Cree Inc., which makes lighting chips for computers and other products, is facing a fall in prices because of oversupply and competition, Lazard Capital Markets analyst Daniel Amir warned Friday.
He also said that manufacturers are moving away from Cree products when installing backlighting for Apple and other notebook computer makers.
Cree makes light-emitting diode chips and other LED components used to light a wide variety of products from computers to storefront advertisements.
It has seen a fall in prices because of an "aggressive" price cut by Taiwanese competitor, Epistar, Amir said.
Cree's average prices always will be higher than Epistar's because of its higher quality, but it will need to drop prices below seasonal averages to compete, Amir said.
"We see this as a potential negative data point for Cree as this could further reduce its gross margin in the near term," he said.
His checks also found that manufacturers are moving away from Cree for chips used in backlighting for notebook computers.
His consultations in Taiwan suggest that the backlighting industry is moving away from the higher-power, more-expensive Cree chips toward cheaper chips from Japan and Taiwan.
"Specifically, we are hearing that Apple, Asus and Acer, which are all shifting rapidly to LED backlighting in their notebooks, are moving away from Cree-based LED," he said.
Shares of Durham, N.C.-based Cree rose 1 cent to $23.27 in morning trading.
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