During Cree’s fiscal third quarter (Q3) earnings call, CEO Gregg Lowe said demand for 5G infrastructure has materialized faster than expected and demand for GaN on SiC transistors will exceed Wolfspeed’s capacity “for the next few quarters.” Lowe said Wolfspeed is “really struggling to keep up with demand. In fact, we are not keeping up with demand.”

To increase GaN capacity, Cree is moving to 150 mm wafers and also converting LED fab capacity to support the increased RF demand; however, the timing of the LED conversion is paced by qualifying the GaN process on the LED line.

Q3 Financial Results

For Q3, the quarter ending March 31, Wolfspeed delivered $141 million in revenue at 48.7 percent gross margin, reflecting record revenue and the highest margin in six quarters.

Q3 revenue was 72 percent higher than in the 2018 quarter, which did not include a full quarter of Infineon’s RF power business; Cree acquired the Infineon segment on 6 March 2018. Compared to the December quarter, Wolfspeed’s Q3 revenue was 4 percent higher.

Organic growth, excluding the contribution from Infineon’s RF power segment (primarily LDMOS with a few GaN products), was approximately 40 percent year-over-year (Y/Y), meaning Infineon’s revenue contribution declined approximately 10 percent Y/Y.

The core of the Cree’s growth strategy, Wolfspeed is now Cree’s largest business segment, providing two-thirds of the company’s gross profit. To focus on SiC and GaN technology, Cree is selling the lighting business to Ideal Industries, a deal which should complete in the current quarter.