Cree Q2 Preview: How Is The SiC Business Faring?
Cree (NYSE:CREE) is expected to publish its Q2 FY’19 results on January 30. The company has largely bucked the bearish trend in the semiconductor sector over the last quarter, as it continues to pivot away from the commoditized lighting business to higher-margin businesses such as power and RF products. Here’s a brief rundown of what to expect when Cree publishes its second-quarter earnings.
Our interactive dashboard analysis on what’s the outlook like for Cree details our forecasts and estimates for the company, as well as our valuation estimate. You can modify any of the key drivers to gauge the impact of changes on the company’s results and valuation.
SiC Business Updates
Cree has been doubling down on the power and RF products space, considering the higher gross margins and lower levels of commoditization compared to the lighting market. Over Q1 FY’19, revenues from the Wolfspeed segment grew by roughly 93% year-over-year to $127.4 million, accounting for about 31% of the company’s total revenues. Cree expects Wolfspeed revenues to rise by approximately 5% sequentially over Q2 FY’19 while noting that its lighting and LED businesses are likely to see some declines. In particular, Cree has been a leader in commercializing silicon carbide (SiC) products, which are used in high-voltage applications, including electric vehicles. The company has noted that it has a pipeline in excess of $1 billion for various applications associated with electric vehicles including silicon carbide MOSFETs, diodes and power modules. SiC products add a lot of value for EV manufacturers, as they allow them to maximize the range of their batteries while reducing the size of the inverter. Cree has also been signing multiple deals to produce and supply SiC wafers to various companies. In early January, the company signed a supply deal with STMicro, while forging a long-term supply agreement with Infineon in early 2018. We will be looking for updates on how the company’s SiC business is faring.
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