CEO of Cree’s parent: LED industry will consolidate

The CEO of Cree LED’s parent company SGH Corp. told analysts on Tuesday that Cree is well positioned for what is “likely” to be an LED industry consolidation, although he held back from saying whether SGH would be a buyer or seller.

SGH boss Mark Adams made the observation on a call to discuss third-quarter results in which Cree sales were basically flat compared to the same quarter a year ago, at $63.9 million for the quarter ending May 31, versus $64.1 million for the 2023 third quarter ending May 26 of that year.

“The broader market environment in LED continues to suggest that consolidation is likely in the sector at some point,” Adams said. “Cree’s outsourced manufacturing capital-light model positions us very well competitively as we return to profitability with strong gross margin performance vis-a-vis our competitors.”

He did not elaborate on what SGH’s role in the consolidation might be — that is, on whether SGH would look to unload Cree, or, conversely, whether it might look to acquire another LED company. The web call was with analysts. LEDs Magazine participated in a listen-only mode.

Adams discussed the LED business as part of his prepared presentation. Analysts did not ask him to expand on that. Rather, they focused their questions on the company’s computing-related businesses.

After the call, LEDs Magazine asked SGH for additional insight.

“We do not speculate on any potential future acquisitions or divestitures,” a spokesperson replied.

As LEDs Magazine has pointed out, SGH is more than ever highlighting its two computing groups, especially its high-performance computing division called Intelligent Platform Solutions, which sells products, software, and services for enterprise artificial intelligence applications and other computing purposes. Intelligent Platform accounted for 48% of SGH revenue in the quarter at $145 million, and Memory Solutions accounted for 30% at $91.6 million. Using round figures, Cree’s $63.9 million accounted for 21%.

Although sales fell in both computing groups for the quarter, SGH’s corporate bottom line was up as the company reported income of $5.6 million compared to a loss of $24.5 million in 2023’s third quarter. 

Adams opened his presentation by characterizing SGH as a computing outfit.

“Our financial results are clear evidence of our transformation into a high-performance, high-availability enterprise solutions provider,” he said. 

Adams also spent noticeably more time reviewing each of the Intelligent Platform and Memory Solutions divisions than he did on reviewing Cree.

Still, he expressed confidence in the Cree LED business. The Durham, N.C. company makes LEDs for large video screens and gaming displays and for outdoor, horticulture, architectural, and specialty lighting.

It continues to innovate. In the third quarter, for instance, it added to its XLamp line with the XFL family of LEDs for flashlights and other portable lighting. Cree says the XFL chips have a 90% smaller surface emitting area compared to competitors. In May, Cree received four BrightStar Awards from LEDs for chips aimed at efficacy and brightness.

It is also leveraging its patent portfolio. Adams told analysts that “ongoing IP assertion activities across multiple LED applications support and facilitate…growth opportunities.”

Cree maintains that its outsourced manufacturing approach keeps costs down. In a 2022 interview with LEDs, Adams said the company uses “one of the largest manufacturers of LED products in the world.” That company is believed to be in China or Southeast Asia.

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