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XLamp uptake gains Cree sales record

The US LED manufacturer says its drive to sell packaged components rather than simply bare die has set it on a course for steady sales growth, but one analyst begs to differ.

Double-digit growth in XLamp LED sales at Cree has helped bring a quarterly revenue record, despite generally flat sales in other areas.

The LED maker earned $119 million sales for the quarter ended December 30 2007, up 5 percent over the previous three months.

Cree says its profits doubled over the same time last year to reach $12.2 million, when issues like selling its stake in Color Kinetics and buying the Taiwanese packager Cotco are taken out of the equation.

“We continue to be successful in executing our strategy to increase sales by growing our LED component product line while maintaining the current level of LED chip sales,” said Cree CEO Chuck Swoboda.

During the December quarter, Cree also laid the groundwork for further XLamp growth by completing additional packaging capacity at its Taiwan site.

For January to March, typically a slower quarter for the company, Cree is expecting its revenue to increase slightly to $120-125 million. Again the growth is expected in the XLamp packaged LED range, with sales from other products predicted to remain steady for a few quarters.

SiC: Strength or weakness?
Outside of the LED part of the business, Cree s SiC material expertise also looks set to deliver flat revenues. The company says that lower sales of moissanite gemstone SiC will be offset by increased sales of high-power products such as Schottky diodes.

Growing this high-power device business is one of the company's key priorities according to Swoboda, and new offerings can be expected to support that.

“We are working on several new power products to expand the range of applications we can serve, which are targeted to be introduced over the next two quarters,” he explained.

Swoboda is also keen to point out that Cree s material expertise offers it a unique advantage in producing its LEDs, on both cost and technological fronts. The company is the only major LED manufacturer using SiC substrates for its chips, a matter that continues to raise discussion amongst investors.

One investment analyst who considers this approach to handicap the company with a “high cost structure” is Jed Dorsheimer of CanAccord Adams. He sees this, the lack of sales growth in products other than XLamps and the Cotco acquisition as reasons for concern.

He also predicts a nasty surprise over the coming months as a number of Cree s LED packaging customers begin their own chip production.

“Expiration of AlGaN buffer layer patents in the industry will enable new low-cost entrants to the market,” he said. “They've already ordered reactors, have the capacity in place, and have more reactors on order.”

“They haven't turned on the switch to manufacture internally because they would still be in violation of the patents.”

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