Cree's power devices put in new place

Company opening new site, widening plans from LEDs

DURHAM -- Known for nearly two decades for its low-power lighting components, Cree is making a new push into energy-efficient products for other markets, as well.

Cree introduced the broader strategy Tuesday, along with its new 230,000-square-foot plant in Research Triangle Park.

The expansion represents more than a simple shift of employees and equipment from Cree's Durham headquarters just 2.4 miles away; it also signals the company's growing emphasis on helping power products from refrigerators to hybrid cars.

Energy conservation is the biggest challenge of this generation, Cree CEO Chuck Swoboda told an audience of elected officials and employees Tuesday.

"This facility ... will provide us with new capabilities and capacity to address these important growing market opportunities," he said.

It also will provide space for the company's radio-frequency devices. Developed in large part with government grants for military applications, the technology has commercial uses in broadband wireless Internet networks.

And the new plant should help end the manufacturing logjam that recently has left Cree unable to meet customer demand for its light-emitting diode products, slicing sales and Cree's stock price. Cree's shares hit $35 in April; on Tuesday they closed at $17.94, down 43 cents.

Moving the radio-frequency and power devices to the new building gives room for those businesses to grow and frees space for LED manufacturing at the company's newly expanded headquarters, said John Palmour, executive vice president of advanced devices and a company co-founder.

"We were very much constrained in the current facility," he said. "This was critical to creating enough capacity to do all of the things that we need to do."

The opening, billed as a success story for U.S. manufacturing, drew Rep. David Price, Rep. Bob Etheridge and state Treasurer Richard Moore.

But two years ago, it wasn't clear that the result of Cree's expansion plans would be growth in the Triangle. China and Virginia were both competing for the company's $300 million, 300-employee expansion. Just two weeks before the company's formal announcement in August 2004, Swoboda told analysts and investors that Cree was still considering international locations.

In the end, up to $5.1 million in tax breaks and incentives from the state kept Cree in the Triangle. Swoboda thanked the state Tuesday for "taking a much more progressive view about helping build companies that are already here."

While expanding to Asia might have been cheaper, growing locally made it easier for Cree to shuffle employees and equipment, he said later in an interview.

Cree has about 1,320 employees in Durham and Research Triangle Park and 60 more in California and Virginia. The company also has 67 open positions, said Brenda Castonguay, vice president of human resources.

The Research Triangle Park facility places a greater emphasis on radio-frequency and power devices, but Cree has been working on the products since the company's inception in 1988, Palmour said. Cree already sells products used to power high-end computer servers more efficiently.

The power devices address a market worth more than $3 billion, Palmour said. Already competing in the industry are companies such as International Rectifier, Infineon, Fairchild Semiconductor and Mitsubishi Electric.

The market is growing, albeit slowly, but that's not what's sparking Cree's optimism.

"It's the fact that we could grow tremendously within that market, displacing the existing technology," Palmour said. Cree's silicon carbide technology is more energy-efficient than the silicon devices it's looking to replace, he said.

Cree engineers are developing power components that could help address 78 percent of electricity usage worldwide and reduce energy consumption by 3 percent, according to the company. Ultimately, Cree's power chips could save $35 billion in electricity costs worldwide, Palmour said.

"There are a lot of ifs, but there's tremendous potential," he said.

Cree's work with power devices is "very much ahead of the curve," said Alix Paultre, executive editor of Electronic Products, an electronic components magazine for engineers. When Cree introduces its energy-saving devices for heavy motors, "it's literally going to put a couple of companies out of business," he said.

Meanwhile, Cree expects its radio-frequency business to grow along with WiMAX, a wireless broadband technology that could someday make high-speed Internet as broadly accessible as mobile phone service is today.

Power and radio-frequency devices are relatively small parts of Cree's business today, with power devices contributing just 3.5 percent of Cree's revenue in the third quarter, but they're some of the fastest growing, Palmour said. Taken together, sales of the two technologies have doubled in each of the past two years, he said.

And the power and radio-frequency devices have become more important to Cree as growth opportunities have slowed for LEDs in mobile phones, a market that is becoming saturated.

"It does highlight the importance of continuing to grow those other businesses," Palmour said. "It's not a new thing for us, but the timing is good."