Wednesday, May 19, 2010

How a NC Company Plans to Obsolete the Light Bulb

The second of a series on the NC CEO Forum, with a look at Cree Inc. and its efforts to establish LED as the leading lighting source in the U.S. and abroad.

One of the most energizing speeches at the 2010 NC CEO Forum came from the chairman and chief executive of one of North Carolina’s burgeoning success stories.

Chuck Swoboda - click to read more about Mr Chuck Swoboda of Cree Inc. (left) unleashed a wave of straight talk during his allotted time at the event, overriding any post-lunch urge to doze off. Cree, a “23-year-old overnight success,” is busy making the case that LED lighting is a greener and, over time, cheaper way of illuminating the world. The CEO readily acknowledged that his company has faced an uphill battle against established companies and incandescent technology that he believes is well past its prime.

“One day you will see incandescent bulbs on a shelf in a museum,” Swoboda said as he showed the audience a 75-watt light bulb, comparing its 21st century usefulness to vinyl records. He referred to florescent bulbs and an intermediate, and still inefficient, solution to lighting, predicting that both would eventually give way to new technology.

LED lighting is “the cleanest and cheapest energy that we never use.” The issue? Established lighting manufacturers are fighting the movement, “protecting what they have.” Interestingly, Jerry Greenfield told a similar story about how Ben & Jerry’s early in its life had to fight through bullying tactics from Häagen-Dazs and then-parent company Pillsbury.

Swoboda cautioned that preventing innovation “doesn’t work,” using the current challenges of the U.S. automakers to prove his point. Cree, in contrast, relishes challenges. “We listen to what our competitors say we can’t do and basically we just go do that,” he said. Cree also nurtures a culture where employees are challenged daily to make the Durham company’s own products obsolete. “We look for people who are unafraid of failure but unwilling to fail,” he added.

imageOn a bigger scale, Swoboda lamented how the governmental and regulatory environment stymies innovation in his industry, suggesting some necessary adjustments. First, the U.S. needs “progressive” regulation where subsidies are replaced with higher energy standards than what are in place now. Another issue involves purchases contracts for state agencies, which are creating a barrier of entry for LED lighting.

Cities such as Raleigh and Los Angeles are experimenting with cost-saving lighting changes as are countries such as China. In fact, the vast majority of Cree’s business involves foreign markets looking to compete against the U.S. with more efficient infrastructure rather than cheaper labor costs, Swoboda said.

Before his speech, Swoboda gave me another compelling argument for supporting LED technology – employment opportunities. Cree has grown from a team of five engineers in the late 1980s to a publicly traded company with several thousand employees. (The company earned nearly $30.7 million in its last fiscal year, which ended June 30, 2009.)

Finally, he said energy regulators need to do their jobs and create guidelines to encourage utility companies to sell less energy. “We need to change the incentive structure,” he said. “So they can make money by saving energy.” Cree meanwhile is doing its part – Swoboda used the event to pledge up to $1.5 million over the next three years to provide LED lighting in kitchens for homes built by Habitat for Humanity.

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