John Roberts, founder of GaN Systems, holds a gallium nitride wafer semiconductor Aug. 22, 2014 in Ottawa.Dave Chan/The Globe and Mail
One of Canada’s most promising semiconductor makers, GaN Systems Inc., is being purchased by German chip giant Infineon Technologies AG for US$830-million.
It’s a deal the son of deceased GaN co-founder John Roberts said would make his father proud. For Infineon, the acquisition will “significantly accelerate” the company’s strategy to strengthen its leadership in power systems, said chief executive Jochen Hanebeck.
But it is also a “disappointing” outcome for a promising Ottawa-based company that sold before reaching its full potential, like many Canadian technology companies before it, said Olivier Trescases, a professor of energy systems at the University of Toronto who has worked with GaN products.
“It’s sad to hear, actually,” Mr. Trescases said. “GaN was still early days and they had some great success and high-profile wins,” he said. “It’s a shining star.”
GaN makes components known as power semiconductors, depositing a compound called gallium nitride on silicon to produce components that are smaller and lighter than existing silicon-only transistor chips, but also faster and more energy efficient as they convert high-voltage power into usable currents within machines.
GaN’s technology is used in smartphone chargers, laptop and smart-speaker adapters and street lighting, and the company has shipped to more than 2,000 customers, including BMW, Dell, Siemens and Samsung. But the market is still in its early stages and the big prize is in clean technologies and particularly electric vehicles, where GaN has been aiming to provide its power-efficient semiconductors that will help car makers produce lighter vehicles that can travel farther on an electrical charge.
“GaN technology is paving the way for more energy-efficient and CO2-saving solutions that support decarbonization,” said Mr. Hanebeck. The Munich-based company is a long-time time partner of GaN’s.
Mr. Hanebeck added that adoption in a range of applications, including mobile charging, solar inverters and on-board EV chargers “is at the tipping point, leading to a dynamic market growth.”
There has been a worldwide reordering of chip supply chains at a time of pandemic-related shortages, war in Europe and worsening trade relations between the U.S. and China. That has left Canada scrambling to define its own strategy. The U.S., Europe, Japan and India have moved aggressively during the pandemic to establish chip-manufacturing facilities away from geopolitically tense China and Taiwan, committing US$100-billion-plus to the sector, while dozens of companies, including Infineon, Intel and IBM have earmarked hundreds of billions for investment.
“There is a global shift under way, with trillions of dollars of economic value at stake” with economic implications “for every country – including Canada,” said Benjamin Bergen, president of the Council of Canadian Innovators, which represents Canadian-based technology companies.
“Canada needs a national semiconductor action plan which fortifies and builds upon our homegrown Canadian companies,” he said. “Without a clear road map which mobilizes Canadian industry, we risk winding up with yet another branch-plant industry where profits and economic benefits accrue primarily to foreign multinationals.”
Unlike GaN, which contracts out chip fabrication to giant manufacturers in Asia, Infineon has its own facilities, including a US$2.1-billion plant in the works in Malaysia that is set to start production next year. “Canada has a strong legacy in semiconductors but in the last few decades has lagged, so we don’t have any major fabrication facilities,” said Mr. Trescases. “That is a major concern.”
GaN chief executive Jim Witham said in a statement that the deal would “serve the accelerating adoption of GaN in a wide range of our target markets” and “unleash our full potential.” Market research firm Yole believes revenues for gallium-nitride power applications will grow by 56 per cent a year on average, reaching US$2-billion in 2027.
While gallium-nitride chips are more expensive than silicon, manufacturers can more than recoup the cost with savings in other parts of machine systems thanks to efficiencies derived from using the transistors, Mr. Trescases said.
GaN was founded in 2008 by Girvan Patterson, the former chief executive, and Mr. Roberts, the chief technology officer. To them, “it was clear that a revolution in power semiconductors was coming and necessary if we wanted to build the basis of clean-tech power systems for solar, electric cars and data centres,” said Toronto venture-capitalist Matt Roberts, the son of John Roberts, who died in 2021.
“It’s sad my dad didn’t live to see this, but he’d be proud it turned out so well for everyone involved. It was not an easy journey, semiconductor funding was not plentiful anywhere, particularly in Canada, even for repeat founders like John and Girvan. It’s still the case.” He credited “great early investors” such as Canada’s Chrysalix Venture Capital and RockPort Capital for backing them.
GaN distinguished itself in 2016 by helping to power the winner of a $1-million Google-funded challenge to engineer a high-density small power inverter. The next year, GaN raised US$35-million led by BMW’s investment arm. It has raised more than US$220-million to date, including a US$150-million round in 2021, led by Fidelity Management & Research LLC. Other investors include Canada’s Cycle Capital and BDC Capital.
Infineon has signed a definitive agreement to buy GaN for cash.
Editor’s note: (March 7, 2023): A previous version of this article incorrectly stated that GaN spun out of the federal Communications Research Centre Canada. This version has been corrected.