What could happen after Cree’s strategy pivot?
CREE HAS PIVOTED!
In February 2018, Cree announced a strategic pivot on its investor day. The company decided to change its focus and invest primarily in its smallest business, Wolfspeed. This announcement comes after a series of actions:
• It decided to spin out the SiC power and radio frequency (RF) GaN business, branded Wolfspeed in 2015
• It tried to sell Wolfspeed, including the SiC power and GaN RF businesses and its SiC wafer business, to Infineon for $850M in 2016, but was blocked by the Committee on Foreign Investment in the United States.
The new strategy is a 180° turn-around with respect to Cree’s previous strategy. Following the announcement, Cree acquired the assets of Infineon’s RF power business for approximately €345 million, strengthening its Wolfspeed business. Why this pivot? In fact, Cree had grown strongly for a long period before 2015. Since 2015, the company’s total revenue has dropped year-on-year, in particular in the LED and lighting segments. Selling Wolfspeed was the way to get money to invest in its LED and lighting business, but it did not work out.
With the new CEO and new vision, the company has decided to change its focus and make the majority of its investment into the rapid growing Wolfspeed segment. The company expects Wolfspeed’s related business to growth significantly and become the biggest segment of the company in five years, reversing its revenue downturn. In this report, Yole Développement invites you to look at the facts and figures about Cree and Wolfspeed and discover its company profile in detail.
WOLFSPEED: TARGET MARKETS GROWING AT THE SPEED OF WOLF
With revenue of $221M in 2017, Wolfspeed is still a small player in the semiconductor industry. But all its targeted markets have very bright futures:
• SiC power devices: the first commercially available SiC diode appeared on the market 17 years ago and the adoption process has been long. It has taken its time to gradually convince the end user. Today, it is the main revenue contributor in the SiC power device market. This is going to be reshaped by SiC MOSFETs, which have only been commercially available since 2011. The 2016-2018 period is crucial for SiC MOSFETs as well as for the whole SiC industry. SiC MOSFET manufacturers have improved device reliability and performance, and the device is therefore gaining numerous customers’ confidence and penetrating different applications. The benefits enabled by SiC, continuous performance improvement, and the cost erosion of SiC power devices will fuel market adoption.
• GaN RF devices: in the last couple of years, the GaN RF device market grew impressively, driven by both defense and telecom applications. Originating in the US Department of Defense, GaN devices have been implemented in new generation aerial and ground radars. With the defense market driving GaN development in past decades, designers are becoming increasingly familiar with this new technology, and the adoption of GaN RF technology will continue. In the civil market, with the transition from fourth generation (4G) to fifth generation (5G) wireless protocols, the telecom market will bring a huge opportunity for GaN devices. Compared to existing silicon LDMOS solutions, GaN devices are able to deliver the power/efficiency level required for next generation high frequency telecom networks. Also, GaN’s broadband capability is one of the key elements for enabling important new technologies, such as multi-band carrier aggregation. GaN HEMTs have been the only candidate technology for future macro base station power amplifiers and the market outlook is very promising.
• SiC materials: the above two markets are using SiC-on-SiC technology and GaN-on-SiC technology, which using n-type and semi-insulating SiC wafer, respectively. As a consequence of the rapid growth of the end markets, the SiC materials business is expected to expand in coming years.
Yole Développement invites you to read its report and discover more details about different markets, including LED, lighting, SiC power, including a detailed analysis of its understanding about the adoption of SiC power devices by electric vehicles, SiC materials, and the GaN RF device market.
WHAT COMES AFTER THE PIVOT?
Cree has three business segments today: LED, lighting and Wolfspeed. In 2017, these businesses represented 37%, 48% and 15% of the company’s total revenue, respectively.
We are beginning to see the results of the strategic pivot. In the third quarter of financial year 2018, Wolfspeed’s contribution to the company’s revenues increased to 23% compared to 15% in 2017. Wolfspeed’s revenue for the first three quarters is $219M, almost equal to its $221M for the whole financial year 2017.
With intensified investment in Wolfspeed, Yole Développement has no doubt that Wolfspeed’s revenue will keep increasing. The $850M target for 2022 claimed on the investor day is targeting a higher growth than the market average. We consider it is ambitious but not completely impossible.
What about the LED and lighting business? Will Wolfspeed keep its leadership in all of its businesses? What could happen next in the short and long term? This report gives a competitive analysis of all Cree’s segments, with a focus on Wolfspeed. Yole Développement also invites you to see its analysis about what could happen in the future with scenario discussions.
Objectives of the Report
This report’s objectives are to:
- Provide facts and figures about Cree and Wolfspeed
- Give an overview of Cree’s intellectual property portfolio
- Competitive analysis of Cree’s LED, lighting and Wolfspeed segments
- Deliver Yole Développement’s analysis on what could happen following Cree’s strategy pivot
- Give an overview of the markets for SiC materials, SiC power devices, GaN RF devices, LED and lighting markets and Yole Développement’s market projections