Cree struggles with inventory corrections in Asia
Lower-than-expected sales by Cree’s LED component distributors in Asia caused the company’s revenue to drop below analysts’ expectations. Cree said the underlying cause was a pause in LED street-light demand in China and lower-than-expected growth in LED bulb applications.
Sales of LED products were $229.7 million, down 6% from the previous quarter, but up 26% compared with the same period last year.
Chuck Swoboda, Cree chairman and CEO, said that revenue and earnings “were lower than our targets due primarily to lower sales to our LED component distributors in Asia…We are managing through an inventory correction in Asia in the near term, but the opportunity in LED lighting has not changed.”
Cree also said that, for the current quarter ending March 27, 2011, it targets revenue in a similar range as the December 2010 quarter at $245 million to $265 million, due to seasonality and the on-going inventory correction in Asia. Analysts had been expecting around $288 million for the quarter.
In Cree’s earnings call, Swoboda elaborated on the inventory situation. Cree’s LED component distributors in Asia achieved lower sales, due to an inventory correction at their customers. “The inventory correction has been caused by a pause in the China LED street-light demand and lower-than-expected growth in LED bulb applications,” said Swoboda.
Swoboda explained that the street-light slowdown in China is related to a pause in the market as new specifications were being developed by the government. “The specifications were published last quarter, and a number of companies were recently approved under the new guidelines,” he said. “We have design wins at the majority of these companies and expect new projects to start being awarded after the Chinese New Year.”
Meanwhile, the LED bulb slowdown is related to Cree’s customers working off inventory that was bought in Q1 ahead of end-customer demand. “The application is growing, but not as fast as our customers had anticipated, which has resulted in the short-term inventory correction,” said Swoboda.
However, Swoboda also had more positive news related to LED lamps. “I am pleased to announce that we recently demonstrated the brightest, most efficient LED-based A-Lamp that meets Energy Star performance requirements for a 60-W standard LED replacement bulb.”
The prototype dimmable bulb uses remote-phosphor technology and delivers more than 800 lumens, consumes fewer than 10 watts and features a CRI of 90 at a warm-white 2700K color, said Swoboda.