DownSouth, just a minor disagreement with your characterization of CREE in G&K terms. I don't own CREE, but I have followed the G&K discussion and have done my own DD. Here's how I would characterize CREE:
CREE has the potential to become a Gorilla because it's in a mass market involving a discontinuous innovation, it controls the IPR of an open, proprietary standard (on a certain method of producing blue LEDs), and there are significant barriers to entry. It cannot become a gorilla unless a tornado forms. Most would agree the tornado has not yet formed and, therefore, it cannot be considered a Gorilla. However, there are signs of a storm brewing on the horizon based on the recent increase in orders of blue LEDs, the backlog of orders, the soon-to-be increased capacity to produce LEDs based on the factory expansion and conversion from 2" to 3" wafers, and the potential size of the market for CREE's technology.
I think there is some disagreement over whether CREE can become a Gorilla for two reasons. First, other competitors can actually produce blue LEDs using different techniques and materials. Most would agree these other techniques and materials are generally inferior to CREE's techniques and materials. How this plays out in the future will determine whether CREE can become a Gorilla or King. For example, these other companies might continue to produce blue LEDs using their current inferior methods, but they'll limp along because they generally won't be able to produce the volume or efficiencies that CREE can achieve, and, if a tornado forms, it's likely CREE would become the King and the others princes. On the other hand, these other competitors might throw in the towel and licence CREE's techniques, in which case CREE could become a Gorilla. In either case, CREE is in a fairly powerful position, which is why I'm continuing to track it.
Second, some may not consider the barriers to entry to be extremely large at the moment. This is because blue LEDs can be swapped for other parts if necessary, and others can produce them. However, the barriers to entry might become more significant as the applications of CREE's technology become increasingly complex.
Personally, I think CREE's blue LEDs are across the chasm and in the bowling alley. I respect there is a difference of opinion on this issue. However, I don't think you can characterize some of the auto manufacturers as early adopters of something that isn't a whole product. I agree other applications of CREE's technology, including the blue laser, are not yet across the chasm or a whole product.
I'd appreciate some feedback because I'm still trying to figure CREE out and acknowledge I may not have summarized some of the issues accurately.
Eric |
