While sales continued to decline for Cree LED in the fourth quarter, the slippage again slowed, and the CEO of parent company Smart Global Holdings (SGH) expressed hope for continued strengthening.
For the fiscal quarter ending Aug 25, sales fell to $66 million from $83.1 million in the same period a year earlier. It was the fifth consecutive quarter of lower sales, but the 20.5% drop marked an improvement over the 36.7% tumble in the third quarter, which in turn bettered the 48% plummet in the second quarter.
Cree makes LEDs for specialty lighting, video screens, gaming displays, horticulture, outdoor, and architectural applications.
As he did at the end of the third quarter, SGH CEO Mark Adams said that sales should continue to recover.
“LED is trending better for us than, say, Q2 of '23, and we’re hopeful that that will continue,” SGH CEO Mark Adams said on a call with analysts to discuss fourth quarter and fiscal year-end results. He also noted that on a sequential basis, sales inched up for the second quarter in a row. The $66 million represented a 3% uptick over Q3’s $64.1 million.
In another echo of his third-quarter remarks, Adams emphasized that customer product design activity will be a key driver of livelier sales.
“That’s what we’re counting on,” said Adams, noting that the company is “hopeful” that “the LED business will continue to rebound from where it is today.”
Adams did not identify specific customers or their pending new products, but he said that Cree’s new XLamp XP-G4 will play a major role. Cree introduced the G4 in July as the fourth generation of its XLamp XP-G product family.
“The XP-G4 provides improved performance for a wide range of both indoor and outdoor directional lighting applications, requiring precise light control, long-term reliability, and exceptional color over angle performance,” Adams said.
He also pointed to Cree’s “capital light” outsourced manufacturing model, “strong IP,” and “disciplined expense management” as factors in the steady improvement.
SGH does not break out Cree profits in its financial reporting. The company reports profits for SGH as a whole, which in addition to Cree includes an AI-oriented, high-performance computing group called Intelligent Platform Solutions that owns Stratus Computing, and a computer memory group called Memory Solutions. Cree is the smallest of the three groups, representing 21% of revenue in the quarter, up from an earlier 17% as SGH sold off the memory division’s SMART Brazil operations.
SGH sales for the fourth quarter totaled $316.7 million, down from $362.5 million for the fourth quarter a year ago. IPS accounted for 46% with $145.4 million, up slightly from $144.7 million, and Memory Solutions had 33% of sales with $105.2 million, down from $134.6 million. SGH non-GAAP income for the quarter was $18.4 million, down from $31.6 million a year earlier.
Chief financial officer Ken Rizvi said that non-GAAP gross margins improved from to 31.7% from 27.1% a year ago, “primarily driven by IPS.”
Indeed, IPS occupies center stage at the company. For the year, SGH sales were up 3.2% to $1.44 billion from $1.40 billion, “driven by the strong growth in our IPS segment, offset by some headwinds in our memory and LED segments,” Rizvi pointed out. IPS sales surged in 2023 to $749.7 million from $441 million in 2021, as the company acquired Stratus. Sales for Memory Solutions fell to $443.3 million from $551.7 million. Cree LED sales for the year crashed to $248.3 million from $403.2 million.
Adams and Rizvi are hopeful that the steady recovery at Cree — still a work in progress — lessens the drag on SGH’s overall performance.
MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]).Follow our LinkedIn page for our latest news updates, contributed articles, and commentary, and our Facebook page for events announcements and more. You can also find us on the X platform.