Cree (NASDAQ:CREE), a market leading manufacturer of LED products, recently announced the first of its kind agreement with Lutron Electronics. The two companies have joined hands to introduce world’s most efficient lighting control and delivery system, by embedding Lutron’s technology on a chip in Cree’s luminaries. They hope to accelerate LED adoption and increase energy efficiency among designers, contractors and owners. Cree featured among the top 7 LED suppliers in 2011 along with competitors Nichia, Samsung LED and Osram Opto Semiconductors.  It has witnessed an almost 150% growth rate in LED revenues since 2007, and the agreement with Lutron could be just another step to achieve its target of double digit growth in LED lighting.
Integrated System to Increase Efficiency, Lifetime & Payback of LED Lighting
Lutron Electronics designs and manufactures energy-saving light controls, automated window treatments and appliance modules for both residential and commercial applications. More than 16,000 of its energy-saving products are sold in over 100 countries around the world. Its products save energy and make light bulbs last longer, making them an eco-friendly addition to the home and workplace.
The combination of leading LED technology from Cree with proven energy control strategies from Lutron yields the world’s most energy-efficient commercial troffer lighting control and delivery system. The solution introduces digital intelligence to the control of Cree LED luminaires and delivers integrated, pre-tested system compatibility backed by Lutron to ensure performance of the overall system.
By using Lutron’s energy management solutions, Cree’s LED lighting will have the potential to significantly reduce operating costs of building owners. The alliance can break new ground for LED fixtures and control systems as the integrated system can increase performance across the board with increased efficiency, lifetime and payback.
Cree Looks Determined to Lead Transition to LED Lighting
Cree’s recently announced Q3 2012 result were impacted by a temporary setback from agent transition, widening LED surplus and a consequent impact on the gross margins. (Refer to our Article: Cree’s Results Hit Choppy Waters, Stock Worth $26) However, with continued focus on R&D and new product innovations, the company is determined to continue leading the transition to LED lighting.
The lighting market remains unsaturated and is expected to generate significant growth for the LED industry. We estimate the LED market to grow to US$10 billion in 2012, up almost 100% from US$5 billion in 2007. With major countries promoting LED lighting, LED lumen efficiency has been improving and the LED lighting prices have come down over the years, making it an affordable alternative and marking a shift from traditional (incandescent and fluorescent) options to LEDs.
Cree currently accounts for 10% of the market share for LED, and we see this going up to 13% by the end of our forecast period.
As LEDs gain acceptance globally, there is potential of substantial growth in LED chips, components & lighting. If Cree’s market share increases 2% more that what we forecast by the end of the forecast period, this could lead to an upside of about 7% to our current price estimate of $27.50.
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- LED market grew almost 10% in 2011, with 44% growth in lighting, Industry News, February 7, 2012 [↩]