But at first glance LED as a commodity business doesn’t seem to fit.
“Certainly LED is another horizonal technology, but if you look at what Cree does, they play in the high power LED business. It’s not a mainstream consumer lighting business, they sell into emergency vehicles, architecture, retail lighting. That’s why they perform better than other LED companies so in this space they are a specialty vendor.”
Cree had already sold off the luminaire and LED bulb business, Cree Lighting, to Ideal Industries.
“I don’t think the vertical integration play is important here. They had to find customers that need a special effect, high reliability, different colours, there’s no one vertical company that solves those problems.”
The deal is more about the team, he says. This is the business that started Cree, and the team was being held back, says Adams.
“One of the reasons why Cree LED was available, Greg Lowe made a very strategic pivot to RF and were limited in capacity. They have a SiC (silicon carbide) fab in North Carolina and for every wafer allocated to RF they were getting more margin and more return so this was an asset that wasn’t working for the LED business,” he said.
“They want to incentivise us to move as fast as they can and they want to make sure Cree LED does well – this was the legacy business that started the company.”
“The team led by Claude has a desire to prove themselves again, and they have the ability to grow with the supply agreements as we increase our capacity and they were held back by the growth of Wolfspeed,” he added.
The technology is also changing.
“They are moving from SiC to sapphire for LED and moving from North Carolina to outsourced partners,” said Adams. “We have a supply agreement from North Carolina that is very attractive. It’ll be good margins for Smart,” he said. “By the end of the Q1 29 percent of the business will be with outsourced partner in Asia primarily on 6in wafers and that will continue for the 18 month transition period.”
“Us being the only pure foundry model will play to our advantage – there’s enough capacity that I don’t worry about it.”
SMART Modular Technologies is probably the best known subsidiary of the group.
Founded in 1988, SMART Modular Technologies makes memory modules, solid state storage products and hybrid solutions which are critical to electronic devices and are available in standard, custom and ruggedized, high performance, high capacity applications for global OEMS.
In July 2019, Smart Modular Technologies acquired the Embedded Computing Business from Artesyn Embedded Technologies, and also has a high reliability subsidiary and SMART Wireless Computing, formerly Inforce Computing.
The acquisition of Penguin Computing in June 2018 for $85m and the creation of a new business unit, SMART Specialty Compute & Storage Solutions (SCSS), saw the expansion into specialized computing platforms in artificial intelligence (AI) and machine learning (ML), advanced modeling and high performance computing (HPC).
There are other parts of the group, such as SMART Supply Chain Services (SSCS rather than SCSS) which focusses on logistics and there are opportunities for growth by linking to the other parts of the group. “There is certainly an IoT dimension to smart lighting. There are the overlapping trends of smart embedded business with IoT,” said Adams
“The type of packaging we use in Malaysia and Brazil is significantly more advanced than LED packaging so there’s an opportunity to add value and something we are going to explore,” he said.
“We are on a diversification play to grow and scale the business and we are looking forward to extending our group.”
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