By making a cheaper LED lightbulb, the newcomer to the industry hopes to dominate the market for energy-efficient lighting alternatives.
Opportunity: Driven in part by new government regulations on energy efficiency, LED lighting is increasingly replacing both incandescent and fluorescent lighting in everything from desk lamps to streetlights. LED lighting, which uses semiconductors to produce the illumination, offers various benefits: it’s more energy efficient, a bulb lasts many years, and it’s dimmable. What’s more, thanks to advances in the technology over the last decade, LEDs produce light of reasonably good quality. But many consumers and businesses have been reluctant to switch over to the new technology. That’s partly because initial products were ungainly and because LED lights are more expensive than incandescent bulbs, a technology that dates back to Thomas Edison.
Innovation: Cree started out as a supplier of components to other LED makers. Two years ago, however, unsatisfied with the quality of LED-based bulbs made by those established manufacturers, engineers at Cree resolved to design and make their own. Last year, Cree released a consumer product with the familiar shape and light quality of an old-style filament bulb, priced at under $14 for the equivalent of a 60-watt bulb; LED bulbs had been selling for more than twice that just a few years earlier. The company has begun selling its bulbs at Home Depot.
Cree’s LED bulb competes directly with ones from lighting giants such as General Electric, Philips, and Osram Sylvania. But Cree now sells about $500 million worth of LED lighting annually and has nearly 10 percent of the market in North America, according to the Carnotensis Consultancy.
Inside each bulb is the source of Cree’s technology advantage: a series of LEDs, each about half the size of a typical pencil eraser. Cree makes them on silicon carbide wafers, allowing the company to produce more light from an LED chip than competitors that use sapphire substrates. But price, ultimately, is what drives consumers. And Cree predicts it will be able to match traditional lighting on price in the not-very-distant future.