LED lighting revolution on track at Cree

11 Aug 2010

Leading chip developer reports that sales of LED lighting components have doubled in the past year.

The past year has witnessed a huge increase in sales of LED lighting components at Cree, the US company has confirmed.

Reporting the LED chip manufacturer’s latest financial results, CEO Chuck Swoboda said: “Fiscal 2010 was a great year for Cree and the LED lighting revolution.” During the year, Cree’s overall revenues leapt 53% on the fiscal 2009 figure, reaching a record high of $867 million, with the company also posting net income of $152 million.

As the company closes in on a billion-dollar annual run-rate, sales for LED lighting applications in particular are exploding, and more than doubled in the past 12 months.

LED-based lamps are now beginning to hit the regular residential market, with Swoboda noting that the major US retailer Home Depot was now taking online orders for its Cree-produced LED downlights.

The 65 W-equivalent “EcoSmart” LED lamp sold by Home Depot, which consumes only 10 W of electrical power, is based on Cree’s CR6 downlight product. Production of that lamp is currently ramping up, in advance of broad market release in the coming quarter.

Though momentum in the lighting market is strong, Swoboda acknowledges that there is still a long way to go before LEDs really start to make an impact. “In the context of the overall lighting industry, we are still just getting started,” said the CEO.

One of the main reasons for that is the price of LED lighting, which remains much costlier than competitive technologies. For example, the Home Depot LED downlight retails at $49.95 – comparing with just over $12 for a two-pack of 65 W-equivalent compact fluorescent lamps (CFLs). However, those CFLs consume 16 W each, making them 60 percent more expensive to run than an equivalent LED lamp.

Optics + Photonics
The key to further penetrating the general lighting market relies on improving the cost-performance ratio of LED lamps. At the recent SPIE Optics + Photonics event in San Diego, Jeffrey Tsao from Sandia National Laboratories highlighted the challenges still facing developers of the technology.

Tsao highlighted the combination of up-front capital costs (the purchase price of a lamp) and the ongoing operating costs (power consumed by the lamp) as the key influence on consumer buying. With LED lamps still 8-10 times more expensive than an equivalent CFL, this currently outweighs their 60 percent lower operating cost to a large extent.

But Tsao expects that, at the current rate of improvement, LED lamps will overtake CFLs as the best lighting option in two years’ time: “The transition begins in 2012, this will be the ‘magic’ year,” Tsao said in his San Diego plenary talk.

Cree is preparing for that anticipated breakthrough by stepping up its manufacturing capacity accordingly. One key factor is a transition to LED production on 6-inch wafers, rather than the current 4-inch size used. Last week, substrate maker Rubicon announced that it had received the first major order for 6-inch sapphire wafers used in LED production, indicating a wider shift to the larger format. Cree mostly produces on silicon carbide wafers.

Cree’s recent patent agreement with rival LED maker Philips Lumileds, which was partly designed to reassure the market that LED lighting will not be beset by legal wrangles, is seen as another important step in the move to widespread acceptance of solid-state lighting technology.

• Update: Shares in Cree tumbled by more than 10 percent in value in early trading on August 11, as investors reacted badly to Cree's guidance for Q1 of fiscal 2011. The company said it expected a sequential increase in revenues to between $270 million and $280 million.