News Article

Cree Goes Into Reverse As LED Chip Sales Fall

Lower-than-expected sales of LED chips for mobile phone backlights are blamed as Cree reveals that its second quarter revenue will be around $15 million below previous guidance.

Top-tier LED and power chip manufacturer Cree has said that its second-quarter revenue will be some $15 million below prior expectations.

Company executives believe that sales in the company's second fiscal quarter, which ends on December 24, will be between $90 million and $92 million. At its last earnings call in mid-October, the company had anticipated a figure of at least $105 million for the quarter (see related story).

CEO Chuck Swoboda blamed the shortfall on lower orders for LED chips to be used in cell-phones and other mobile appliances. "The LED chip market remains challenging, particularly for our mid-brightness products in mobile applications."

Whether that slack demand has been caused primarily by a slump in sales of handsets or by a loss of market share for Cree is not yet clear.

Predictably, the investor community was unimpressed with the financial update, and Cree's shares were marked down 15 per cent in early trading to just over $18.

Despite the slowdown in sales to the mobile handset sector, Cree remains positive about its prospects as it goes through a strategic transition. With LED chip sales now in decline, the company's plan is to offer higher-value products such as LED-based lamps, ultra-bright white LEDs, and a variety of power devices based on SiC and GaN structures (see related magazine interview).

Cree will be hoping that these newer product lines can now grow quickly from a small base, as it expects sales of LED chips to remain flat in the subsequent third fiscal quarter of 2007.

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