What does Infineon's Acquisition of Wolfspeed Mean for the CS Industry?
On July 14th, Infineon Technologies announced they had entered into a definitive agreement to buy Wolfspeed and the SiC substrate business of Cree for $850 million. As a quick refresher, Wolfspeed was the name chosen by Cree's Power and RF Group in 2015 in anticipation of a planned IPO. At the time, this plan made a lot of sense. The vast majority of Cree's revenue is in the lighting market and spinning out Wolfspeed would allow them to focus solely on that market. Wolfspeed would be decoupled from the challenges of the lighting market and they would be free to pursue RF and high power electronics opportunities with their GaN and SiC products. Cree planned to maintain the majority stake in Wolfspeed and nurture their investment by providing GaN and SiC foundry services and IP to the new company. Early in 2016, Cree announced the planned IPO of Wolfspeed would be delayed until the second half of the year and this delay ultimately culminated in the announcement by Infineon of the acquisition.
So, what does this mean for the compound semiconductor industry? The simplistic answer to this question is "one less compound semiconductor manufacturer", but I think the longer term answer will prove to be much more multifaceted. Cree was one of the early pioneers of GaN technology, and they will continue to use the technology for LEDs. The longer term trajectory for Wolfspeed's GaN and SiC capabilities with Infineon is where things get interesting.
Just about two years ago, Infineon acquired International Rectifier. This acquisition expanded Infineon's power electronics/power management portfolio with the addition of IR's silicon-based MOSFETs, IGBTs, power modules and power management ICs. It also brought GaN-on-silicon capability for these applications. The acquisition of Wolfspeed adds SiC technology to the power electronics/power management markets and rounds out Infineon's technology portfolio.
The total power electronics/power management market is estimated in the $20-$30 billion range and silicon-based products currently dominate the revenue. The performance advantages offered by GaN and SiC are compelling, but these technologies are just starting to capture share in this market. An emphasis on improving conversion efficiency to reduce energy consumption and the expectation of an explosion in the number of connected devices make it likely that these technologies will quickly capture share from silicon and expand the applications in this market.
Having capability with silicon, GaN and SiC gives Infineon a big advantage. Their technology portfolio means they can address any requirement, from the most cost-sensitive to the highest performance application over the full range of voltage breakdowns. The challenge to Infineon will be to keep the progression from silicon to compound semiconductor technologies for these applications orderly, so they optimize their revenue growth. Having access to this broad technology portfolio gives Infineon the opportunity to drive this market toward compound semiconductors and new applications. Their scale will allow them to become a dominant force in this segment of the compound semiconductor market.
The RF situation is similar, but a bit murkier. Wolfspeed is a strong player in the RF GaN market and this will expand Infineon's RF power portfolio. Prior to the acquisition, Infineon's RF power portfolio consisted primarily of LDMOS parts. The company has recently released some GaN RF power devices, but their selection guide shows 96 LDMOS power devices versus 7 GaN devices. Expanding the GaN portion of their RF power portfolio looks to be a smart strategic move as the evolution of this market will favor GaN performance characteristics with new applications heading toward higher frequencies and wider channel bandwidths.
The path to this future may be a bit bumpy, however. Wolfspeed's RF GaN revenue is largely based on defense and wireless infrastructure applications. In "Infineon buys Wolfspeed - is the US DoD losing a strategic supplier of GaN RF technology?", my colleague Asif Anwar points out that Infineon will need to allay foreign ownership concerns if the company expects to maintain its defense revenue. In the wireless infrastructure RF power market, Wolfspeed has lost share to Japan's Sumitomo Electric Device Innovations (SEDI). The entire RF power market and GaN revenue in particular has grown explosively in the last few years, driven by deployments of LTE base stations in China. We anticipate the China LTE deployments will essentially be complete by the end of this year and future growth of the RF power market for wireless infrastructure will be positive, but uneven.
There is no question that the acquisition of Wolfspeed gives Infineon a stronger presence in the compound semiconductor industry. They bring a full portfolio of technologies to the high power electronics/power management market and they are entering the segment with compound semiconductor solutions at a very opportune time. Wolfspeed expands Infineon's share of the RF power market, but the company faces some short term hurdles to position their presence for the future. For clients, I've included some additional thoughts on this acquisition and its effect on the compound semiconductor industry in "Assessing the Impact of Infineon's Acquisition of Wolfspeed on the Compound Semiconductor Industry".