CREE: The Lights Are On

The global movement to energy-efficient lighting is prompting lighting companies and consumers to look at other options. Therefore, lighting will be the strongest end market for Cree, Inc. (CREE - Analyst Report), likely followed by video displays and notebooks. Yield improvements, higher capacity utilization, larger wafers and offshore production will increasingly offset new product ramp up costs. The LED market is hot in our opinion, and the LLF acquisition opens up new opportunity.

With the signing of the energy bill in December 2007, the U.S. government has decided to ban inefficient light bulbs by 2012. The energy efficiency standards set by the government effectively do away with incandescent light bulbs as we know them today. Although General Electric (GE - Analyst Report) has stated that it is developing a more efficient bulb that will meet the efficiency standards, a delay in development may actually put it out of the running.

The Australian government has already banned the usage of incandescents, which transfers users to CFL. The Irish government has also taken a decision to phase out incandescents by 2009. The EU is committed to converting a fifth of the block to efficient lighting by 2020. China, which currently makes 70% of the world’s light bulbs, has agreed to phase out its incandescent production and shift to more energy-efficient products by 2018.

The only viable alternative that is currently available is the CFL, although a lot of effort is on to develop whiter and brighter LEDs that could be used for lighting purposes. At present, LEDs appear to be the most environmentally suitable alternative, and lighting solutions based on this technology are likely to become extremely popular over the next decade.

Sejuti Banerjea contributed to this post.