­Further Details on Infineon’s Acquisition of GaN Systems

Last Thursday evening, Infineon announced that it had agreed to acquire GaN systems for US$830 million. Headquartered in Ottawa, Canada,GaN Systems is a global technology leader in the development of GaN-based solutions for power conversion. The company has more than 200 employees, mainly engineering focussed. The announcement itself was brief and kept to the facts. However, Infineon hosted an analyst call on Friday evening to flesh out some more details and explain the thinking behind the acquisition.

Infineon has always pushed the fact that the company is material agnostic and wants to provide solutions in silicon and silicon carbide as well as GaN. In fact, in the company’s original announcement, the quote from its CEO Jochen Hanebeck stated that, “The combination will further strengthen Infineon’s leadership in Power Systems through mastery of all relevant power technologies, be it on silicon, silicon carbide or gallium nitride.” On the call, the first speaker, Infineon’s PSS Division President Adam White also confirmed that the company will focus on the three materials, but he also said that GaN was becoming more dominant faster than expected. White explained, “While all three basic materials will coexist for quite a while, future market growth in power semiconductors will be predominantly from SiC and GaN. Today, the GaN market is still nascent, but it is poised to see the highest growth rates. The market is clearly accelerating as a couple of key power applications have reached or are getting close to a tipping point - for example, chargers and adapters for portable devices, high voltage power supplies, and support for renewable energies. The transition paths of individual applications are going to differ, some will move directly from silicon to gallium nitride, while others might well see a period in which SiC is the technology of choice before the full advantages of GaN can be reached. The remainder will remain with silicon or SIC.”

Industry analyst Yole estimated that the GaN revenue for power applications will grow by 56% CAGR to approx. US$2 billion by 2027 in its ‘Compound Semiconductor Market Monitor-Module I Q4 2022’. White believes that estimate may well be much too low. He clarified his comment by saying, “As often happens with disruptive technologies, the speed of adoption and market growth beyond an inflection point is underestimated. Market researchers continuously increase their predict projections calling for mid or double digit growth rate over the coming years. According to Yole, GaN for power management application offers a cumulative market potential of over 6 billion US dollars over the next five years and would not come as no surprise to us if these estimates in hindsight proved to be conservative.”

The next speaker on the call was Ulrich Pelzer, CFO of Infineon’s PSS Division, who went onto more detail on the synergies between Infineon and GaN Systems and what we can look forward to in the future. He begun by praising GaN Systems, saying that the company had built a strong product IP base, an impressive library of patents, top notch application understanding, a broad product portfolio and superb customer access. It's foundry partnerships had helped it to scale and ramp revenues quickly for customers in the server telecom, automotive, industrial and consumer markets.

He went on to detail how the two companies would fit together by saying, “In this market, competitive differentiation does not hinge on the materials. Transistors are grown through epitaxial properties on commoditized and readily available silicon wafers. Infineon commands critical IP relating to epitaxy and front-end device processing. GaN Systems will offer product and packaging patents on the manufacturing side. GaN Systems will also provide foundry capacity corridors, while Infineon is expanding its in-house capacity in Villach, Austria and Kulim in Malaysia. To reap the benefits of GaN at systems level, specific topologies and packages are necessary. The combination of the two companies’ expertise in these areas will quicken the creation of innovative solutions, including monolithic integration of logic functions.”

To take advantage of those synergies and facilitate integration, Infineon will establish a dedicated dedicated GaN business unit. The only thing stopping the acquisition at the moment is regulatory approval, but Pelzer does not see that becoming a problem. The relatively small size of the market, along with the fact that the combination of the two companies will not result in a domineering market share ensure that approvals should come quickly. Infineon expects the deal to close before the end of this year.