Power Integrations, a quiet but consistent player in the high-voltage power conversion market, released its Q1 2024 earnings transcript, painting a picture of recovery after a turbulent 2023. While analysts focused on the expected sequential growth and improving inventory picture, a hidden detail within the transcript points towards a potentially seismic shift in the power semiconductor landscape: the acquisition of Odyssey Semiconductor.

On the surface, the move seems like a straightforward bolstering of Power Integrations' existing GaN technology. Odyssey specializes in vertical GaN, a technology known for its higher current capabilities, potentially opening doors for Power Integrations to address higher power levels – specifically hundreds of kilowatts. This aligns with the company's stated roadmap of expanding GaN's reach beyond its current 10-kilowatt ceiling.

However, a deeper dive into Balu Balakrishnan's, Chairman and CEO of Power Integrations, comments reveals a more ambitious strategy. Balakrishnan repeatedly emphasizes that Power Integrations is *not* adopting Odyssey's vertical GaN technology. Instead, the acquisition is a strategic play for "expertise" and a "clean room," accelerating Power Integrations' own internal development of a different high-current GaN technology.

This is where things get interesting. Balakrishnan hints at a new GaN technology with a focus on cost-effectiveness, aiming to challenge silicon carbide (SiC) in the high-power domain. He states, "Our goal is to get GaN to much higher power levels like hundreds per kilowatts so that we can be a very compelling alternative to silicon carbide...Silicon carbide is fundamentally more expensive whereas GaN, there is no fundamental reason why it can't be very much less expensive than silicon carbide."

This seemingly offhand remark signifies a potential game changer. Silicon carbide, while gaining traction in applications like EV drivetrain inverters, has always been hampered by its inherent cost disadvantage. If Power Integrations can successfully develop a cost-effective, high-current GaN technology, it could disrupt the SiC market and open up a vast new frontier for GaN.

The transcript provides some clues to support this hypothesis. Power Integrations is already pushing the voltage boundaries of GaN, having introduced 900-volt and 1250-volt switches in 2023. The transcript further reveals that an even higher voltage technology is imminent. This relentless pursuit of higher voltages, coupled with the acquisition of Odyssey's high-current expertise, strongly suggests a calculated strategy to position GaN as a direct competitor to SiC.

While Balakrishnan remains understandably tight-lipped about the specifics of this new technology, the potential impact on the market is undeniable. Imagine a world where GaN, already recognized for its efficiency and smaller footprint, becomes cost-competitive with SiC at significantly higher power levels. This would not only expand Power Integrations' addressable market, but also accelerate the adoption of GaN across numerous industries.

"Projected Revenue Growth by Segment Power Integrations highlighted its anticipated revenue recovery across several segments in their Q1 2024 earnings call. The following chart reflects the projected quarterly revenue growth for the remainder of 2024. Note that this chart represents a hypothetical projection based on qualitative statements from the earnings call transcript, and should not be interpreted as financial guidance."

This hypothesis is further strengthened by Power Integrations' aggressive investments in key strategic markets. In 2023, despite a challenging year overall, the company saw significant design win increases in high-power applications, particularly in renewable energy. Their Hiper driver business also achieved consistent growth, demonstrating strength in the industrial market.

Furthermore, Power Integrations is aggressively expanding its presence in the burgeoning Indian market, with revenues approaching 10% of total sales. This strategic move positions the company to capitalize on India's rapidly growing middle class and modernizing infrastructure.

The Q1 2024 transcript, while seemingly focused on the immediate recovery, subtly reveals a much grander ambition. The Odyssey Semiconductor acquisition is not merely about adding vertical GaN to the portfolio. It's about leveraging expertise to unlock a new era of GaN technology, one that could challenge the dominance of silicon carbide and redefine the power semiconductor landscape.

While the exact timeline and details remain unclear, one thing is certain: Power Integrations is positioning itself to become a major player in the high-power market. Their proprietary GaN technology, coupled with a relentless pursuit of cost-effectiveness and strategic investments in key growth areas, could usher in a new era where the sleeping giant finally awakens.

"Fun Fact: Gallium Nitride (GaN) is a wide-bandgap semiconductor material, meaning it can handle higher voltages and temperatures than traditional silicon. It was initially used in LEDs, giving us the brilliant blue and white light we see in modern lighting and displays. Now, GaN is poised to revolutionize power electronics, bringing higher efficiency and smaller form factors to a wide range of devices."