June 13, 2011 / 10:22 PM / 7 years ago

Cree CEO says LED payback still too long

LOS ANGELES (Reuters) - LED lights need to pay back hefty investments a lot quicker before they will go mainstream in offices and houses, the chief executive of LED maker Cree Inc (CREE.O) said on Monday.

Energy efficient light emitting diodes (LEDs) have long been seen as the future of the lighting industry, but mass adoption has been slower to materialize than many had hoped.

“At the end of the day we’re still asking people to pay a pretty high premium for LED lighting, and the paybacks are too long,” Cree CEO Chuck Swoboda said in a phone interview as part of the Reuters Global Energy and Climate Summit.

Cree recently introduced a product aimed to replace overhead fluorescent lights in commercial buildings that gives building owners a one to two year payback, Swoboda said, rather than the typical two to three years.

“That’s just one product. There are thousands of those types of products needed to drive adoption,” Swoboda said. “We still need more innovative products that are as good or better than what they replace.”

Durham, North Carolina-based Cree has struggled with weakened demand for its energy efficient LEDs and stiff competition from a slew of new Asian competitors.

A darling of Wall Street as its shares soared during the market turmoil of 2009, Cree’s stock has fallen 54 percent since April 2010, closing at $38.42 on Nasdaq on Monday.

Still, the company was held up as an example of American innovation and job creation when President Barack Obama toured its Durham, North Carolina headquarters on Monday.

The weak economy is partially to blame for slowing LED adoption in the United States, Swoboda said.

“There has been an inherent slowdown in investments in infrastructure,” Swoboda said.

LEDs are used mainly to light consumer electronics products such as mobile phones and television screens, but makers hope to unseat incandescent and compact fluorescent light bulbs as governments, businesses and consumers seek to cut electricity costs and curb greenhouse gas emissions.

Higher efficiency standards for buildings would go a long way toward speeding the market’s growth, Swoboda said. Obama’s jobs council on Monday recommended investments in energy efficiency as one of several jobs-boosting ideas for the nation’s stubbornly high unemployment.

    “We’re getting close to where it pays for itself, we’ve just got to get someone to push the ball over,” he said.

    Meanwhile, a shift to new regulations slowed growth in China, which accounts for about 40 percent of Cree’s sales.

    The Chinese market should improve in the next six months, however, Swoboda said.

    “Now that the regulations are out and the new five-year plan is out, I would expect that here over the next six months that we will slowly see that market start to regain some momentum,” Swoboda said.

    The European market, also, has been slower to gain traction than many had hoped, Swoboda said, though he still sees Europe as a significant business opportunity.

    “They have a relatively aggressive policy toward energy efficiency,” Swoboda said. “It hasn’t adopted LED lighting as fast as we would have originally targeted, but we see some momentum there.”

    Reporting by Nichola Groom and Peter Henderson; editing by Bernard Orr

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