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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Mike Buckley who wrote (17625)2/10/2000 10:26:00 AM
From: FLSTF97  Read Replies (1) of 54805
 
CREE Value Chain

May I expound on this point a little?

Q: Has the value chain formed?
A: Probably not. It appears to be coming together in the product of blue LEDs more than other products.

When is a value chain formation complete? Probably never, but at some point you reach dimensioning growth rates in that chain as you saturate the applications.

I think we can say that CREE's value chain is forming and growing.

In addition to the users of the LEDs one should also include the various universities and government agencies not to mention other purchasers of substrates like Nitres and ABB and Charles and Covad (even if it is a non semiconductor app. they do constitute 10% of the revenue). I'm not sure how to value elements of the value chain that ultimately could be competitors, but I know I'd rather be the one controlling their raw material costs if I compete with them in the device arena.

The value of the gov. is not so much product revenue, but rather their help in launching products and developing technology. They are willing not only to fund the R&D partially but also will buy the product while it is still at a high price point due to low volume.

The universities help train the talent that CREE needs to grow (okay the competitors benefit too, but if you are the biggest it shouldn't be hard to select and pay for the best and brightest.) They also legitimize the technology.

Every little bit of the value chain helps.

FATBOY
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