July 29, 2004...Historically, just when outsiders start to question Cree's capability to withstand their latest round of challenges, that Durham, North Carolina USA compound semi leader always tends to surprise everyone. I've been inside the wide bandgap field so long now, that I've learned from experience... never underestimate Cree's capability, nor their will to win.

After over 20 years in business, Cree is now employing 1100 people, and I've had the pleasure of tracking the company since it emerged as the brainchild of fresh grad students out of North Carolina State University. That original "can do" spirit and youthful optimism continues to pervade every facet of the company. I've never in my 30 years of following advanced semiconductor companies seen anything to compare with them, including Intel and Apple. Cree is in a class by itself. So when the pressure started to mount over the past year as more and more competitors in the blue spectrum LED business made their presence known... and their intentions to turn this business into a low price commodity business, I just kept a "wait and see" attitude. Traditionally, every time rumbles start up about how Cree won't be able to stand up to the competition, they not only stand up to the challenge, Cree actually starts quietly writing a fresh new playbook for the advanced LED industry... confidently filling the quarterback role.

Believe it or not, the advanced LED business, especially those wearing the blue spectrum colors, are an international team. And, contrary to what you may perceive as the truth, Cree is a team player. They've supported every technical conference devoted to the wide bandgap (WBG) materials and device development since wide bandgaps came into play in the greater worldwide arena. The international technological synergy fostered by technical leaders like Cree's co-founders, Calvin Carter, John Palmour and John Edmond, cannot be measured by anyone on the outside. But the techs who have attended SiC technical conferences like ICSCRM and the various GaN meetings know well of their individual and collective contributions. That's why we honored them with our Pioneer Awards. They are major team players.

The fact that Cree reported an outstanding year didn't surprise me at all (ref: our July 29 headline news). Neither were any of the analysts who routinely track them surprised (they're catching on). As a longime industry insider, Cree's performance this time gave me a feeling of personal pride, because, over the years, I've come to feel like part of that global WBG team. Cree's blue spectrum LED unit shipments increased a whopping 65% while their "blended average sales price" declined only 7% since the fourth quarter of FY '03 and those results were offset by a 19% reduction in their average LED costs, which contributed to their profitability. And what's possibly even more exciting to those of us who have such faith in the importance of wide bandgap devices for electronic applications, the people at Cree Microwave met their goal by turning the corner to profitability... reporting a record $41,000 in profit as compared to a negative gross profit of $370,000 in Q-3. As Cree's CFO said in their conference call, "At the end of our FY 2004, our balance sheet was outstanding!" And the topper for their year was the acquisition for $10.7 million of ATMI GaN business which is sure to pay off handsomely in the years ahead. If I could invest in the companies I report on (which I can't... and won't) Cree would be the first one I'd put my personal bets on.

And outsiders best not forget that this unique company, which continues to maintain 100% of their manufacturing in the USA, enjoyed an increase of 41% in USA government contract revenues. What I find even more interesting... and worthy of a spot on CNN's "Lou Dobbs Show" (a major supporter of American companies who figure out how to compete effectively without going offshore) as yet another heroic USA success story during tremendously "challenging" economic times in this country, is that blue spectrum LED sales to Cree's Japanese distributor, (Sumitomo Corporation) represented 33% of total revenues and four of Cree's top 10 end customers were located in Japan. In addition, Osram (Germany) and Agilent (much of whose business now comes from the German arm) each accounted for 13% of Cree's revenue.

Those not in the know may wonder: "What's the significance of moving to 3" wafers and the continued expansion in capacity?" One clearcut goal: continued leadership in all sectors. They admittedly will have yield challenges as they move to 3" (Cree traditionally thrives on yield challenges), but the pullers can take it and the MOCVD epiwafer reactors are already geared to take the larger diameters. Cree's knowledge of SiC substrate growth and GaN epi technology is unsurpassed. Behind 3" SiC and further guaranteeing their place in the fast-paced technology world are 4" SiC wafers and the early iterations of native GaN substrates as Cree incorporates one of the true world class GaN growth groups into their team, under the direction of George Brandes.

And Cree's President and CEO, Chuck Swoboda, has his eyes wide open to the challenges. As he said in the conference call, "While it will take us at least four quarters to complete, we have started the conversion of the three-inch wafers which we expect will more than double the number of chips per wafer, and should result in a significant cost reduction once we have worked through the transition. We need to continue to develop new LED products with increased brightness and lower costs to maintain our leadership position in a very competitive market. We must work with our customers to get our new products designed into the key applications, and insure that they can win the market with these products. Although we must continue to overcome these and other obstacles in our business, we look forward to the challenge and building on our past success. We realize that we compete with a number of companies around the world who are investing in the LED market, and we continue to evaluate the competitive situation, and factor it into our expansion plans and targets for the year ahead." Chuck also mentioned that "We are evaluating several options for expansion on our current site, as well as other U.S. and international locations."

In order to position Cree's Shottky diode business for long-term success and help give their LED manufacturing some additional growing room, Cree announced that they have decided to qualify their Sunnyvale, California fab to able it to produce three-inch, SiC Shottky diode products and to transfer production there over the next several quarters. "This move should also provide us the facilities, equipment and people to convert to four-inch wafers and expand the silicon carbide power device business for the next several years, and enable us to better utilize our Sunnyvale capabilities," said Chuck Swoboda in the conference call. Cree has already done the pilot release of their first 60 watt SiC MESFETs and have garnered favorable feedback from customers. "Although this is longer term opportunity, we believe the SiC and GaN microwave devices we are developing could potentially be disruptive technologies for the next-generation wireless infrastructure in communication systems." In the laser area, Cree continues to extend the lifetimes for both their 405 nanometer products as well as the very short wavelength devices which are part of our government funded SUVOS (ultra violet lasers) development contract.

Chuck confided that, due to the rapid expansion of their LED business, that activity on the near term 405 nm product has slowed a bit, but that Cree is now making the investment to get that development back to full speed, with the target of a commercial 30 milliwatt design by the end of FY '05 and that the 30 milliwatt product would "raise the bar" even higher... (which Cree loves doing). "To put this in perspective," he said, "a 30 milliwatt chip should enable us to produce a greater than 100 lumen per watt, white LED which is believed to be one of the critical technical milestones to commercialized LED lighting." Cree's newly announced XLamp LED product (see news story, Cree Wraps Up FY-04 on an All-Time High & Launch of XLamp, this issue) is the company's first step in their strategy to be a leader in the market for LED based lighting. "As we demonstrated with our results over the last few quarters, our value proposition continues to win in the market, especially in applications where the combination of performance, costs, quality, and IP are important factors in the customer's decision process," said Chuck. And as he did when delivering the keynote address at our Blue 2004 meet in Taiwan last May, Chuck again underscored that... "In addition to our focus on increasing performance and in reducing costs, our legal team in actively putting companies on notice of potential infringement issues regarding Cree's nitride chip and white LED IP. We believe that this effort is important to reinforce the value of our intellectual property in the market which we believe is an important differentiator."

So my advice to those on the outside looking in is... whether you're an observer, an investor, or prospective player in the wide bandgap field, take the advice I'm sure is shared by their wise colleagues and competitors alike, and never underestimate Cree.

July 29, 2004...Veeco Instruments of Woodbury, New York USA has received an initial $10 million order to supply Lumileds Lighting of San Jose, California USA with Veeco's high end "GaNzilla" Turbo Disc gallium nitride (GaN) MOCVD production systems. The initial order was received during Veeco's second quarter, and is part of a multi-year purchase order for additional systems. The GaNzillas are produced in Veeco's Somerset, New Jersey plant, which resides next door to TurboDisc's original parent company, Emcore. The association with Lumileds began some time ago with Emcore. Lumileds is a user of a variety of MOCVD reactors and the Veeco order further fortifies Lumiled's impressive ramp as that company continues to lead in the increased production, worldwide, of all colors of high brightness LEDs (ref: July 13 editorial Lumileds Ramps and July 15 news Lumileds and Agilent Team to Co-Produce New Mid-Range LEDs).

Commenting on the continued ramp, Michael C. Holt, CEO of Lumileds, said, "Our experience with Veeco's GaNzilla reactors has been excellent, and led to this large equipment order. As we continue to enable never before possible lighting products with our Luxeon LEDs, we look forward to working with Veeco to ramp our GaN production program." Commenting on behalf of Veeco, Edward H. Braun, Chairman and CEO of Veeco said, "We are pleased to be a strategic equipment partner providing critical MOCVD epitaxial deposition equipment and support to Lumileds. The rapid emergence of high power, high-brightness LEDs will be helped by the collaborative efforts between our companies. Veeco is committed to maintaining a strong presence in this fast growing market." The news release further noted that, according to Strategies Unlimited the GaN LED market reached a record $2.7 billion in 2003 and is forecasted to reach more than $5 billion in worldwide revenue by 2008.
Company news release

July 29, 2004...The multitalented USA wide bandgap materials and device leader, Cree Inc. of Durham, North Carolina USA wrapped up their fiscal '04 year with an outstanding report card in all areas of their diverse endeavors, but most especially their contributions to the field of blue spectrum LEDs, which Cree has pioneered since their inception in the mid 1980s. To cap off their impressive earnings report (see details in their press release and via the replay of their conference call), Cree said they are transitioning on schedule to 3 inch SiC wafer production and announced that their new 7090 series XLamp LED product is now available in production quantities. According to Cree, this is the first high-powered packaged LED product that Cree has released as part of the lighting product strategy they first announced last fall and targeted as a true alternative to the classic, entrenched incandescent bulb as a Solid State Lighting (SSL) solution over conventional sources in architectural lighting and general illumination applications.

The 7090 series XLamp product utilizes a high-power surface mount package designed to operate at 1 Watt with a typical operating current of 350 mA and a footprint of 7 mm x 9 mm. According to Cree's President and CEO, "Our X lamp is in the 25 to 30 lumens per watt range." It is available in all the blue spectrum hues, including blue, green, and white versions based on Cree's XB-900 chips as the light engine and is also available in a red version (Yes, red. Cree buys their red die, however, as they continue to specialize in blue). This new product is at a brightness level that now puts Cree in contention with white LED leaders like Lumileds and Nichia for replacements for conventional, incandescent lighting. According to Chuck, "Availability of our XLamp packaged LED product is an important first step in our strategy to be the leader in the market for LED lighting and should create greater visibility for the performance capabilities of our LED chip and materials technology. The XLamp product is designed to provide longer life, lower maintenance cost and energy consumption, as well as smaller space requirements compared to an incandescent bulb and other conventional lighting technologies."

Providing an update on early stage customer reaction for the new product Norbert Hiller, VP of Cree Lighting said, "We have been sampling selected customers over the past two quarters for potential use in applications such as channel letters, appliance lighting, track lighting and reading lamps. Feedback on the design and performance has been very positive. We can now focus on ramping our production capability to service our customers while continuing to expand our product line to address the needs of a number of emerging applications including automotive headlamps and backlighting for large format LCD screens." Company news release

July 29, 2004...Coming out of its first quarter as a publicly held company, Color Kinetics Incorporated of Boston, Massachusetts USA which now trades under the Nasdaq symbol "CLRK" ) has introduced yet another clever intelligent solid-state lighting (SSL) system. This one is called the iColor Module FX which is a new lighting medium in the form of a 6” (15.2 cm) square modular unit for wide-ranging designs that call for singularly controllable points of light -- from interior surface designs, to backlit fabrics, to three-dimensional objects. The new unit incorporates 9 or 36 tri-color LED nodes, mounted on a printed circuit board, and driven by Color Kinetics’ custom Chromasic microchip. Each LED node within the module is individually controllable, whether applied across one unit or a large-scale, multi-unit installation, which gives lighting designers a creatively flexible, extensible medium with which to bring complex lighting designs to life, including scrolling text and images, video and animations. More details are in the company news release.

July 26, 2004...During last Friday's earnings report conference call, John Fan, President and CEO of Kopin Corporation of Taunton, Massachusetts USA told analysts that... "While Kopin continues to make good technical strides improving product performance, the global market remains extremely competitive, and it is clear to us that the current business model for our LEDs is not sustainable. We are exploring a range of business models that will encourage and enable us to combine superb technology with a low-cost structure. We hope to complete our evaluation by the end of this year." Loosely translated, that means Kopin will either exit the LED business altogether, move its LED manufacturing to Asia, and/or team in some way with one or more established Asian LED manufacturers. Kopin is a pioneer compound semi company, but it came to the HB-LED business, specifically producing blue spectrum GaN on sapphire LEDs, grown by MOCVD, comparatively late in the game.

Orders for Kopin's HBT products evidently remain strong and the technology for the company's CyberDisplay line continues to improve, with the percentages of revenues from color products continuing to climb. Answering a question from CIBC's Earl Lum regarding where John's vision is regarding the future of Kopin's LED involvement, John answered, "Our goal is to see whether we can combine the two primaries; high technology for us (in the USA) and low-cost manufacturing systems in Asia. And this is where the model will end at this point."

Answering a variety of poignant questions posed by analyst Jed Dorsheimer of Adams, Harkness & Hill, Kopin revealed that it has five (Aixtron) reactors employed in the development of CyberLite HB-LEDs in their Massachusetts facility. "We always try to develop our technology here, and eventually we always think we're going to move overseas. But we never installed all of our machines here." Kopin's "labor-intensive" part of their CyberDisplay business, for example, was moved to Korea as planned. From the gist of what John continued to say, it sounded as though Kopin is considering having the CyberLite line follow suit and move quickly to Asia as well, but it was implied that no firm decision to either exit the business or team with an established Asian producer or outsource firm had yet been made. "The key matter for us is that technology alone is not going to win this market now. You've got to have the cost structure."

July 26, 2004...Microsemi Corporation is a very interesting USA publicly held company that continues to dabble in the compounds. Now at 1500 employees and based in Irvine, California, Microsemi specializes in providing high-reliability discrete components to military and aerospace customers. Primarily a silicon house, what they do best is figure out how to package our industry's wares and integrated them into total solutions, which often entails the packaging of extremely high temperature devices. Through the years, they've often served in a catalyst function helping enable many leading edge compound semi devices to work more efficiently in harsh operating environments. For example, Microsemi was an early stage underwriter of GaN on Silicon technology and helped prove that GaN on Si technology could, indeed, work. Microsemi eventually dropped that effort when facing the reality that, because silicon absorbs light rather than helping emitting it, that in order to make GaN on Si packaging cost-effective in a manufacturing environment, one has to lift off the GaN layer... which tends to get a bit costly, putting it right back up into the cost realms of GaN on SiC or sapphire.

According to Microsemi spokesperson Steve Litchfield, while Microsemi continues to make some of its own GaAs ICs for WLANs, when this silicon industry-heavy company gets involved in the compounds, it generally buys the die and figures out a better way to work the hot spots, sticking primarily to the high end packaging side of the business. They still sell a few SiC-based Shottky diodes, and Microsemi "dabbled" in the HB-LED packaging business at their Boston facility, under the direction of longtime friend and supporter of CompoundSemi Online, Bob Karlicek. During Microsemi's involvement in the HB-LED packaging business, they created some very innovative ways of dealing with thermal management in the packaging of HB-LED die, which the company bought from a variety of sources. According to Steve, Microsemi while it quietly exited that business, they'll hang on to their hard-earned IP as it directly relates now to their silicon diode packaging business, which remains intact in the Boston facility. Steve also indicated that, while Microsemi will not be actively pursing the licensing of that technology to other packagers of HB-LEDs, the company would be willing to entertain the notion of doing so, which makes good sense as it's considerably less expensive to license IP than it is to defend it!

So what's the next hot spot for Microsemi? According to Steve, the Washington DC military contract scene is looking especially hot these days, geographically speaking, and Microsemi has long been active as a DoD contractor. Steve has already hooked up with a compound semi industry veteran CEO, Jim LeMunyon (ref: Sept 4, 2003 news: Jim LeMunyon Joins Prestigious Beltway Consulting Firm). As longtime developers and users of compound semi devices know, one thing our world does best is manage extremely high temperatures, and that remains Microsemi's forte'... thermal management.

July 26, 2004...Newport Corporation of Irvine, California USA has generously set up a new series of travel awards totaling $10,000 for students presenting papers at the two largest meetings of SPIE – The International Society for Optical Engineering. Called these Newport Research Excellence Awards, these grants will be open to any student from a USA university who has had a paper accepted for presentation at the SPIE Annual Meeting or Photonics West Symposium. The grants will be awarded annually by SPIE. Recipients will be selected based on both the quality of the original research described in the submitted paper(s) and financial need. Newport Research Excellence grant winners will also attend a recognition dinner during the meeting where they will be given the opportunity to discuss their research with industry leaders.

"Newport Corporation has a long history of supporting basic research at the university level. We believe this research is critical to ensuring the future health of the entire photonics industry," said Gary Spiegel, VP Worldwide Sales & Marketing at Newport. "Moreover, today’s students will be tomorrow’s leaders in technical societies like SPIE. In this context, we are proud to collaborate with SPIE in enabling outstanding students to present their research at these prestigious conferences." And adding to that, Eugene Arthurs, Executive Director of SPIE said, "Technical conferences provide a unique and important forum for researchers to interact with their peers and exchange ideas; however, finding funding for student travel is always a challenge in any research group. These new annual awards from Newport will help several outstanding students travel to conferences that might previously have been impossible for them to attend. On behalf of SPIE, and particularly our student members, I would like to thank Newport Corporation for their generosity in funding these awards." To apply for the grants, here are the hotlinks direct to the pages on both the Newport and SPIE websites.

July 22, 2004...According to an article today in DigiTimes titled Unity Opto Technology to Expand Monthly White LED Capacity on Increasing Orders by Irene Chen and Carrie Yu, Unity Opto Technology Technology Company Ltd., an HB-LED (and optical module) manufacturer that produces the full range of LED colors, plans to expand its monthly white LED capacity to 30 million units in the September timeframe, which represents a significant rise from their current capacity of 10 million units. The reason given for the ramp is the receipt of large orders from major international companies. Unity Opto evidently began shipping their blue spectrum LEDs for small to medium LCD white backlight applications earlier this year and plans to offer products for the larger, 17 inch display backlight applications by September. The company also cites automotive applications and optical fiber modules as other push applications, which are projected to increase the company's revenues in the second half of the year to between NT$1.4-1.5 billion which would be up from NT$958 million in the first half.

July 21, 2004...Market research/conference producer Intertech of Portland, Maine USA now has its program in place for the 5th annual meet, this year called LEDs 2004: The Strategic Summit for LEDs in Illumination. While there are a growing number of meets for the solid state LED industry, this one is noted for being especially eclectic. It will be held again in San Diego, California October 20-22 and will feature over 25 speakers, a panel discussion 10 networking functions, 55 exhibitors, and what Intertech calls a Lighting Design Forum, which will be held during the reception on October 21st. For more details, consult the company news release.

July 21, 2004...President Takashi Matsuura of Toyoda Gosei Co. Ltd announced today from the company's Aichi, Japan office that Toyoda Gosei has completed the jurisdictional procedures involved to officially include Toyoda Gosei as one of the "co-patentees" through what is evidently a "partial transfer" of shares in the patent rights to patents noted as "WO02/054502" and "PCT/AT01/00364" which relate to the white LED patents jointly owned by three European companies Tridonic Optoelectronics GmbH of Austria, Leuchtstoffwerk Breitungen GmbH of Germany, and Litec GbR of Germany, which Toyoda Gosei has been working with for some time as a licensee. Other related patent applications were also included in the co-ownership arrangement. We first learned of the relationship between Toyoda Gosei and the three early stage developers of high luminosity GaN white LEDs in November of 2001 when they issued a news release (and ref our coverage) at the time the four companies began their relationship, which resulted in the launch of Toyoda Gosei's "TG White Hi" LED which, at the time, targeted a ramp for Feb. 2002 boasting luminosity levels as high as 400 millicandela (mcd) and a 20mA forward current. Company news release