LED professional: Mr. Farraway you just started as a vice president for Cree, EMEA. What are your 3 to 5 year goals for the EMEA market?
Mr. Farraway: Cree is a major player in the US market so in total we’re over a billion dollars and approaching a billion dollars in lighting products in the USA. So the first task, really, is to try to emulate a lot of that success in the Europe and Middle East regions. In order for us to do that we need to take a lot of the products that we’ve been selling in the USA and modify or alter them so that they’re suitable for the European market. Then we need to bring them into the European market.
We can take the business and grow it by the geographic markets that we address and also the application segments that we address. Now, if you want me to put it into three or five year chunks it’s a little bit harder for me to do because we haven’t really sat down yet and said, “These are the geographies that we’re going to address and these are the products and application segments that we’re going to address.” But really, in three to five years we would want to be a major player in the European market as we are currently in the US market.
LED professional: Are you applying the same global strategy for the EMEA market? Will you cover everything from the component to the finished product?
Mr. Farraway: Well, I look after the fixtures business rather than the semi-conductos business so Cree’s overall strategy, worldwide, remains the same. The overall strategies and objectives of bringing better light to the market – the overall objective of making any legacy light source redundant, replacing it with LED solution, remain the same. When you think about the European market or the EMEA market, we’re starting at a much smaller place than Cree are currently in North America. So, although we will adopt the same overall strategies, the implementation will have to be specifically for the European market. The whole distribution model is quite different in North America than the distribution model here in Europe and there is a lot more use of independent agents, for example. Although we’re doing that in a number of markets in Europe it’s not the traditional way of going to market. In answer to your question, the overall strategy is the same but local implementation will be slightly different to make it more appropriate for the European market rather than the North American market.
LED professional: How exactly will you be changing your products?
Mr. Farraway: Well, the core technology will remain the same – we have some fantastic technology – we pride ourselves in what we call “vertical innovation”. We innovate from the very beginning of the creation of the die all the way through to the light chip to the fixture and then the finished product. But the overall technology will stay the same. So we will still use our nano-technology and we’ll still use our smart cars technology and all of these things. But when you get down to a product level, depending upon the application segment, there are often particular standards requirements on a country-by-country basis here in Europe. For example, we need a CE marked product and the US needs an UL marked product. They have 120 volt system and we have a 230 volt system. Now in the US, custom and practice, in general, is the same across the US because it’s one market – but if you’re trying to sell a street light, for example, here in Europe, the requirements of the Italian market or the Spanish market are completely different to the requirements of the UK market. There are a lot of local variances that we have to accommodate. Now, at the moment, a lot of what we do is to take that US product and modify it to be suitable for central Europe. Going forward, the proposal from me would be to start to design those products in the very first instance to be global products with variants that are suitable for the US market, the Asian market, and the European market.
LED professional: Where do you see the challenges on the EMEA market?
Mr. Farraway: Challenges come from different directions. Of course there’s the whole internal challenge of that product diversification and Europeanization that we have to have and then there’s the internal challenge of “how do we take that product portfolio to market by application and by geography?” So we need to establish a challenge strategy that is going to work for us in terms of our product and our application strategy. And externally, of course, we have a number of competitors – existing legacy competitors – some of whom are adopting LED technology far better than others and are very successful. And those that aren’t very successful are creating space and opportunity within the market place for entrants like Cree to come in and take advantage of. But we’re not the only new entrant. The market has been fragmented – there’s a great deal of discontinuity caused by the LED revolution and this results in a lot of Asian businesses and American businesses coming in. Compared to five or ten years ago the market vista – the competitive vision is very different to what it was. It’s very challenging because there’s a wealth of competitors that we’ve never heard of before and new ones coming up every day combined with all those long term competitors who have already got a great deal of history and momentum in the market place.
LED professional: Technologies are changing fast. How will Cree’s portfolio be adapted to the client’s technology requirements and needs?
Mr. Farraway: There are a couple of areas of interest here. The first one is that Cree is the only major lighting supplier that designs, develops and produces the die, the wafer, the light-emitting chip and then we incorporate it into a fixture of our own design- our own manufacture – and then we market that product. So we’re the only people that are vertically integrated. Nobody else on the market place is – with one small exception that I’m aware of. The term vertical invasion comes from our products! At every stage we’re trying to innovate and improve the overall performance of the product. So the final product that the customer buys is optimized in every way with the light chip that we produced in the first instance in the die. The whole product integrity and optimization is better than anybody else’s. We don’t buy dies or chips from one place, optics from another, a heatsink from a third and hobble it together as a product and offer it to the market. We design the complete product. And we design it from first principles. We understand the application – the end user application – and then we say ‘ok, for this end user application we need a product that has a light distribution of x and y number of lumens. We therefore need a fixture that does this and a light chip that does that.’ And then we work backwards and produce the component parts that we need to give us the product. So we’re very highly optimized to meet the end-user’s needs.
LED professional: Where is that going, going forward?
Mr. Farraway: There are two issues here. The first thing is that in the LED industry there has been a rush in the lighting industry to adopt LEDs and therefore people have lost a lot of their focus on the real specifications of the product. It’s been the case of find me an LED that does the job and I’ll buy it. And there are lots of products out there which are LED variants of existing technology products. But it’s not a very good product. It’s an LED but it’s not very good. It doesn’t have the glare control or the cut-off angles or the performance of the historic products. It’s just been a price fight and availability argument. And price is just a race to the bottom. But what I think is going to happen over the next year or so is that as those price points start to bottom out, the specifiers and the lighting designers and the end users can start to bring their focus back to the true performance of the product and how it meets their needs to meet the needs of their application.
So in shop lighting are you getting good vertical illumination and good contrast ratios? Are we getting color rendering? Do we create the sense of drama that we need to have there? In industrial areas are we getting good quality longevity, low running costs, low cost of ownership through life? Are we getting the right kind of light in the aisles in warehouses? And I think that we’ve lost sight of that a lot in the last four or five years and it’s going to come back.
So I think that’s great for the end user and I think that’s great for companies like Cree because suddenly we’re going to be selling the products again for its performance and its features and benefits rather than “We have an LED version, it’s available and it’s cheap.” I think that’s where we’ve been to a greater extent for the last four or five years.
LED professional: And what are the main technologies you’re focusing on now? Where are you doing the most research?
Mr. Farraway: Well, obviously a lot of that is confidential but in general we’re driving the performance at a chip level. We’re driving the performance of the chip to get better efficacy – as is everybody. We’re trying to get better quality of light. We’re all about quality of light. We believe in the simple term of “better lighting”. And that means whiter, better color rendering and we’re driving to have warm color products. In outdoor lighting everybody has moved to 4000 to 6000 kelvin products because it’s efficient. We want to give you that efficiency at 3000 kelvin so you can have nice warm light in an outdoor environment.
We’re also looking at optical technology. We consider ourselves to be very capable in terms of optical design and with our nano-optics technology – that’s a big thing for us. And then a lot of people are talking about the Internet of Things or Lighting 3.0. You know I’ve seen a number of things here with 3.0. At Cree we talk about Cree 3 which is about intelligent lighting. I won’t use the term controls because we don’t see it as controls; we see it as the ability to be able to dispense with the need for controls. So we have truly stand-alone, independent, intelligent lighting. It knows where it is, can communicate with each other, senses the usage of the application and adapts itself to work. So you fit it, and then it works. We’re marketing those products in the USA and obviously we want to bring that to the European market. That’s probably more of a mid-term plan for us here because we’ve got a lot of other things to do first to get us into the conventional market as it exists now.
LED professional: You told us about connectivity. Is there anything specific that you are doing in the direction of Human Centric Lighting?
Farraway: Yes, it comes back to a couple of comments that I’ve made already: We basically believe in the simple term of better lighting which is about Human Centric or making it a much more comfortable environment. We want our customer’s customers to walk into the environment and feel comfortable and natural – as if they were at home. We talk about this in terms of their retail experience. So we want 3000 kelvin lighting. We want over 90 CRI true white. We want those things in there so it’s Human Centric in that regard. We’re looking at circadian rhythms and where that’s the appropriate technology we’ll be looking to incorporate that as well. But there’s still a lot of discussion about whether that is a real benefit or not. It depends on the application whether it is or is not. We’re looking at that and then this whole thing about intelligence that we spoke about before – trying to make the light adapt to the application and the end-user’s use of the space. So it senses where it is, it senses what the usage is, what the ambient light levels are and what the presence is. It adapts itself to work for the human element – the human component. So yes – we’re looking into three or four different areas.
LED professional: What’s new here at the show?
Mr. Farraway: We’re introducing our high bay luminaire CXB and some waterproof products and linear fluorescent tubes and some true white MR16 halogen replacement lamps. And that’s a very early step of trying to come out of our current sweet spot – which is street lighting. We’ve got some great street lighting products – we’re continuing to develop them and to expand those across Europe. But we do need to get into our other application segments. The industrial segment is an obvious parallel synergistic application to street lighting. You still need to talk about quality of product, long life, cost of ownership through life. And we can provide all those things. We use our optical controls to give us great distribution of light for warehouse aisle racking or big box retail – whatever we’re doing – so we’re moving into that. A number of our products are focused on our expansion into the industrial segment. What you’re seeing from Cree at the moment is the movement away from just street lighting into the general, large area flood lighting and industrial applications. And we will continue to do that over the short term whilst discussing what application sections to go in to.
LED professional: What applications are you looking for?
Mr. Farraway: At the moment we’re very much focused on street lighting – so we’re moving from street lighting to flood lighting and industrial. Moving forward we’re looking at other segments such as commercial, commercial office, education, healthcare, retail. We can’t do all of those but on a country-by-country basis we can look at those and say ‘where can we bring innovation, differentiation, value to the market? Where is there a buoyant market?’ So for example, you would be silly to try and sell office lighting in a country like Spain at the moment because the market isn’t very buoyant. There’s not very much in commercial offices going on. But in the UK it might be a good opportunity for us. So you have to look at that type of thing. And retail lighting. The Italian market might be a great market for us. Or the UK market might be good. The Nordic markets – maybe not as good. We have to look at that kind of thing and figure out where the opportunities lie for Cree – given the technology and the product ranges that we have.
LED professional: Thank you for talking to us.
Mr. Farraway: Thank you.
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