Why Has Cree’s Revenue Jumped 40% In The Past 2 Years?

November 18th, 2019 by Trefis Team
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Cree’s (NASDAQ: CREE) revenue has grown from $770 million in 2017 to $1.08 billion in 2019, largely due to a growing demand for Cree’s power and RF products. Revenue grew around 40% over this period, as demand for Cree’s power products has seen huge growth, especially from the electric vehicles segment. The company recently divested its under-performing lighting business, to increase focus on Wolfspeed (the power and RF segment), as they expect a further spurt in demand growth going forward. However, 2020 may be a difficult year due to the ongoing semiconductor demand crunch.
But, we expect demand to eventually catch up and help drive revenue up to $1.2 billion by 2021, which is a 11% jump from 2019 numbers.

 

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Cree Has 2 Operating Segments-

To know more about Cree’s operating segments, and what products they offer, you can view our interactive dashboard, Cree Revenue: How Does Cree Make Money?

A] Revenue from the Wolfspeed segment to grow around 25% over the next 2 years (to $676.3 million) and make up about 56% of Total Revenue

  • Revenue from Cree’s Wolfspeed division has grown almost 2.5x from FY’17 to FY’19 , due to increasing demand from the electric vehicle (EV) space, and a general preference for Wolfspeed’s products due to their improved efficiency and smaller unit size.
  • The global electric car fleet grew to over 5.1 million in 2018 from 3.2 million in 2017, and we expect this growth to continue, which would mean an even higher demand for Wolfspeed’s products.
  • Demand for RF products is also expected to shoot up later in 2020, with the advent of 5G communication devices.
  • We expect revenue from this segment to further grow to $676.3 million by 2021.

B] Revenue from the LED products segment to drop from $542 million in 2019 to $528 million in 2021, and make up the remaining 44% of Total Revenue

  • Revenue from this segment has remained largely flat between 2017 and 2019, due to increased competition leading to a drop in LED prices.
  • LEDs have significant benefits over traditional bulbs, and this has led to a huge growth in demand for LED products, while also bringing in more market players.
  • Fierce competition and falling margins have caused Cree’s LED business to stagnate.
  • We expect things to remain much the same and see revenue hover around $528 million by 2021.

C] For an overview of the divested lighting business, you can view our interactive dashboard, Cree Revenue: How Does Cree Make Money?

 

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