Infineon To Acquire Wolfspeed-Investor Presentation

Infineon to acquire
Wolfspeed
Investor Presentation
July 14, 2016
Table of Contents
1
Key facts
Deal rationale
Strategic fit
Financial fit
Summary
2016-07-14
Copyright Infineon Technologies AG 2016. All rights reserved.
Key facts of the deal

Transaction perimeter:
s
SiC wafer substrate business
(excluding LED)
Purchase price:
US$ 850m
Transaction type:
cash and debt free
Financing:
US$ 720m bank loans

US$ 130m cash-on-hand
Signing date:
July 13, 2016
Expected closing date:
~ end of calendar year 2016
2016-07-14
Key facts about the acquired business

Recent performance:
Revenues of US$ 173m in the twelve months ending March 27, 2016
Outlook:
Revenue CAGR of ~20% and gross margin* of ~55% expected going forward
Core competence in compound semiconductors:
SiC**-based products for power applications
GaN-on-SiC***-based products for Radio-Frequency (RF) power applications
SiC wafer substrate business; third party business will be continued
Market position:
Power: #1 in SiC
RF power: #2 in GaN-on-SiC
Profile:
More than 28 years part of Cree
Headquartered in Research Triangle Park (North Carolina), USA
~550 employees worldwide, thereof ~500 at two major US sites
Strong IP portfolio of ~2,000 patents and patent applications

*According to US GAAP, excluding effects from purchase price accounting
**SiC = Silicon Carbide, ***GaN-on-SiC = Gallium Nitride on Silicon Carbide
2016-07-14
Table of Contents
1
Key facts
Deal rationale
Strategic fit
Financial fit
Summary
2016-07-14
Financial fit
Deal rationale
Margin and adjusted EPS accretive from day 1
Expected Gross Margin*:
Incremental revenue CAGR:
55%
20%
Strategic Fit
Become #1 in RF power
Create #1 in SiC power; further strengthen
automotive & industrial; accelerate SiC
adoption; expand power semi-market beyond Si
2016-07-14
Table of Contents
1
Key facts
Deal rationale
Strategic fit RF power
Financial fit
Summary
2016-07-14
5G redefines global connectivity:

high bandwidth and speed enabled by SiC
10 times faster
download
~25 times
shorter latency
1000 times
higher data
volume
The promise of 5G
5G
10 .. 100 times
more connected
devices
4k video streaming anywhere
5G redefines
automotive connectivity
manufacturing concepts (Industry 4.0)
transportation systems
energy networks
healthcare monitoring
2016-07-14
mission critical connectivity

Compound semiconductors are a necessity to

deploy 5G cellular infrastructure
At higher frequencies, only compound semiconductors deliver the required output
~5 GHz
power
[log scale]
1 kW
5G relevant additional spectrum
~80 GHz
Available: today
Available: tomorrow
Available: today
remains for low-end

mass market
lower cost than GaN-on-SiC

monolithic integration
highest performance
GaN-on-SiC
100 W
GaN-on-Si
10 W
LDMOS (Si)
1W
SiGe-BiCMOS
SiGe
Automotive Radar, Gesture Sensing
Mobile Comm
1 GHz
2016-07-14
RF-CMOS
10 GHz
100 GHz
frequency [log scale]
Infineon the only player with the full suite of

RF power technologies necessary for 5G
Infineon today
Si
GaN-on-Si
Competitive position
#3 in RF power*(Si-LDMOS)
GaN-on-Si in development
Superior package
know-how
System/application
know-how
Prime access to global base
station customers
Acquired business
Infineon in future
GaN-on-SiC
RF power
#2 in GaN-onSiC*
Most
comprehensive
portfolio
Sole vertically
integrated
vendor
SiC substrate
wafer
production
Costperformance
leader in GaN
RF components
Optimization
across
substrate,
component &
system
*Source: ABIresearch, RF power semiconductors, 2016

2016-07-14
10
Technology roll-over paves the path to

global #1 in RF power by ~2020
RF power market for cellular infrastructure
[US$ m]
IFX:
#1
#3
GaN-based products:
CAGR(15-25): +22%
1200
1000
800
110
112
+18%
600
+33%
260
+8%
400
746
460
380
530
200
280
0
2015
Si (LDMOS)
Source: IHS, Yole, Infineon
2016-07-14
2020
GaN-on-SiC
2025
GaN-on-Si
Today:
GaN-on-SiC for high-end LTE & 4.5G (up to 6GHz)
2018:
GaN for 4.5G (up to 6GHz)
2020/21:
GaN for 5G large-scale deployment

11
Table of Contents
1
Key facts
Deal rationale
Strategic fit Power
Financial fit
Summary
2016-07-14
12
Compound semiconductors allow for

novel topologies increasing the semi-market
Silicon Carbide components offer benefits on system level (e.g. in solar inverter)
Reduction of cost, higher semi-value:
15 to 20% lower bill of material for
inverter manufacturer
2 to 3x higher semiconductor content as
compared to Si-based design
~1.5% additional growth on top of Si
industrial market
Total system cost [US$]
other
(e.g. resistor,
capacitor, etc.)
semiconductor
Si-based solution
Reduction of system size:

SiC allows for simpler topologies (2-level
instead of 3-level) with less control effort
SiC allows for higher switching frequency
with smaller transformers
Handling of same power in smaller box
size results in significant cost reduction
2016-07-14
other
Si IGBT reference
semiconductor
SiC-based solution
SiC MOSFET demonstrator
13
GaN and SiC enable higher efficiency through

faster switching with lower losses than Si
Pout [W]
10M
SiC
1M
Reaching tipping point

Targeting 600V 1,7kV
High power
High switching frequency
Central PV*
pile
100k
OBC**
Lower cost than SiC

Targeting 100V - 600V
Medium power
Highest switching frequency
String PV*
10k
Silicon
1k
1k
GaN
Remains
mainstream
technology
10k
100k
1M
10M
fsw [Hz]
* PV = photovoltaic inverter; ** OBC = onboard charger

2016-07-14
14
Further strengthening cost-performance

leadership in power semiconductors
Infineon today
Competitive position
Si
SiC
GaN-on-Si
#1 in Si* with relative

market share of >2.7
Technology leader
#2 in
SiC*
Trench
MOSFET
Acquired
business
Infineon
in future
SiC
Power
#1 in SiC*
Planar
MOSFET
Industry leading system and

application know-how
Vertically
integrated
Industry leading package and

module know-how
Substrate
business
Global sales force and customer

access across all applications
Stronger
leadership in
power semis
Costperformance
leadership
in all technologies
Vertically
integrated in
SiC, allowing
optimization
from system
to substrate
*Source: IHS, Yole, Infineon

2016-07-14
15
Infineon accelerates the Silicon Carbide

market with cutting edge products
Leverage Infineons global customer access and application

know-how on Wolfspeeds SiC product portfolio
Combine Wolfspeeds technologies with Infineons

superior packages and modules
Optimize products across substrate, device and application
Lower system cost triggers faster introduction of SiC-based components in earlyadopter markets and creates additional semiconductor opportunity
2016-07-14
16
Silicon Carbide can help accelerate the

adoption of Plug-in (Hybrid) Electric Vehicles
SiC onboard charger
Smaller form-factor
Lower cooling effort
SiC main inverter

[units m]
Total xEV market*
14
Higher efficiency higher reach
12
CAGR16-21
10
30%
Smaller form-factor
Lower cooling effort
6
4
2
0
CY
CY
CY
CY
CY
CY
CY
2015 2016 2017 2018 2019 2020 2021
*Source: IHS, Alternative Propulsion Forecast, Jan 2016 (includes BEV, PHEV, HEV, mild-hybrids)
2016-07-14
17
Electro-mobility, photovoltaics and drives

trigger demand for SiC-based components
Total Silicon Carbide market
CAGR2015-2025:
+23%
[US$ m]
1600
1400
CAGR2015-2020:
+20%
1200
1000
800
600
400
200
tipping points
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
PV* inverter
drives
xEV charging
infrastructure
xEV onboard
charger
xEV main
inverter
Roll-over driven by multiple tipping points
Source: IHS, SiC & GaN Power Semiconductor Report 2016, 2016
2016-07-14
* PV = photovoltaic
18
Table of Contents
1
Key facts
Deal rationale
Strategic fit
Financial fit
Summary
2016-07-14
19
Transaction is expected to be margin and

adjusted EPS accretive from day 1
Gross margin*:
Revenue growth CAGR:
55%
20%
Fits perfectly into Infineons growth and

margin expansion strategy
Supports 8% long-term revenue growth target
2016-07-14
20
Solid balance sheet after cash-/debtfinanced transaction

Financed with US$720m (~652m*) of new debt,
plus US$130m (~118m*) cash-on-hand
Bank financing split into different maturities:
3-year, 4-year, 5-year
largely US$-denominated
Balance sheet after Q2 FY16
Pro-forma balance sheet after closing
[EUR m]
1,803
1,776
1,685
2,428
gross cash
debt
27
gross cash
debt
net cash
net debt
-743
*x-rate: EUR/US$= 1.105, 8 July 2016

2016-07-14
21
Deal is preserving Infineons well balanced

maturity profile
Maturity profile
[EUR m; US$ m]
500
new debt
$350
300
$250
200
$350
$250
$235
2018
2019
2020
2021
2022
Eurobond
Sep 2018
3-year
$-term
loan
4-year
-term
loan
5-year
$-term
loan
Eurobond
Mar 2022
2019
2020
2021
2023
2024
2025
8-year
USPP
Notes
Apr 2024
2026
10-year
USPP
Notes
Apr 2026
2027
2028
12-year
USPP
Notes
Apr 2028
Note: In addition other debt with maturities between 2017 and 2023 totaling 149m.
2016-07-14
22
Table of Contents
1
Key facts
Deal rationale
Strategic fit
Financial fit
Summary
2016-07-14
23
Summary of deal rationale

Become #1 in RF power amplifier market by ~2020 with
most complete technology portfolio by capitalizing on
technology disruption in cellular infrastructure
#1 in Silicon Carbide for power, strengthen automotive &
industrial and accelerate market introduction with cutting
edge products as cost-performance leader and create

thereby a higher addressable market for Infineon
Deal is margin and adjusted EPS accretive from day 1
GM 55%*
CAGR 20%
with expected 55% incremental Gross Margin* and 20%

incremental revenue growth of the acquired businesses
2016-07-14
24

Infineon To Acquire Wolfspeed-Investor Presentation

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Infineon to acquire

Copyright Infineon Technologies AG 2016. All rights reserved.

Key facts of the deal

cash and debt free

US$ 720m bank loans

July 13, 2016

Expected closing date:

~ end of calendar year 2016

Copyright Infineon Technologies AG 2016. All rights reserved.

Key facts about the acquired business

Core competence in compound semiconductors:

SiC**-based products for power applications

GaN-on-SiC***-based products for Radio-Frequency (RF) power applications

SiC wafer substrate business; third party business will be continued

More than 28 years part of Cree

Headquartered in Research Triangle Park (North Carolina), USA

~550 employees worldwide, thereof ~500 at two major US sites

Strong IP portfolio of ~2,000 patents and patent applications

Copyright Infineon Technologies AG 2016. All rights reserved.

Copyright Infineon Technologies AG 2016. All rights reserved.

Incremental revenue CAGR:

Copyright Infineon Technologies AG 2016. All rights reserved.

Strategic fit RF power

Copyright Infineon Technologies AG 2016. All rights reserved.

5G redefines global connectivity:

4k video streaming anywhere

mission critical connectivity

Compound semiconductors are a necessity to

5G relevant additional spectrum

remains for low-end

lower cost than GaN-on-SiC

Automotive Radar, Gesture Sensing

Copyright Infineon Technologies AG 2016. All rights reserved.

Infineon the only player with the full suite of

*Source: ABIresearch, RF power semiconductors, 2016

Copyright Infineon Technologies AG 2016. All rights reserved.

Technology roll-over paves the path to

Source: IHS, Yole, Infineon

GaN-on-SiC for high-end LTE & 4.5G (up to 6GHz)

GaN for 4.5G (up to 6GHz)

GaN for 5G large-scale deployment

Strategic fit Power

Copyright Infineon Technologies AG 2016. All rights reserved.

Compound semiconductors allow for

Total system cost [US$]

Reduction of system size:

Copyright Infineon Technologies AG 2016. All rights reserved.

SiC MOSFET demonstrator

GaN and SiC enable higher efficiency through

Reaching tipping point

Lower cost than SiC

* PV = photovoltaic inverter; ** OBC = onboard charger

Copyright Infineon Technologies AG 2016. All rights reserved.

Further strengthening cost-performance

#1 in Si* with relative

Industry leading system and

Industry leading package and

Global sales force and customer

*Source: IHS, Yole, Infineon

Copyright Infineon Technologies AG 2016. All rights reserved.

Infineon accelerates the Silicon Carbide

Leverage Infineons global customer access and application

Combine Wolfspeeds technologies with Infineons