Cree expands LED product portfolio with new joint venture

LED lighting company Cree is expanding its market opportunities by forming a joint venture with a Chinese company to produce lower-cost, mid-power LEDs.

Durham-based Cree will own 51 percent of the new business, Cree Venture LED Company, which it is forming with San’an Optoelectronics, and also will receive royalties for its patent portfolio. The venture will be in Hong Kong.

Cree CEO Chuck Swoboda told analysts during a conference call that the joint venture won’t affect the company’s Durham manufacturing operation where it churns out high-power LEDs, which has been Cree’s focus.

“For us it’s an opportunity to expand the LED portfolio that our components team is selling and expand the number of customers we can sell to,” Swoboda said.

Mid-power LEDs are used for a broad range of indoor and outdoor lighting applications.


High-power LEDs are best for applications where the beam of light is focused on a specific area, such as stadium lights, while mid-power LEDs are used primarily in instances where the light is evenly dispersed over a wide area, Mike McDevitt, Cree’s chief financial officer, said in an interview. Cree brand light bulbs use both high-power and mid-power LEDs.

The market for mid-power LEDs is about $4 billion a year, versus about $1.8 billion for high-power LEDs, McDevitt said.

The joint venture “combines Cree’s technology leadership, sales channel and IP (intellectual property) with San’an’s tremendous manufacturing scale,” Swoboda said. Initial products sales are anticipated in the first half of Cree’s next fiscal year that begins at the end of June.

Cree also announced Tuesday that revenue for its fiscal third quarter that ended March 26 totaled $342 million, down 7 percent from a year ago.

Adjusted net income totaled $749,000, or 1 cent per share, down from $17 million a year ago. However, adjusted net income would have been $11 million, or 11 cents per share, if not for charges associated with the termination of the sale of Cree’s Wolfspeed subsidiary. The proposed sale to Germany-based Infineon collapsed after the U.S. government raised objections on grounds of national security.

Of Cree’s three main businesses, Wolfspeed was the only one that expanded its revenue in the quarter. Its revenue totaled $56.1 million, up 29 percent from a year ago, accounting for 16 percent of Cree’s total revenue.

Wolfspeed’s power components are used in computer servers and uninterruptible power supplies and for solar energy. Its RF transistors and integrated circuits are used in radar and telecommunications systems.

Cree’s lighting products revenue fell 18 percent to $154 million, hampered by quality control problems with drivers from an outside supplier. Drivers regulate the power to LEDs.

That problem was corrected in the previous quarter but “it affected our win rate in the near-term for new projects,” McDevitt said. “Now it’s about building (those win rates) back up.”

David Ranii: 919-829-4877, @dranii