Updated March 6 to add information from Cree's call with investors, including the purchase price in U.S. dollars.
In an ironic twist, Cree has purchased Infineon’s RF power business, a year after Infineon’s attempt to buy Cree’s Wolfspeed RF business was blocked by the U.S. government, citing national security concerns.
Cree paid approximately €345 million or $426 million for Infineon’s RF power segment, which expands Wolfspeed’s wireless market opportunity and provides Wolfspeed with long-established relationships with the major wireless infrastructure equipment manufacturers, such as Ericsson and Nokia
The deal shifts Wolfspeed’s strategy from being a GaN foundry for power transistor suppliers to providing power products directly to wireless infrastructure manufacturers. It also expands Wolfspeed’s portfolio to include LDMOS.
The Infineon RF power business is projected to increase Wolfspeed’s annual revenue by approximately $115 million in the next twelve months and is expected to be accretive to Cree’s non-GAAP earnings per share in the first full quarter of operations, Cree’s fiscal fourth quarter ending June 24, 2018.
Cree’s purchase includes the intellectual property (IP) and technology portfolio related to the business and approximately 260 employees located in Morgan Hill, California; Chandler, Arizona; Finland; Sweden; China and South Korea. Cree also acquired Infineon's facility in Morgan Hill, used for packaging and test of Infineon’s LDMOS and GaN-on-SiC products.
Although the transaction closed today, Infineon will continue to handle the business operations for the next 90 days or so, to ensure continuity and a smooth transition from Infineon to Wolfspeed.
Long term, Infineon agreed to a supply agreement for LDMOS wafers and related components produced in its wafer fab in Regensburg, Germany, as well as assembly and test services from its facility in Melaka, Malaysia.
Cree funded the €345 million from cash and borrowings on its revolving line of credit.
The transaction does not include the Infineon Chip Card & Security (CCS) operations in Morgan Hill, which will remain at the site and continue to operate as part of Infineon.
Cree CEO Gregg Lowe said, “The acquisition strengthens Wolfspeed’s leadership position in RF GaN-on-SiC technologies, as well as provides access to additional markets, customers and packaging expertise. This is a key element of Cree’s growth strategy and positions Wolfspeed to enable faster 4G networks and the revolutionary transition to 5G.”
Gerhard Wolf, general manager of the RF power products segment at Infineon, said, “We are looking forward to combining our strengths with Cree. With our highly skilled and dedicated team, advanced technologies and commitment to business excellence, we look forward to serving our customers seamlessly as the 5G mobile standard ramps up.”
Reinhard Ploss, CEO of Infineon, said, “Cree is a strong new owner for this portion of our RF business and has an excellent reputation in the industry. We are excited about the business rationale and the prospects for the combined businesses. At the same time, we will be able to focus our resources more effectively on Infineon’s strategic growth areas and will retain a strong technology portfolio for the wireless market.”
The following slides were provided to investors to support a call discussing the acquisition, held on 6 March 2018.
During the investor call, Edwin Mok of Needham & Company asked Lowe about Wolfspeed's interest in Infineon's LDMOS technology and possibly expanding the portfolio to GaN on Si. Lowe said the strategic intent of the deal was to acquire the growth opportunity that comes from GaN, specifically GaN on SiC. Nonetheless, he said the supply agreement with Infineon will enable Wolfspeed "to address the LDMOS portion of this business for years to come." Listen to his comments: