CREE Strengthens Its $100 Million Power & RF Business By Adding New Products To Its Portfolio

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Cree

Cree (NASDAQ:CREE), a leader in gallium nitride (GaN) RF devices, has introduced record breaking GaN HEMT (high electron mobility transistor) devices that solve a number of long-standing issues for radar systems employing traditional travelling wave tube (TWT) amplifiers. GaN-based solid state amplifiers operating at 50V are not prone to the failure mechanisms seen with high voltage (kV) TWT power supplies, thus providing longer lifetimes. Also, such solid state systems provide near-instant on capability – with no warm up, longer detection ranges and improved target discrimination. [1]

Cree has also introduced its latest breakthrough in Silicon Carbide (SiC) power device technology: the industry’s first 900-V MOSFET platform. Optimized for high-frequency power-electronics applications, including renewable energy inverters, electric vehicle charging systems, and three-phase industrial power supplies, the new 900-V platform enables smaller and higher-efficiency next-generation power conversion systems at cost parity with silicon-based solutions. [2] Built on Cree’s industry-leading SiC planar technology, the new 900-V MOSFET platform expands the product portfolio to address design challenges common to new and evolving application segments in which a higher DC-link-voltage is desirable. The lead product (C3M0065090J) features the lowest on-resistance rating (65 mΩ) of any 900-V MOSFET device currently available in the market.

The remarkable success of Cree’s core businesses – LEDs and LED lights – has overshadowed another group of semiconductor products that generate more than $100 million in annual revenue and have the potential to be much bigger. For the fiscal year that ended in June, Cree’s power and RF business generated $118.2 million in revenue, up 20 percent from a year earlier. That amounted to just 7% of Cree’s $1.68 billion in total revenue, which is why the power and RF business hasn’t attracted much attention outside the industry. But Cree’s smallest business is also its most profitable, percentage-wise. The power and RF business posted gross margins of 56.5%, versus 45.7% for its LED products and 27.9% for its lighting products.

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Our price estimate of $35 for Cree is at a significant premium (~20%) to the current market price.

See Our Complete Analysis for Cree Here

Strong Growth Potential In Power and RF Business Can Help Cree Diversify Its Business

John Palmour, company co-founder and chief technology officer for Cree’s relatively obscure power and radio-frequency, or RF, business unit, estimated that the market addressed by Cree’s power diodes and transistors exceeds $5 billion today, while the RF products are attacking a market that currently accounts for $1.5 billion to $2 billion in sales. Expanding into new markets is part of the game plan. Cree forecasts that the power and RF business will grow at a 12% to 15% annual pace over the next several years, which actually is below last year’s pace as growth rate slows a bit with the base getting bigger.

Cree’s power components were silicon carbide-based interlopers in a market dominated by silicon-based products. Cree’s products were smaller, faster and more efficient – and more expensive. So, for years the company has focused on niche markets and honed a sales pitch focused on how the efficiency of their devices could save money in the long run. But Cree has steadily whittled down its prices thanks to the steadily increasing volume and efficiency of its factory in Durham. At the same time, however, the fact that companies must redesign their system to take full advantage of Cree’s technology is a considerable hurdle to landing new customers.

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27.9% for its lighting products.
Notes:
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  2. Read Press Release []