Greg Merritt's presentation to the Triangle AMA October 2011 luncheon.

1. MARKETING THE
LED REVOLUTION
October 20, 2011
Greg Merritt

2. Agenda
• Cree
• Why LED Lighting?
• Barriers to Adoption
• Cree’s Approach / Examples
• Q&A
Copyright © 2011 Cree, Inc. pg. 2

3. Who is Cree?
• Headquartered in Durham, NC
• Founded in 1987 by 5 NC State University
graduates
• Invented the “blue LED” in 1989
• Now >5800 employees (>2000 in Durham)
Copyright © 2011 Cree, Inc. pg. 3

4. Cree: A Global Company
R&D Manufacturing Sales
•Durham, NC •Durham, NC •Durham, NC •Hong Kong
•RTP, NC •RTP, NC •Racine, WI •Shanghai
•Racine, WI •Racine, WI •Germany •Shenzhen
•Santa Barbara, CA •Huizhou, China •France •Singapore
•Italy •Japan
•Turkey •Taiwan
•United Kingdom •South Korea
Copyright © 2011 Cree, Inc. pg. 4

5. Cree Businesses
Cree
SiC/GaN
SiC/
Materials
Copyright © 2011 Cree, Inc. pg. 5

6. Cree Company Mission
LEAD THE
LED LIGHTING
REVOLUTION
to obsolete energy-
inefficient lighting

7. Track Record of Growth
$1,100
LED Power & RF
$1,000
$900
$800
$700
CAGR
$600 23%
Revenue $500
($ Millions)
$400
$300
$200
$100
$-
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11
Copyright 2011, Cree, Inc.
Copyright © 2011 Cree, Inc. pg. 7

8. The Market is Large and Adoption is Low
Global Lighting Market Large LED Lighting Opportunity
• Adoption is growing, but still low
$108 Billion*
• The tipping point is near, but
Fixtures
Outdoor**
Outdoor **
disruptive technology requires
Residential
demonstrable end user
Lamps Fixtures
Commercial
Industrial
applications
Commercial
Industrial
Residential
• Recent success has proven that
a vast upgrade opportunity
exists beyond the traditional
market
Our strategy is not to wait for the market, but drive adoption ourselves
*Source: Freedonia Group estimate for 2012 (Excludes manufactured goods) / **Non-Building / *** Source: Philips Lighting
Copyright © 2011 Cree, Inc. pg. 8

9. So, what’s the Big Deal about
LED Lighting?
Copyright © 2011 Cree, Inc. pg. 9

10. Why is Lighting important?
• 2nd largest user of electricity
behind Heating and Air Lighting
conditioning 22%
• For businesses, the
percentage is much higher –
up to 65% for retail stores US Electricity Usage*
Widespread use of LED Lighting can cut electricity
usage for lighting by up to 67% -- a 15% reduction
in total U.S. electricity usage (1987 levels)
*Source: U.S. Department of Energy
Copyright © 2011 Cree, Inc. pg. 10

11. We’ve Seen This Before….
Vacuum
Transistors
Tubes
1940s – 1960s
VHS DVD
1980s – 1990s
Flat
CRT Panel TV
TV and
1990s – 2000s Displays
Film Flash
1990s – 2000s Memory
Light Bulbs/ Solid
Fluorescent State
Tubes Lighting
2000s – …
Copyright © 2011 Cree, Inc. pg. 11

12. What Are the Barriers?
• LED Lighting initial cost higher than traditional
lighting in most cases – “sticker shock”
• Willingness of Customers to accept Life-Cycle
Cost Argument – “It’s good for you”
• New technology – Fear of the Unknown
– Risk of technology failure
– Risk of financial failure
– Don’t want to go first – “pioneers and arrows”
• Acceptance or Belief of the Benefits
Copyright © 2011 Cree, Inc. pg. 12

13. And, Good Ole Skepticism…
Everyone is
trying to talk
“green”
•Eco-friendly
•Energy-efficient
•Sustainable
•Renewable
•Reduce your
carbon footprint
Copyright © 2011 Cree,2011
Copyright © Inc. pg. 13

14. Addressing the Issues
“Houston, we have a problem”
Copyright © 2011 Cree, Inc. pg. 14

15. Higher Initial Cost – Financial Benefits
Accumulated Upgrade Savings
Using Cree Fixtures instead of CFLs
• Education
$15,000
• Payback “calculators” $10,000
$5,000
• Work through their #’s
$-
• Customer examples $(5,000)
Years of Operation (50,000 Hours)
Copyright © 2011 Cree, Inc. pg. 15

16. Raleigh, NC
Raleigh Convention Center - 2009
49% less energy than HID
Payback in just over 3 years
Estimated $636k savings over 15 years
Copyright © 2011 Cree, Inc. pg. 16

17. City of Los Angeles
Number of street lights
140,000
being replaced in LA
Total program cost $57 Million
Estimated cost savings $10 Million/yr
Estimated payback 6 Years Or
period Less*
Estimated energy
savings 55%**
Enabling the largest LED lighting retrofit undertaken to date
*7 years initial target / **40% initial target
Copyright © 2011 Cree, Inc. pg. 17

18. Consumer Marketing
• Relevant
• Compelling
• Straightforward
Copyright © 2011 Cree, Inc. pg. 18

19. Countering Technology Risk
• History of Success
• Conservative Claims
• Third-Party Endorsement
– Testing
– Standards
– Testimonials
Copyright © 2011 Cree, Inc. pg. 19

20. Do You Have a Track Record?
260
240
R&D Capability 231 LPW
220
200 208 LPW
Cool White (lumens/Watt)
180 186 LPW
160 161 LPW XM-L
High Volume
140 Production
131 LPW 3 yrs XP-G
120
HID XP-E
100 XR-E
Fluorescent
80 XR-E
60 CFL
40
LED
20 Incandescent
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Copyright © 2011 Cree, Inc. pg. 20

21. Don’t Overreach
• Pushing the limits on benefits claims is dangerous
• Only takes one counter-example to damage your
cred.
• Under-promise and Over-deliver
Copyright © 2011 Cree, Inc. pg. 21

22. Independent Testing
Copyright © 2011 Cree, Inc. pg. 22

23. LED Lighting – Other Benefits
• Emits Very Little Heat
• Long Lifetime
• High-Quality Light
• And, more….
Copyright © 2011 Cree, Inc. pg. 23

24. LED Lighting Emits Very Little Heat…
Let’s melt some
Chocolate
Bunnies!
Over 43,000
views – average
views 1-5k
Copyright © 2011 Cree,2011
Copyright © Inc. pg. 24

25. LEDs Last a Long Time….
LED Lighting product warranties of 3 years, 5 years
and 7 years depending upon product type
Well-designed systems with Lighting-class LEDs at
low TA, TJ will run a very, very long time…
Copyright © 2011 Cree, Inc. pg. 25

26. Lifetime of 50,000 hours is:
137 Years at 1 hour/day
68.5 Years at 2 hours/day
34.2 Years at 4 hours/day
22.8 Years at 6 hours/day
17.1 Years at 8 hours/day
11.4 Years at 12 hours/day
5.7 Years at 24 hours/day
A very long time….
Copyright © 2011 Cree, Inc. pg. 26

27. Very High Quality Light…
“Identify the LED” Contest – Would you have been right?
Copyright © 2011 Cree, Inc. pg. 27

28. Beautiful LED Light
Copyright © 2011 Cree, Inc. pg. 28

29. Retail Display – Light Quality Improved
Lighting Before – Total Wattage = 158W; CRI = 81
Cree LED Lighting – Total Wattage = 36W; CRI = 93
Copyright © 2011 Cree, Inc. pg. 29

30. BUT, The Best Argument is….
• “Aw Mom, Everybody is Doing it”
• Peer examples
• Competitor examples
• “Light post” examples
Copyright © 2011 Cree, Inc. pg. 30

31. CreeLEDRevolution.com
Copyright © 2011 Cree, Inc. pg. 31

32. Case Studies
Copyright © 2011 Cree, Inc. pg. 32

33. Case Studies
Copyright © 2011 Cree, Inc. pg. 33

34. Case Studies
Copyright © 2011 Cree, Inc. pg. 34

35. Let Your Evangelists Tell The Story
Copyright © 2010 Cree, Inc. pg. 35

36. Let Your Evangelists Tell The Story
Copyright © 2010 Cree, Inc. pg. 36

37. Key Component – Revolutionary Tone
• A little irreverence or cheekyness
• Not take ourselves too seriously - Anti Al Gore
• Challenge the staid and the traditional
• It is a revolution, and some people are going to
get hurt
• Have a little fun…
Copyright © 2011 Cree, Inc. pg. 37

38. Benjamin Moore Paint Store – Staunton, Va.
BEFORE
28 T12 fluorescent tubes
2,240 total watts consumed
Copyright © 2011 Cree, Inc. pg. 38

39. Benjamin Moore Paint Store – Staunton, Va.
BEFORE
AFTER
18 CreefluorescentTroffers
28 T12 CR24 LED tubes
792 total watts consumed – 65% savings
2,240 total watts consumed
Copyright © 2011 Cree, Inc. pg. 39

40. Walmart
Cree LRP38
Copyright © 2011 Cree, Inc. pg. 40

41. McDonald’s
• 78% energy reduction
from baseline store
• 97% of lighting is high-
performance LEDs
Courtesy of Derry
Berrigan, DBLD
Copyright © 2011 Cree, Inc. pg. 41

42. Burger King, Ben & Jerry’s
• 80% Energy Savings
• Excellent Color Rendering
(CRI >92)
Cree LR6
Copyright © 2011 Cree, Inc. pg. 42

43. Red Robin
Replacing Incandescent and Halogen lamps with
GE LED technology as part of an interior lighting
retrofit program in 274 restaurants
• 77% energy reduction per lamp
• Lasts more than 6x longer than
previous types
Courtesy of GE Lighting
Copyright © 2011 Cree, Inc. pg. 43

44. Yum Brands
• 81% energy reduction
from baseline store
• 95% of lighting is high-
performance LEDs
Courtesy of Derry
Berrigan, DBLD
Copyright © 2011 Cree, Inc. pg. 44

45. U.S. Pentagon – Washington D.C.
Before – 432W
Copyright © 2011 Cree, Inc. pg. 45

46. U.S. Pentagon – Washington D.C.
After – 288W = 33% Savings
Before – 432W
Copyright © 2011 Cree, Inc. pg. 46

47. Where Can You Find Us?
Facebook.com/CreeLEDRevolution
Twitter.com/Cree
YouTube.com/CreeInc
CreeLEDRevolution.com/blog
Copyright © 2011 Cree, Inc. pg. 47

48. Thank You!
Greg Merritt
Greg_Merritt@cree.com
(919) 407.7836