Trailblazing Kanata-based semiconductor developer GaN Systems is being acquired by German chip powerhouse Infineon Technologies AG for US$830 million in a deal the companies say will accelerate the local firm’s growth.
The announcement comes less than 15 months after GaN Systems raised US$150 million in fresh venture capital to ramp up research and development of its high-speed power semiconductors that are now used by more than 2,000 customers, including BMW, Dell, Samsung and Siemens.
GaN and Infineon have reached a preliminary agreement on an all-cash purchase, the companies said this week. The transaction is expected to close later this year pending regulatory approval.
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GaN Systems chief executive Jim Witham told Techopia a sale was never on the firm’s radar until Infineon first approached him a few months ago.
“Our path forward was, ‘Put the pedal to the medal, take that (VC) cash and grow our business and push towards an IPO.’ And then this came up and plans changed,” he said in an interview on Friday.
Witham said GaN Systems and Infineon have “known each other for years.” They target similar markets, making the acquisition a “nice fit,” he explained.
“The companies’ goals and plans are similar,” Witham said. “The way that they operate and the way we operate has a certain chemistry.”
Infineon chief executive Jochen Hanebeck said the acquisition will speed the German organization’s push to solidify its position as a global leader in semiconductors.
“Adoption in applications like mobile charging, data centre power supplies, residential solar inverters, and onboard chargers for electric vehicles is at the tipping point, leading to a dynamic market growth,” Hanebeck said in a statement on Thursday.
“The planned acquisition of GaN Systems will significantly accelerate our GaN roadmap, based on unmatched R&D resources, application understanding and customer project pipeline,” he added.
GaN Systems’ semiconductors use a compound called gallium nitride, a byproduct of aluminum and zinc production known for its high heat capacity and conductivity. The product is deposited on silicon to create chips that are smaller, faster and more efficient at converting power into current than their silicon-only counterparts.
Demand for the lighter and more energy-efficient chips has surged as the number of mobile devices grows, data centres consume more energy, and manufacturers of electric cars look for ways to squeeze more mileage out of batteries before they need to be recharged.
Global market research firm Yole Group predicts revenues for gallium nitride power applications will grow by an average of 56 per cent annually to about US$2 billion by 2027.
“Power electronics is kind of sexy these days, whereas maybe a decade ago, it wasn’t,” Witham said.
The Kanata company’s sale comes amid a global semiconductor supply chain crunch that has led many countries, including Canada, to seek ways to repatriate chip production from plants in Asia.
Earlier this week, the federal government announced it was creating a $150-million fund to “make targeted investments to build on Canada’s domestic strengths associated with the development and supply of semiconductors.”
Benjamin Bergen, president of the Council of Canadian Innovators, said the global shift toward “reshoring” semiconductor production has “major national security and economic implications.”
Bergen declined to comment directly on Infineon’s acquisition of GaN Systems. In an email to OBJ on Friday, he said “the issue here is the bigger context” of what position Canadian companies will occupy in the global semiconductor supply chain.
“As a country, Canada needs a national semiconductor action plan which fortifies and builds upon our homegrown Canadian companies,” Bergen said. “Without a clear roadmap which mobilizes Canadian industry, we risk winding up with yet another branch plant industry where profits and economic benefits accrue primarily to foreign multinationals.”
Witham said that while GaN Systems will soon be under foreign control, its new owner intends to continue investing heavily in its Canadian operations.
“It’s full steam ahead with respect to Ottawa and GaN transistors,” he said. “We’re still in the early stages of (the technology’s) growth. We’re kind of at a tipping point, and this is the time to accelerate investment and do more. That means doing more in Ottawa and taking advantage of the base and the foundation that we’ve put here and building on it.”
GaN Systems was founded by longtime Ottawa tech entrepreneurs Girvan Patterson and John Roberts in 2008. The company currently has about 200 employees, including nearly 100 at its head office and R&D hub in Kanata.
But the firm contracts out its manufacturing to overseas foundries, mainly in Taiwan, due to a lack of production facilities in Canada. Meanwhile, Infineon is investing more than two billion euros in a new fabrication plant in Malaysia that’s expected to open next year.
In light of the federal government’s recent announcement, Witham said he hopes that GaN Systems will eventually be able to produce its chips on home soil.
“My customers really would like to see manufacturing in North America, manufacturing in Canada, because semiconductors are so important,” he said. “I’m happy to see there’s some momentum to doing that.”
