That's using 65,536 as the maximum number of rows a worksheet can have, and 256 as the maximum number of columns. If you don't expect that much of sheet1 to be used, you can use lower values.

In fact, you can select the region of sheet1 you need to check, name it (Insert | Name | Define) and use that name in the formula, redefining the area it covers as necessary:
Of course, this only works if "x" is the only character in a cell.