An US$830-million deal that closed this week could transform an Ottawa company into a global power player.

While chip companies like Nvidia have enjoyed soaring valuations as the AI boom fuels demand for their products, GaN Systems is the latest to benefit as automakers look to soup up EVs. 

The Ottawa-based firm sealed its sale to the German chip firm Infineon on Tuesday, as the auto industry experiences its own frenzy to scoop up faster computer chips. 

The deal unites two major players that work with an emerging technology, gallium nitride (GaN), which they say uses power much more efficiently. They’re betting that this alternative to traditional silicon chips could become essential, as everyone from AI researchers to car designers try to make more powerful products—but use less energy in the process. 

Why car companies are flocking to make chip deals: GaN Systems boasted investors such as BMW’s venture arm and the Toyota–backed Sparx Group, while Infineon works with battery makers like Panasonic and signed a deal last week to supply a different type of chips to Hyundai and Kia.

As the auto industry recovers from a chip shortage that halted assembly lines, Infineon is spending up to €5 billion to expand its Malaysia chip plant to make more of the energy-efficient chips—and provide “supply continuity” for automotive customers, said Adam White, president of Infineon’s power and sensor systems division, which oversaw the deal. The firm is hoping the market for GaN chips will see “massive growth,” from US$47 million in 2020 to US$801 million in 2025.

To be sure, the market for silicon-based chips is still booming in its own right, as everything from your phone to your refrigerator tries to process more data, faster. White said, “Whether it’s automotive or other markets, we need all three technologies, whether it’s silicon, silicon carbide or gallium nitride.” But GaN chips are getting attention from innovators focused specifically on improving battery life.

Jim Witham, the CEO of GaN Systems, who is joining Infineon as an advisor, said gallium nitride is a unique material for semiconductors because it allows for fast switching, which wastes less power. That allows manufacturers of anything from laptop chargers to EVs to make their power supplies about half or a third of their current size. 

“Everything in the world that uses power has power transistors inside of it,” he said. “Smaller things are cheaper to make.” 

Gallium nitride could also mean packing more power into the same space. 

“There’s a huge benefit if you can make things lighter and smaller in vehicles, because then ultimately you will be able to potentially bring in more battery … to support a longer range,” said White. 

“You get better performance.” 

The details of the deal: Infineon is putting together a dedicated business line, also called GaN Systems, which will be centred in Ottawa but will include members of its team based around the world. A dedicated automotive product line will also be created in the nation’s capital. The total team of 450 will include the roughly 100 GaN Systems engineers currently based in Ottawa, with no plans to reduce their number. “With [automotive] being the biggest marketplace, it’s a big growth effort for us,” Witham said. 

Some have lamented the loss of Canadian ownership of the company. Witham said the tie-up will expose it to more automakers, since Infineon has a range of silicon, silicon carbide and GaN customers to which it sells.

What’s next: While EVs are the biggest market for GaN chips, AI could become the fastest growing, Witham said. Like EVs, data centres can benefit from packing more power into the same real estate, and would benefit from more efficient GaN chips so they can spend less to cool down their systems. 

Some fear that Moore’s Law—the ability to double the number of transistors on a chip every two years, making computers more powerful—may be slowing down. But alternatives like GaN are just at the beginning of their computing potential, Witham said.

“We’re just seeing, every couple of years, a big leap in GaN,” he said. 

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