,000 full-time employees globally, offering competitive compensation, benefits, and development programs - Employs 1,027 full-time employees globally as of December 31, 2021, with 924 in the U.S. and 103 internationally77 - Compensation program includes competitive base salary, benefits (life and health insurance, paid time off, 401(k) with company match), and non-qualified stock options to align employee and stockholder interests79 - Supports employee development through in-house training and tuition reimbursement, and engages in community initiatives8081 Available Information The company's website serves as a comprehensive resource for SEC filings, corporate governance documents, and product information - Company's website (www.vicorpower.com) serves as a resource for SEC filings (10-K, 10-Q, 8-K), corporate governance documents, and product information83 ITEM 1A. RISK FACTORS Vicor faces operational, competitive, intellectual property, regulatory, and share value risks, including supply chain disruptions, intense competition, infringement claims, compliance costs, and stock price volatility Operational Risks Operating results are subject to fluctuations from demand changes, supply chain issues, product mix transitions, and competition, with COVID-19 exacerbating these challenges - Operating results are difficult to predict and subject to fluctuations due to factors like changes in demand, supply chain management, product mix transition, and competition8788 - The COVID-19 pandemic negatively influenced financial and operational performance, causing widespread delays in production and delivery, and impacting customer demand9198 | Year | Amount (in thousands) | % of Annual Revenue | | :--- | :--- | :--- | | 2021 | $6,678 | 1.9% | | 2020 | $7,259 | 2.4% | | 2019 | - | 2.0% | Competitive Risks Vicor competes with larger companies possessing greater resources and faces risks from new technologies, aggressive pricing, and customer acceptance of its innovative products - Competes with many companies possessing far greater
Vicor(VICR) - 2021 Q4 - Annual Report