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EdisonReport has received a Cree letter sent on 12 JUL and signed by David T. Emerson, Executive Vice President – LEDs. In this letter to customers, Emerson states that Cree will “…protect you from the effects of the tariff on these products by absorbing additional costs resulting from these tariffs ourselves so that you can focus on designing and manufacturing great products with Cree LEDs in the United States.”
Cree is the largest U.S.-based manufacturer of LEDs and manufactures the majority of the LED content of its products in the United States, many of Cree’s LED products will be subject to this 25% tariff because the last step in their manufacture occurs in Cree’s wholly-owned China facility.
The industry is desperate for a price increase, so why would Cree miss this opportunity?
The reason is likely because of switching costs. Arch rivals Nichia from Japan, and Seoul Semiconductor from South Korea, are not subject to the 25% tariffs. Most component buyers are likely conducting due diligence now and considering alternatives to Chinese suppliers given this threat of a 25% increase. Saddled with huge engineering costs and certification costs (UL, DLC, etc.) it is expensive to switch. OEMs could move away from Cree based on the threat. Even if these tariffs are temporary—and they may not even happen–Cree knows that if customers begin experimenting with Seoul or Nichia, they may be stay so long as they receive good service.
We suspect that Cree wants to nip this in the bud and send a signal that there is no reason to even consider the switch, regardless of what, if anything, happens to the tariff.