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Wolfspeed Deal Cuts through Choppy Regulatory Waters, Though Major Review Lies Ahead

Nov. 28, 2016
Infineon is on schedule to close the deal. Now it needs approval from an American security panel that has grown increasingly skeptical of foreign chip deals.

Infineon Technologies is on schedule to complete its acquisition of Wolfspeed, a former Cree division that builds power and radio frequency chips, according to a regulatory filing released by Cree last week. The companies are aiming to close the deal in February.

The deal has been submitted to the Committee on Foreign Investment in the United States, the federal agency that reviews proposed acquisitions that would send companies out of the country, said Cree’s chief financial officer Michael McDevitt. The agency is tasked with approving Wolfspeed’s sale to Infineon, which is based in Nubiberg, Germany. That is separate from passing antitrust regulators.

Cree has expressed little doubt about the deal’s approval, but foreign acquisitions of American chip makers have faced increasing scrutiny over the last year. Regulators have put a microscope on the industry, especially as China has targeted American firms to advance its native chip industry.

Earlier this month, the German chip maker Aixtron said that an American security panel had recommended it drop its pending sale to China’s Fujian Grand Chip because it would endanger national security. It is not clear whether Infineon's business in China could imperil the Wolfspeed deal. 

In the filing, McDevitt hinted that there were few obstacles to gaining CFIUS approval. He added that “the likelihood of closing the transaction remains unchanged.”

In July, Cree reached an $850 million deal to sell Wolfspeed's assets to Infineon. It was a surprising reversal for the North Carolina-based supplier, coming only months after Wolfspeed revealed its brand, appointed a chief executive, and laid plans for an initial public offering. For Infineon, the deal marked another investment in chips that augment things like renewable energy inverters and self-driving cars.

Wolfspeed’s products are capable of handling higher voltages and switching frequencies than normal chips. These abilities come courtesy of wide-bandgap materials, like silicon-carbide for power management chips and gallium nitride for wireless power amplifiers. Wolfspeed’s products are smaller and thinner than regular silicon chips, cutting energy losses.

But selling the keys to Wolfspeed could be a little awkward. Gallium nitride chips are used in military applications, ranging from radar to satellite communications. In addition, the company developed the chips with support from the Department of Defense. Wolfspeed is known as “trusted foundry” for the department, filling special chip orders for classified military projects.

Whether that erects roadblocks for the deal remains to be seen. McDevitt said that he expects the CFIUS review process to start “in the near term.” The agency usually completes its review within 30 days.

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