China lockdowns offset Q3 LED revenue gains elsewhere for SGH

July 8, 2022
After growing the top line during the first year of Cree ownership, sales flatten for the new owners, but CEO Adams is confident in the long term.

COVID-19 lockdowns in China flatlined third-quarter sales of Cree LEDs for owner SGH Holdings, which previously had managed to substantially grow the business in the year since acquiring it from Cree Inc.

In the three months ended May 27, revenue in SGH’s LED Solutions division — which sells under the Cree LED brand — was $101.35 million, a tiny dip from $101.76 million in the same quarter a year ago, the company reported recently.

It was the first quarter in which Milpitas, Calif.–based SGH was able to compare LED sales to a year earlier period on its own books. It closed the acquisition of Cree from Durham, N.C.–based Cree Inc., now called Wolfspeed, on March 1, 2021.

Earlier this year, in comparing LED revenue under SGH to LED revenue under Cree Inc., SGH CEO Mark Adams noted that LED sales were “up substantially” in the company’s first quarter, at $111.9 million. The company has forged a rejuvenated sales and profit push around a focus on specialty LEDs, a shift toward outsourced manufacturing, and a move away from silicon carbide wafers to sapphire.

But overall LED sales growth paused in the last quarter. Adams said a “strong performance” in the Americas and in Europe, the Middle East and Africa (EMEA) “partially offset demand softness in the greater China and Southeast Asia region, which continues to be hampered by COVID related problems affecting supply chain networks.”

Asia is a key region for the company, as chief financial officer Ken Rizvi said that this quarter it accounted for over 35% of LED sales.

CEO Adams emphasized SGH’s commitment to LED innovation — such as its new XE-G color mixing LED family — and asserted “we remain confident in the long term operating performance of the LED business.”

LED Solutions is one of three operating divisions at SGH, which reported a company-wide net sales increase of 6%, to $463 million. A high-performance computing division called Intelligent Platform Solutions (IPS) accounted for $95.3 million in revenue, compared to $95.9 million a year ago, while the Memory Solutions group rose to $265.9 million from $240.9 million. Corporate net income was $24.1 million, compared to a year-ago loss of $7.2 million.

Adams outlined more near-term optimism for IPS and LEDs than for Memory Solutions, which sells into the consumer market for PCs and smartphones.

SGH also announced that it has agreed to acquire high-performance computing company Stratus Computing for $225 million in cash. Maynard, Mass.–based Stratus will join the IPS group and shrink LED Solutions’ overall share of company revenue by a few percentage points.

MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]).

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About the Author

Mark Halper | Contributing Editor, LEDs Magazine, and Business/Energy/Technology Journalist

Mark Halper is a freelance business, technology, and science journalist who covers everything from media moguls to subatomic particles. Halper has written from locations around the world for TIME Magazine, Fortune, Forbes, the New York Times, the Financial Times, the Guardian, CBS, Wired, and many others. A US citizen living in Britain, he cut his journalism teeth cutting and pasting copy for an English-language daily newspaper in Mexico City. Halper has a BA in history from Cornell University.