19 Jan 2011
The top-tier LED maker missed its revenue target in the latest quarter, but remains confident of a strong market in the long-term.
Cree, one of the world’s leading LED manufacturers, has posted sales of $257 million in its second fiscal quarter of 2011. Although that figure was strongly up on the equivalent period of last year, it represented a drop from $268.4 million in the preceding quarter, and well below the North Carolina company’s forecast of $270 million-$280 million.
CEO Chuck Swoboda explained away the decrease by citing lower sales in Asia, resulting from temporary difficulties within the local supply chain. "We are managing through an inventory correction in Asia in the near term, but the opportunity in LED lighting has not changed,” said Swoboda. “Quarterly revenue increased 29% year-over-year and based on the market trends we are seeing, and the success of our own LED lighting business, we are more confident that we will see continued adoption of LED lighting over the next several years.”
That outlook is backed up by a preliminary analysis for this year’s LED market from IMS Research. Its forecasters now believe that the 2010 packaged LED market will turn out to have been worth some $10.2 billion – a remarkable 67% increase on 2009 that represents the largest annual revenue increase ($4.1 billion) in the history of the LED market.
The rapid growth is only partly attributed to the use of LEDs in LCD television backlights. According to analyst Jamie Fox at IMS, the TV application accounted for about half of the overall market growth seen in 2010. The other half resulted from increased traction in backlights for notebook PCs and monitors, as well as a significant contribution from general lighting applications.
General lighting player
Cree does not claim to play a major role in the backlighting market, and is more focused on the general lighting space – as recent deployments of its LEDs in the Denny’s restaurant chain across the US demonstrates.
Following the record growth pattern in 2010, IMS is expecting something of a slow-down this year, saying: “The boom year of 2010 is not likely to be repeated again as mature markets return to a flatter or steadier growth level, and backlighting markets saturate.” It now predicts total LED market growth of 25% in 2011, although that will still represent a market expansion worth more than $2.5 billion if correct.
By 2013, all backlighting applications are expected to be close to saturation, at which point general lighting will take over as the key growth application for LEDs. With that on the horizon, IMS Research suggests that some consolidation among LED makers is possible. Like Cree, it sees a huge long-term opportunity for LEDs across the full range of general lighting applications. But, for the shorter term, it predicts:
“With general lighting excluded, LED revenue will decline after 2013 due to price erosion, more efficient LEDs (meaning less are required) and market saturation. The next few years could therefore be a challenging period for some manufacturers in the LED industry, possibly leading to some consolidation.”
For its forthcoming fiscal quarter, Cree offered a modest revenue outlook, forecasting between $245 million and $265 million in sales and pointing to a flat quarter. For Cree and the other leading LED makers, the major growth opportunity of general lighting remains a couple of years out.
• Cree shares were down 12% at around $55 in early trading following the company's financial results announcement.
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