Financials Mergers & Acquisitions

Infineon eyes millimeter wave with Wolfspeed buy

Chipmakers look to new materials as silicon is inefficient for high frequency RF and new power technologies, Wolfspeed puts its new owner in the the lead

The move to push cellular networks higher and higher up the frequency spectrum will create shifts in the balance of power between some semiconductor players. Infineon’s latest acquisition, of power chip maker Wolfspeed, is an example, giving it the kind of technologies which will be necessary to deliver commercial equipment in millimeter wave bands.

Wolfspeed specializes in gallium nitride (GaN) and silicon carbide (SiC) semiconductors for power and RF applications – it is Infineon’s second purchase in this area, following that of International Rectifier in 2014, and it will now be a market leader.
This is important because, while silicon is the usual material for mass produced chips, it is inefficient for some power and RF applications, including radio semiconductors in high bands such as 80 GHz, which are expected to host 5G networks from the 2020s.

Alternatives rely on compounds – of GaN with silicon or with SiC – which are far more efficient but have remained niche solutions, without silicon’s price and scale efficiencies. However, as silicon starts to run up against the laws of physics, these options may become more mainstream, in order to keep increasing the performance and power efficiency of wireless and Internet of Things (IoT) devices, and harnessing new spectrum bands. Most GaN and SiC chips have been used in high voltage applications, but Wolfspeed has been a pioneer in adapting them for lower voltage purposes.

With its latest deal, Infineon becomes a leading supplier of GaN and SiC devices, improving its ability, it said, to reach into high growth sectors such as 5G and IoT infrastructure, renewable energy and electric vehicles. CEO Reinhard Ploss said that, with Wolfspeed, Infineon would become the world leader in SiC-based power semiconductors, and that in turn would help achieve its target of leading the entire RF power market.

“With Wolfspeed we will become number one in SiC-based power semiconductors. We also want to become number one in RF power,” said Ploss, in a statement.

The 5G space is particularly interesting for Infineon’s medium term expansion strategy, which will be important to offset stagnation or decline in some of its core industrial chip sectors. Some operators, notably in the US are racing towards the use of high frequency spectrum in 28 GHz or above, although most do not expect to make this move until 2022 or later, when a second wave of standards and equipment have solidified.

GaN-on-Silicon allows higher levels of integration at frequencies of up to 10GHz, said Infineon, but above that, GaN-on-SiC becomes the most efficient solution, up to 80 GHz and perhaps beyond. The use of bands as high as 80 GHz will be an even longer term option, more most, than those in the 24 GHz-40 GHz range, despite trials conducted in Korea and elsewhere. The delay will be down to the wait for harmonized spectrum regulations; the wait for actual carrier requirement for these levels of dense capacity; and the requirement for standardized kit and devices.

Infineon will hope it can drive the last of these, and steal a march in a market which should start to become mainstream in the middle of the next decade, and which will be crucial to enable 5G standards which will start to be defined from next year.

Wolfspeed was created in 2015 as a rebranding of Cree’s power and RF division, when Cree decided to focus on its core LED lighting business and divest its other activities. It had planned an IPO for Wolfspeed but instead has accepted Infineon’s offer. The unit generated revenues of $173m in the year to March 27, 2016. It employs 550 people and claims to have the world’s largest SiC and GaN wide bandgap power and RF fabrication facility, plus a portfolio of about 2,000 patents and patent applications.

The deal has been approved by Cree’s board of directors and Infineon’s supervisory board but remains subject to regulatory approvals in various jurisdictions. It is expected to close before the end of this calendar year. It will be financed by $130m in cash and $720m of new debt.

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