Cree’s Plan Makes Sense

On Tuesday, Cree reported a 7% decrease in third quarter revenue to $342 million and shares of Cree stock dropped nearly 8%. The same day Cree announced a joint venture with San’an Optoelectronics.  Read the press release here.

Although the joint venture is based in Hong Kong, San’an is headquartered in Xiamen, China.  San’an claims to be “…the largest and earliest-established industrialized production base for the top-quality full-color ultra-high bright LED epitaxial wafers and chips in China.”

In addition, Cree laid off approximately 70 people from their Wisconsin and North Carolina facilities, a story that EdisonReport first broke.  While the company confirmed our number of approximately 70 for the layoff, we have heard that 22 were from Engineering. The company would not confirm or deny that number. 

While Cree has been very strong in high-power LED, they have missed the market in mid-power.  The JV will fix this issue.  In an article published in The Triangle Business Journal, Daniel Castillo, President of Lighting said, “I believe we have underinvested in the customer service and channel relationship side of the business.  I’m adding some new talent who have strong industry relationships and experience to help accelerate the learning curve.”

While we hate to hear of layoffs in our industry, the plan is logical.  Outsource some of the Engineering to China, bring in new a new class of products that opens many previously closed markets, and beef up Sales and Customer Service to sell the new packages.  

It makes sense.