Cree reports Q2 loss in face of ‘challenging operating environment’

DURHAM – Durham semiconductor giant Cree reported a loss of $52.8 million in its second quarter as it continues to navigate a “challenging operating environment,” noted its CEO Greg Lowe.

Among the headwinds is the on-going U.S. trade war with China that continues to impact business.

“Our customers are cautious and awaiting further clarity with respect to future trade policy as the recent trade deal, while a positive development, didn’t really do much for our sector,” Lowe said in a conference call with analysts on Wednesday.

“This lack of visibility, coupled with delays in — on the 5G side and softer EV sales in China continues to impact us in the short term.”

The company is also being hit hard by the current ban to ship to Huawei, a major customer.

All attempts to get a special license have been rejected, noted Cree’s chief financial officer Neill P. Reynolds, triggering a $8.3 million net loss related to Huawei inventory in the quarter.

That doesn’t look to change anytime soon, either.

“We don’t see any opportunity at this time where we will resume shipping any product we currently have on hand to the customer,” Reynolds said in the call. “We will continue to comply with the ban as it relates to Huawei and do not currently expect to record any RF revenue for this customer during fiscal 2020.”

Even with these challenges, Cree said it sees growing momentum for silicon carbide, its next-generation semiconductor material.

“Cree’s expertise in silicon carbide is unmatched, and we’re building on this leadership to accelerate the transition from silicon to silicon carbide,” Lowe said.

“Our $9 billion device pipeline is large and robust. And we are working hard to convert these opportunities into wins,” he added.

Cree is also moving ahead with its plans to invest $1 billion in a new semiconductor manufacturing plant in Marcy, New York.

“We selected a construction company. Work is under way at the site, and we expect the initial production ramp to begin in calendar year 2022.”

The maker of energy-efficient lighting posted revenue of $239.9 million in the period, which beat Street forecasts. Five analysts surveyed by Zacks expected $236.1 million.

For the current quarter ending in April, Cree expects its results to range from a loss of 15 cents per share to a loss of 9 cents per share.

The company said it expects revenue in the range of $221 million to $229 million for the fiscal third quarter. Analysts surveyed by Zacks had expected revenue of $238.6 million.

Cree shares have risen 10 percent since the beginning of the year. In the final minutes of trading on Wednesday, shares hit $50.95, a climb of 6% in the last 12 months.