Cree has bought 13% of Taiwan-based Lextar. The deal gives Cree quick access to an expanded range of mid-power LED technology, and Lextar capital to expand and a cross-licensing agreement.
When Cree's quarterly results recently disappointed investors and several analyst firms downgraded the stock, more than one of the industry watchers called out Cree's weakness in the mid-power segment of its LED line. Cree has always stressed its expertise in high-power LEDs, and that is where much of its technology investment has been.
Mid-power is where a great deal of the interest is for general illumination going forward. Mid-power LEDs are used in many, if not most, LED tubes designed to replace fluorescents. They are popular with leading luminaire designers who would be using OLEDs if they were affordable.
Cree does not slight mid-power entirely. But it has argued that its ceramic-packaged parts extend product lifetime and reduce lumen degradation and color shift.
While that may be true, ceramic costs more than the plastic packaging often used for mid-power parts. And it is the lower price of plastic-packaged mid-power LEDs that is in large part responsible for the plummeting prices of lamps and luminaires at the consumer level.
The table shows representative prices for small quantities of mid-power parts from Cree, Lumileds, and Seoul Semiconductor, from the Digi-Key site.
While Cree's deal with Lextar gives the company access to "high-quality" mid-power chips, as Cree's CEO Chuck Swoboda said in the press release, Lextar also measurably benefits from the deal. Lextar gets the capital to expand production on Taiwan (their mainland China operation is working near capacity now), and the company also get cross-licensing access to Cree's fundamental LED patents.
Cree's $83 million investment is the result of a "build or buy" decision on the part of the company's management, doubtless driven by the urgency of rapidly demonstrating progress in the mid-power realm.
— Keith Dawson , Editor-in-Chief, All LED Lighting