In 2008, after a decade of experimentation and, later, acquisition of a competitor, Cree introduced its first indoor lighting-class LED fixtures.

Around that time, market growth was modest and lighting companies were just beginning to realize the commercial promise of the technology.

Six years later, Cree has picked up a 10 percent share in the global LED market and is one of the more aggressive cost leaders in the industry. It is part of a growing group of semiconductor companies chipping away at the traditional lighting manufacturers that have dominated the market since the dawn of the incandescent light bulb. 

"Around 2007 and 2008, the legacy guys were saying LEDs were coming, but that they were not yet ready. Now, no one is saying LEDs aren't ready anymore," said Greg Merritt, vice president of marketing at Cree, in a recent interview. "Every company is scrambling as fast as it can to bring products to market."

Cree's first 6-inch, 12-watt downlight released in 2008 cost $100. It now has a 6-inch, 9.5-watt downlight product retailing in Home Depot for less than $20 without rebates.

The company has hit a number of other important milestones recently. In March, it released a 6-watt bright-white LED for under $10; in August, it started selling 25-watt and 42-watt streetlights for $99; and this fall, it unveiled a consumer bulb for $20 ($13 with rebates) with a color rendering index of 93 -- coming close to the warm white light of an incandescent bulb and becoming the first company to meet California's voluntary standard for LED lighting quality.

Of course, other manufacturers -- both new players and legacy firms -- are aggressively working to drop LED costs as well. Although Cree has a very slight edge in pricing, many are offering similar products at comparable price points.

In an interview earlier this year with GTM, Ed Crawford, CEO of Philips Lighting North America, talked about how increasing fragmentation and pricing pressures are forcing change within the incumbent.

"We have to reinvent ourselves. Because if we didn’t change, we’d really run the risk of being left in the dust. As a lighting company, you need to adapt to these changes now -- the business as we’ve known it over the last 100 years won’t be the same in five years," said Crawford.

So how is a relatively new entrant like Cree thinking about reinventing the lighting market? Greg Merritt provided some insight.

From 2008 to 2011, Cree was focused primarily on performance by dropping wattage, improving light quality and increasing product lifecycles. Today, while performance is still clearly a priority, the company is focused more aggressively on expanding manufacturing volume, reducing material costs and lowering installation costs.

"LEDs have gone from 60 percent to 70 percent of the cost of a lighting fixture to less than half. You now have more costs in other places: metal, wiring and downstream installation," said Merritt. "Previously it was all about making the LED better, now it’s reducing the cost of the rest of the materials."

The situation is somewhat analogous to thesolarindustry, where increased manufacturing volumes forced a strong drop in module prices. Today, modules are no longer the most expensive component of an installed system, and companies are looking to reduce other hardware and soft costs when developing projects.

"We are increasingly focused on the downstream market," said Merritt. "How do you pull together options, simplify the process, and make LEDs easily consumable for companies that weren't going to upgrade?"

Merritt pointed to the Department of Energy's Better Buildings Initiative, which helped set up the infrastructure to find contractors and financing for projects. Although Cree would not want to perform that exact function, Merritt said the company is looking to work with "the people that have the capability to bring that information together and equip them with the tools they need."

Cree is not unique in thinking about better ways to deploy product downstream. This week, Philips announced a "lighting-as-a-service" model that will allow the Washington Metropolitan Area Transit Authority to install 13,000 LEDs at no upfront cost. 

Working with lighting controls companies to integrate occupancy sensors and ambient light sensors with LEDs is also key to moving further downstream. Cree has formed partnerships with Daintree Networks and Lutron for this purpose. This strategy is also not unique to Cree -- nearly every major manufacturer has formed similar partnerships to make LEDs smarter and easier to integrate in the commercial sector. 

Cree isn't just competing with the well-established legacy players like GE, Osram and Philips. It is also facing competition from consumer electronics firms like LG and Samsung, as well as a cadre of Chinese companies funded by China's central government. Although these Chinese companies have yet to present a major threat, the broadening ecosystem of manufacturers puts pressure on a company like Cree to ramp up production -- which means the company operates on fairly slim margins.

But Merritt said Cree's approach is to keep innovating and producing "at a pace [competitors] can't match."

"Once you start playing defense, you are doomed," said Merritt. "As long as you keep going, you'll stay ahead. You just have to keep playing offense."

Merritt said the next steps for LED innovation are controllability and building new architectural applications.

Controllability will be addressed through partnerships with providers of commercial intelligent lighting platforms. However, Cree does not yet have a residential product like Philips' hue bulb, which can be controlled in unique ways by a smartphone.

Architectural applications -- building LEDs into ceiling tiles, walls, stairwells, streetlights and parking structures in new ways -- are perhaps the biggest source of untapped innovation downstream.

"There is no inherent reason why they should fit the same form as traditional lighting. With LEDs, there's a lot of stuff you couldn't do before. People are pretty excited about that," he said.

Looking at Cree's position and future strategy for growth, analysts are modestly optimistic about the company.

Even though Cree was able to grow revenue by 24 percent and stay out of debt in the first quarter of its 2014 fiscal year, Cree's stock dropped 17 percent in late October due to its inability to meet guidance. The firm also said it would be spending more money than expected on marketing its Energy Star light bulb, as well as ramping production of its consumer bulbs in Home Depot stores -- a product that offers very slim margins.

However, Daniel Amir, an analyst with Lazard Capital, was positive about Cree's prospects in a recent research note, saying: "We continue to believe that Cree is poised to benefit from the LED lighting adoption with its vertical strategy and that one should take a multiple-quarter view of its consumer light bulb approach."