CREE, Inc.
4600 Silicon Drive
Durham, NC 27703
Phone: +1-919-3135300
www.cree.com
by Natasha Lamb, MBA
Lighting consumes 22 percent of the electricity generated in the US and CREE, Inc. (NYSE—CREE), the leader in LED technology, is tackling this inefficiency head on. In fact, the Department of Energy estimates that LED adoption could lead to power savings equivalent to 27 one-gigawatt coal-fired power plants.
LEDs are a game changer and the only real innovation in lighting in over 100 years. Their environmental and cost saving profile includes inherent advantages over incandescent and compact fluorescent bulbs, including enhanced efficiency, lifespan, and more ecologically sound materials. LEDs are 90 percent more efficient than incandescents, last 20 times longer, and do not contain mercury, a hazard present using and recycling CFLs. The short 1-2 year payback justifies higher their upfront cost.
With only 1 percent penetration in the $40 billion worldwide lighting industry, demand for LED technology is growing and Cree’s high quality LEDs are steadily gaining share. In 2008, demand for LED lighting applications grew 39 percent, fueled by government support, the replacement market, and legislation banning incandescent bulbs. The US Energy Independence and Security Act of 2007 has phased out incandescent bulbs in Federal buildings, while Australia has restricted imports of inefficient bulbs. The Chinese government intends to install 4M LED streetlights in the next two years, for which Cree is a supplier.
LED backlight applications are also driving Cree’s growth. LED notebooks and TVs are more energy efficient, thinner, and boast better performance. LED TV penetration is expected to increase from three to 39 percent in the next five years.
Cree is expected to grow earnings 19 percent on a long-term annual basis, while earnings are forecasted to increase 80 percent in 2009 thanks to production efficiencies. Cree’s strong cash position, at $4/share, and lack of debt will boost growth further as the company makes strategic acquisitions.
