Cree: Shining On The LED Lighting Market

The lighting market that is expected to be completely transformed years from now is currently worth $119 billion. There are many players in this industry who are fully aware that the penetration rate of a potential full scale LED lighting transformation is only 1%. Leading the way is Cree Inc. (NASDAQ:CREE) and below is an excerpt of my interview with them. The very first time I encountered CREE was in an article five years ago that talks about disruptive technologies, as coined by Clayton Christensen, and its potential to change the market place. Modesty aside, how disruptive are the products of CREE then and at present looking forward?

Raiford Garrabrant: It’s quite a coincidence that you first encountered Cree five years ago, because that is right around the time I joined the company, and the reason I joined was my belief in the disruptive nature of LEDs in lighting.

Five years ago, using LEDs for general purpose white lighting was really just an idea. We could see the potential, but there was virtually no adoption of LEDs for general purpose white lighting. Today, we are seeing that potential turned into reality.

One example is the city of Los Angeles, which decided to replace 140,000 city street lights with LEDs (more information on that project is available here). We think LED adoption is still no more than onepercent of the lighting market, but it is starting to gain momentum.

Looking forward, we think the LED Lighting Revolution will continue, and Philips Lighting, one of the largest lighting companies in the world, if not the largest, predicts that approximately ninety percent of lighting will be LED based by 2020.

SIC: How big of a market are you looking at in dollar terms?

RG: The lighting market was $119 billion in 2007 according to The Freedonia Group.

SIC: That is a huge market! And who are your closest competitors? Are you threatened,or the market is so far too big for everybody?

RG: Our primary competitors are Philips Lumileds, Osram and Nichia. We think the market is big enough for Cree and our competitors to be successful, but competition does represent a real risk or threat to our business.

Dislcosure: None.

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