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corresp

June 14, 2005

VIA OVERNIGHT CARRIER & EDGAR

Mr. Patrick N. Enunwaonye

Mr. Gary Todd

Division of Corporate Finance

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

    Re:
    Advanced Energy Industries, Inc. (the “Company”)

Form 10-K for the year ended December 31, 2004

Form 10-Q for the quarterly period ended March 31, 2005

File No. 000-26966

Dear Messrs. Enunwaonye and Todd:

Thank you for your letter of June 2, 2005 with your comments on the Company’s Form 10-K for the
year ended December 31, 2004 and Form 10-Q for the quarter ended March 31, 2005. We appreciate the
opportunity to address your comments. Set forth below are the responses of the Company.

Form 10-K for the year ended December 31, 2004

Comment #1: We see that you have significant revenues from foreign operations and an increasing
presence outside of the United States. In future filings, where significant, please quantify and
discuss the impact of changes in exchange rates on reported revenues and expenses.

Company response: The Company will consider on a quarterly basis the impact of changes in exchange
rates on reported revenues and expenses and, where significant, will quantify and discuss such
impact in future filings.

Comment #2: We see inventory write-downs of $11.3 million, $3 million and $5.8 million in 2004,
2003 and 2002, respectively. Please expand future filings to disclose more details about these
write-downs, including disclosure about the specific circumstances responsible for the impairment
for each period. In addition, disclose whether impaired inventory was sold, discarded or otherwise
disposed. Unless insignificant, you should also address the impact of any sales of impaired
inventory on margins.

Company response: In future filings, the Company will expand disclosure regarding inventory
write-downs to (a) provide greater detail, including the specific circumstances responsible for the
impairment for each period, (b) disclose whether impaired inventory was sold, discarded or
otherwise disposed and (c) unless insignificant, address the impact of any sales of impaired
inventory on margins.

Comment # 3: With respect to demonstration equipment, we see that you now expense the cost of such
equipment when placed with a potential customer while the cost of such equipment was previously
amortized over two years. In a supplemental response, tell us why you changed the accounting
method for this equipment and explain why the new method is preferable. Expand future filings to
identify and describe reasons for the change in more detail. How did your plan for current and
future use of demonstration equipment change?

Company response: For future filings, the Company will expand the disclosure of the change in
accounting for the demonstration equipment to identify and describe the reasons for the change in
more detail. The Company attaches Appendix A hereto, to provide additional information regarding
this change, as supplemental information to the Staff.

Comment #4: We note that you recorded impairment charges for intangible assets of $3.3 million,
$1.2 million and $1.9 million in fiscal 2004, 2003 and 2002, respectively. With respect to
impairment charges, please expand MD&A in future filings to include the following:

    a.
    A reasonably detailed description of the facts and circumstances leading to impairment;

    b.
    A description of the method and significant assumptions used to determine fair value;

    c.
    A discussion of the timing of the charge. This is, what specific events drove the impairment and when did those events occur?

Company response: In future filings, the Company will expand MD&A to include the requested
disclosure regarding impairment charges.

Comment #5: We see that the auditors’ reports do not express an opinion on the effectiveness of
internal control over financial reporting or management’s assessment thereof. The audit report on
internal controls should express a clear opinion and should not be qualified for scope. In a
supplemental response, identify the expected timing for completion of the audit of internal control
over financial reporting and management’s assessment thereof. Tell us when you plan to provide an
amended filing containing unqualified reports from your auditor.

Company response: As requested, the Company has provided its response supplementally, attached as
Appendix A hereto.

Comment #6: With respect to the tabular analysis, future filings should disaggregate the item
“payments and other settlements” to separately present payments from other settlements. The facts
and circumstances leading to non-cash adjustments to exit cost liabilities should be addressed in
the accompanying narrative. That is, you should make substantive disclosure about reasons for
changes in estimates.

Company response: In future filings, the Company will disaggregate the payments and the other
settlements in the tabular analysis of the restructuring reserves. The facts and circumstances
leading to non-cash adjustments to exit cost liabilities will be addressed in the accompanying
narrative.

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Comment #7: Please expand MD&A in future filings to present detailed disclosures about expected
and actual cost savings from restructuring activities. Refer to the disclosure guidance from SAB
Topic 5-P. Show us how you intend to implement this comment.

Company response: In future filings, the Company will expand MD&A to provide more detailed
disclosure regarding expected and actual cost savings from our restructuring activities, taking
into account the disclosure guidance provided by SAB Topic 5-P. An exemplar of future disclosure
implementing this comment is set forth in Appendix A as supplemental information to the Staff.

Comment #8: Please expand future filings to also present the long-lived asset disclosure specified
by paragraph 38b to SFAS 131.

Company response: In future filings, the Company will include the long-lived asset disclosure
specified by paragraph 38b to SFAS 131.

Comment #9: Expand future filings to disclose how you measured the fair values of the convertible
subordinated notes. We see the risk factor regarding repayment on page 11. Clarify whether and
how repayment risk is considered in your estimate of fair value. Refer to SFAS 107 for guidance.

Company response: In future filings, the Company will include disclosure as to how it measures the
fair values of the convertible subordinated notes and to clarify how repayment risk is considered,
in accordance with SFAS 107.

Form 10-Q for the Period Ended March 31, 2005

Comment #10: We see that gross margin in the first quarter of 2005 was positively impacted by cost
re-allocations. Please expand future filings to disclose why you re-allocated costs from costs of
sales to selling, general and administrative expense. Also clarify the nature of those costs and
explain why comparable reclassifications were not made to prior periods. Also respond
supplementally.

Company response: For future filings, the Company will review the identified cost re-allocations
and, in such future filings, will disclose the reasons for such cost re-allocations, the nature of
these costs and the reasons that comparable reclassifications were not made to prior periods. The
Company attaches in Appendix A hereto, as supplemental information to the Staff, additional
information regarding the cost re-allocations identified.

Form 8-K Dated April 21, 2005

Comment #11: You present non-GAAP measures in the form of a pro forma statement of operations.
That format presents numerous non-GAAP measures, including both balances and subtotals. With
respect to earnings releases furnished on Form 8-K, you must provide all of the disclosures
required by Item 10(e)(1)(i) of Regulation S-K for each non-GAAP measure presented. In that
regard, for each measure you should provide statements about how you use the measure in
conducting and evaluating your business, statements about why that measure provides useful
information to investors, and a quantified reconciliation to the most directly comparable GAAP
measure. Those disclosures should also address the economic substance behind management’s decision
to use each non-GAAP measure, the material limitations associated with use of each non-GAAP
financial measure as compared to the use of the most directly comparable

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GAAP financial measure, and the manner in which management compensates
for those limitations. Either delete the non-GAAP income statements from future press releases or
expand to fully comply with the requirement. Show us how you intend to implement this comment.

Company response: The Company does not intend to include non-GAAP financial statements or measures
in future press releases.

The Company acknowledges the following:

    •
    the Company is responsible for the adequacy and accuracy of the disclosure in the filings;

    •
    staff comments or changes to disclosure in response to staff comments in the filings reviewed by the staff do not foreclose the Commission from taking any action with respect
to the filing; and

    •
    the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

The Company believes that it has been responsive to your comments. If you have any questions or
need further clarification, please call me at (970) 407-6570.

    Sincerely,

/s/ Michael El-Hillow

    Michael El-Hillow

Chief Financial Officer

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APPENDIX A

SUPPLEMENTAL INFORMATION TO THE STAFF

Comment # 3: With respect to demonstration equipment, we see that you now expense the cost of such
equipment when placed with a potential customer while the cost of such equipment was previously
amortized over two years. In a supplemental response, tell us why you changed the accounting
method for this equipment and explain why the new method is preferable. Expand future filings to
identify and describe reasons for the change in more detail. How did your plan for current and
future use of demonstration equipment change?

Company response: Demonstration equipment is manufactured product that is utilized for sales
demonstration and evaluation purposes. Prior to the fourth quarter of 2004, the demonstration
equipment program was structured to provide our customers or potential customers with demonstration
equipment for them to evaluate and subsequently purchase our equipment, if such equipment met their
needs. Under this structuring of the demonstration equipment program, the Company amortized its
demonstration equipment based on its originally estimated useful life of two years.

During the fourth quarter of 2004, the Company performed an analysis of the existing demonstration
equipment program and determined that the program was not achieving the desired results, primarily
in terms of the ultimate sale of the demonstration equipment. Fewer sales than expected were being
made of the demonstration equipment as our major customers and a number of potential customers, who
had received the bulk of such equipment, typically took the position that such equipment should be
provided without charge, as a sample.

As a result, the effort to sell the demonstration equipment has essentially ceased and the focus of
the demonstration equipment program will be on achieving design wins with our major customers and
significant potential customers, with the demonstration equipment used solely as a sales and
marketing tool and with no subsequent efforts to sell the equipment.

Based upon the changes made to the demonstration equipment program, specifically the Company’s
decision not to expend resources to realize sales value from the demonstration equipment currently
in the field, the net book value of the equipment in the field no longer meets the definition of an
asset and therefore the Company wrote-off the net book value of the demonstration equipment. Going
forward, the Company changed the accounting treatment for the demonstration equipment to more
appropriately reflect the new focus of the program and the substance of the transactions. Now that
the demonstration equipment is being used solely as a sales and marketing tool it is expensed to
SG&A in the period in which it is given to our customer or potential customer.

In future filings, the Company will expand disclosures to include the above details.

Comment #5: We see that the auditors’ reports do not express an opinion on the effectiveness of
internal control over financial reporting or management’s assessment thereof. The audit report on
internal controls should express a clear opinion and should not be qualified for scope. In a
supplemental response, identify the expected timing for completion of the audit of internal control
over financial reporting and management’s assessment thereof. Tell us when you plan to provide an
amended filing containing unqualified reports from your auditor.

Company response: Currently, the Company’s independent auditor is working to complete its
evaluation of the Company’s internal control over financial reporting at December 31, 2004 and

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management’s assessment thereof, the results of which will be reflected in a new auditor’s report
that expresses opinions on both of such matters. The Company has directed its auditor to, and
understands that the auditor will, issue such report on or before July 29, 2005. Immediately
thereafter the Company will file an amendment to its Form 10-K to include the new report by the
auditor.

Comment #7: Please expand MD&A in future filings to present detailed disclosures about expected
and actual cost savings from restructuring activities. Refer to the disclosure guidance from SAB
Topic 5-P. Show us how you intend to implement this comment.

Company response: In future filings, the Company will expand MD&A to provide more detailed
disclosure regarding expected and actual cost savings from our restructuring activities, taking
into account the disclosure guidance provided by SAB Topic 5-P. The following illustrates how we
intend to expand our disclosures in future filings:

In conjunction with our continuing progress in transitioning our high-volume manufacturing
to Shenzhen, China, we recorded $3.7 million of restructuring charges in the fourth quarter
of 2004 and $___in the first ___months of 2005. These charges are primarily attributable
to employee severance and termination costs for ___employees in the Fort Collins facility
and ___employees in our European operations. These headcount reductions will be offset,
in part, by new hires in the Shenzhen, China facility.

Upon completion of the transfer of high-volume manufacturing from Fort Collins to Shenzhen,
China, the Company expects to save approximately $___annually in labor and related costs
at current production volumes, representing the reduced costs primarily in the U.S. offset
by increased costs in China. The expected savings is anticipated to be realized as to $___
in costs of sales, $___in SG&A and $___in research and development. Beginning in the
first quarter of 2006 and subsequent periods, the Company expects to begin to fully realize
these savings. The cash requirements of our restructuring plan are $___, of which $___has
been paid through ___, 2005. The expected remaining cash requirements of $___are primarily
for the remaining severance payments to be made by ___, 2005.

Facility closing charges were recognized under the restructuring program in 2002 for the
expected remaining future cash outlays associated with trailing lease liabilities and lease
termination payments in connection with plans to close certain leased facilities. The
remaining liability is expected to be paid over the remaining lease terms expiring through
the end of 2006 and is reflected net of expected sublease income of $___. Additional
charges and cash requirements may be required in the fut