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Re: CREE Discussion

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By Imshaken
March 24, 2005

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Cordob:

I read the Cree discussion on the new paradigm investing thread. It was an interesting discussion and I was too busy to add my penny's worth at the time. I'm also curious where you were able to "put the glom" on that LED market forecast table.

The thing is with forecasts, they are just that. Forecasts. I suspect that any one of us would be willing to accept the statement that the actual results of the LED market sales will differ from the forecast as time plays out. Whether the forecast is optimistic, pessimistic, or just plain old missed it.

Nobody knows what LED ASP drops will be in the next few years. Nor do we know what new and unexpected market applications will open up as a result of luminous efficiency increases coupled with price drops.

Automobile daytime running lamps, headlights, LCD backlighting are going to be large LED markets. Someday. Have you seen CCFL vs. LED backlit side by side? Night and day. I'm not holding my breath for the LCD backlit TVs since we're still waiting to see if costs scare consumers away. I'll tell you right now I wouldn't even consider paying $10k for a TV set. On the other hand, I expect LED backlit computer monitors to jump out in front. Much smaller, should cost less, have less heat issues to deal with since smaller LEDs are more luminously efficient AND cheaper!. People who stare at monitors all day will be happy to pay a premium. (Of course this is jmo, not a fact.)

Rather than the well-advertised monster applications in the above paragraph, I think we'll see incremental application growth. Newly created niche uses in a variety of areas we never even thought about. For example: Who's to say that the next fad won't be LEDs in the ends of screwdrivers to illuminate screws in dark areas? (Something I've been toying with making myself, and yes, I am putting the idea out there for all.) I'll bet every plumber in America would have a few of those. Do you know I recently bought a key with an LED in it to light the lock at night? Not a key chain light. A key. I paid $4 for that key and it was worth every penny. Will they sell? I don't know, but I bought one.

When investing, we are investing in the future. Since the future hasn't happened yet we must make assumptions about it. So we all have to make assumptions, one way or another, when investing. If you choose to believe SU's forecast, that's an assumption. If you choose to not believe it, that's an assumption. What I want to make with respect to investing is a reasonable assumption.

Let me ask you, what's more reasonable?

1. Assume the GaN LED market which has grown at a roughly 30%-40% rate over the last decade is suddenly going to stop growing even though the forces that created it, increasing brightness and dropping ASPs, will continue? The assumption is based on a seemingly reasonable notion that an outsider was not able to locate people who, in their industries, are not willing to forecast their growth rates to an outsider.

2. Assume the market will continue to operate as it has in the past.

Individually we will all do what makes sense to us. Personally, I'm going to take the market forecast with a grain of salt. I assume Cree will experience the same general growth rate it has displayed for the last decade. I believe it's more likely, assuming everything else stays the same.

If there's a six-month lull in the GaN market LED growth, so be it. I'm investing for the long haul. I'm not trading. Well... maybe I'm trading a little. :o))


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