We continue to expand our product portfolio to grow our addressable market and provide more products to our key customers where we are already an approved or preferred supplier.
We have a broad exposure to the Healthcare, Industrial and Technology markets. Our customers are manufacturers of capital equipment and their end markets all exhibit different degrees of cyclicality. Generally, the Technology markets are most cyclical but it is clear that the long-term growth prospects for technology are robust. Healthcare is our least cyclical sector with Industrial lying between Technology and Healthcare.
We have a diverse customer base of over 4,500 customers that we deal with directly and many more customers serviced through our distribution channels which have been growing strongly in recent years.
The diversity of our business is a significant strength with no single customer exceeding more than 11% of revenue. Further, there is no single dominant player in the markets we address due to the diversity of customer requirements.
We have no direct exposure to consumer products.
We estimate that XP Power has a 7% share of its addressable global market (excluding RF Power).
North America is a significant market for power electronics with many large customers, particularly in Technology and Healthcare.
The European market is much more fragmented than North America or Asia. In particular it contains numerous smaller industrial companies as well as a number of larger medical companies.
Although Asia is a large market, much of it is not readily available to XP Power. Although XP Power has a factory in China the regulations require our product to be exported and re-imported into China. This means we are at a tax and duty disadvantage to local manufacturers who are generally competing on cost. We are able to service customers who demand high quality and reliability and who value the engineering solutions and support we provide.
Following the acquisition of Comdel in September 2017 we now have RF Power products in our portfolio which significantly increases our addressable market. We believe the market for RF Power to be approximately US$800 million. This presents a significant opportunity for long-term growth.
* Share is based on annualised revenue
Source: MicroTech Consultants 2017 Report and management estimates
Industrial Revenue (£ millions)
Reported revenues from industrial customers grew 10% in 2017. There appears to have been a broad recovery in the Industrial markets. Industrial is the most fragmented sector we deal in and very few of our top 30 accounts are industrial companies despite the fact that Industrial makes up 39% of our total revenues in 2017.
Healthcare Revenue (£ millions)
Reported revenue from healthcare customers grew 35% in 2017. This growth was driven by a number of new programmes entering the production phase from a collection of accounts. We have built a compelling offering for healthcare customers due to our product focus in this area and excellent service and support. Medical customers also value the high efficiency products which can operate without the need for fan cooling. This has a number of benefits but importantly make the power system much more reliable as it has no moving parts.
Technology Revenue (£ millions)
Reported revenues from technology customers grew by 56% in 2017. This growth was aided by the acquisition of Comdel in September 2017 which contributed £4.1 million of revenue in 2017. Without Comdel, technology still grew 44% due to very strong performance from a number of semiconductor equipment manufacturers. Semiconductor equipment manufacturing customers contributed US$37.3 million (2016: US$20.8 million ) of revenue in 2017.
Revenue by geography is set out as follows expressed in US Dollars to highlight the underlying trends in North America and Asia and Sterling in Europe.
North America Revenue (US$ millions)
North America revenues grew by 29% in 2017. The growth was driven by strong performance from semiconductor equipment manufacturers and new healthcare programmes entering production. The acquisition of Comdel also contributed US$5.4 million of revenue in 2017.
Europe Revenue (£ millions)
European revenues grew 16% on a reported basis. Europe benefitted from a general recovery in the Industrial sector plus a number of new medical programmes entering the production stage.
Asia Revenue (US$ millions)
Asia revenues grew by 18% in 2017. Asia growth was fuelled by programmes in the Healthcare and Industrial sectors.