Bulb Price Wars Drives Cree LED Business Restructure

Quotes/ Perspectives from LEDinside: 
“If pricing competitions continues, Cree might increase the volume of outsourced products to Asian manufacturers in the future,” said Roger Chu, Director, Research Division, LEDinside. “For instance they might increase OEM orders they give to Lextar or other Asian manufacturers.”

Market competition in the North American bulb market has pressured Cree to restructure its LED business, said Roger Chu, Director, Research Division, LEDinside.

The U.S. LED manufacturer announced Wednesday that “the company has decided to restructure the LED Products business to reduce excess capacity and overhead to improve the cost structure moving forward.”

Cree's 40W Soft White LED bulb. (Photo courtesy of Cree)

The decision to slim down its LED business was attributed to higher than forecasted LED average selling price erosions, under-utilization of Cree’s LED factory, and its growing reserves that reflect aggressive pricing environment. Cree estimated the restructure would cost approximately $85 million.

Cree, which manufactures LED components for other manufacturers and for its own LED bulb consumption, has been especially affected by main competitors’ low LED bulb pricing strategies in North America, said Chu.

Philips for instance disrupted the U.S. LED bulb price market in May 2015 by pricing two packed 60W LED bulb at a promotional price of US $4.97 through Home Depot sales channel, this brings the cost of a single bulb to $2.48 during the three-month promotional period. GE followed the same strategy by selling a three pack 60W LED bulb for less than $10 through Home Depot channels in June this year.

The steep price cuts are the result of traditional lighting manufacturers growing reliance on Asian OEMs, explained Chu. This places Cree at a disadvantage, since its manufacturing base is in U.S., where production costs are much higher.

“If pricing competitions continues, Cree might increase the volume of outsourced products to Asian manufacturers in the future,” said Chu. “For instance they might increase OEM orders they give to Lextar or other Asian manufacturers.”

The company is also losing ground in Home Depot retail channels, where it previously had an advantageous position.

“Cree entered the Home Depot market about two years ago, and at the time it diversified its LED bulb products by acquiring the ENERGY STAR label,” said Chu. “But with more LED manufacturers entering the Home Depot sales channel, Cree is losing its leverage.”

(Author: Judy Lin, Chief Editor, LEDinside)

Disclaimers of Warranties
1. The website does not warrant the following:
1.1 The services from the website meets your requirement;
1.2 The accuracy, completeness, or timeliness of the service;
1.3 The accuracy, reliability of conclusions drawn from using the service;
1.4 The accuracy, completeness, or timeliness, or security of any information that you download from the website
2. The services provided by the website is intended for your reference only. The website shall be not be responsible for investment decisions, damages, or other losses resulting from use of the website or the information contained therein<
Proprietary Rights
You may not reproduce, modify, create derivative works from, display, perform, publish, distribute, disseminate, broadcast or circulate to any third party, any materials contained on the services without the express prior written consent of the website or its legal owner.
Display devices have been used for many years as a means of HMI (Human Machine Interface) to connect humans and machines interactively, and their usage are still expanding. Automotive interiors are no exception to this trend, with an increasing ... READ MORE
About LiDAR Automotive industry trends In recent years, many vehicles have been launched with ADAS (Advanced Driver Assistance Systems) as standard equipment. As the future evolves towards more automated driving, sensing around the vehicle i... READ MORE