Infineon to lower costs for new-generation AI chips

TAIWAN – Infineon Technologies announced a breakthrough in the production of compound semiconductors that it said will help bring down manufacturing costs and speed their adoption for artificial intelligence (AI) applications. 

The German chipmaker said on Sept 11 it has successfully developed 300mm gallium nitride wafers, which can produce 2.3 times more chips than 200mm wafers, in a move that will make the emerging technology cheaper.

Gallium nitride is a compound semiconductor, meaning it is made from multiple elements, and is particularly energy-efficient, leading to more compact and powerful electronic devices. It is often used in industrial and automotive applications such as power supplies for AI systems, solar panel systems and motor-control systems. 

The company is planning to start sending samples to customers in late 2025 and will eventually mass produce the wafers at its plant in Villach, Austria, according to Infineon division president Adam White.

As the cost of production comes down, such chips are becoming more popular, although silicon remains the most common material to use. The market for gallium nitride will reach at least US$2.3 billion (S$3 billion) dollars by the end of the decade and the company is hoping to be a leader, according to Mr White.

The new tech can improve device performance, reduce overall costs and ensure steady supplies for customers, according to the Germany-based company. There is a growing need for advanced power chips as countries around the world race to build more AI data centres and carmakers upgrade designs for their smart vehicles. 

The production breakthrough came after Infineon agreed to buy Canada-based GaN Systems for US$830 million in 2023. 

Automotive Chips

European chipmakers are leaders in the global automotive chip market, which McKinsey forecasts will be worth about US$150 billion by 2030, rising from US$52 billion in 2021. Infineon competes with European peers NXP Semiconductors and STMicroelectronics in the automotive chip space.

Infineon and NXP are part of a consortium led by Taiwan Semiconductor Manufacturing Company that is building a €10 billion (S$14.4 billion) advanced fab in the Eastern German city of Dresden. The Dresden site is expected to help grow the local semiconductor ecosystem and boost Europe’s renewed industrial push. 

However, Infineon is not immune to a plethora of challenges Germany’s automotive-reliant economy faces. In August, the chipmaker said it plans to eliminate 1,400 jobs due to a prolonged slump in demand for electric vehicles. The AI frenzy has also cooled down recently, with investors questioning whether the new tech can be monetised amid signs of an economic slowdown in the US. 

There is also an increasing number of Chinese firms, such as Siengine Technology and Zhejiang Jingneng Microelectronics, entering the automotive market with support from local carmakers as Beijing seeks to reduce dependence on foreign technologies.

While Infineon and its European peers are still pinning their hopes for growth on the Chinese market, they are likely to be hurt by Beijing’s efforts to foster domestic firms in the long run. Chinese officials had earlier in 2024 told local carmakers to prioritise procuring China-made chips. BLOOMBERG