Infineon Technologies AG, Europe’s biggest chipmaker by revenue, agreed to buy Cree Inc.’s Wolfspeed Power unit for $850 million to expand in fast-growing markets such as electric cars and the Internet of Things.

The company is paying cash for Wolfspeed, which makes compound semiconductors and power-management chips, according to a statement. The deal adds to Infineon’s product portfolio, which includes chips for sensors, radars and security.

With the deal, Infineon is trying to become stronger in power semiconductors as more devices from cars to refrigerators become connected via wireless networks. The purchase is part of chief executive officer Reinhard Ploss’s bet on trends such as energy efficiency, connectivity and mobility, including autonomous-driving technology. In another similar deal, Tesla Motors offered to buy SolarCity Corp. (Nasdaq: SCTY).

For Cree, the sale means it can better focus on its core business of LED lighting, which includes chips, bulbs and power-switching devices. The company said last year it was planning an initial public offering for Wolfspeed, but that never happened because Cree was approached by several parties interested in buying the unit, Cree said.

“Divesting Wolfspeed is targeted to reduce short-term profits, but increase free cash flow,” Cree CEO Chuck Swoboda said in a separate statement. “It unlocks value, increases management focus on the core business and supports our mission to build a more valuable LED lighting technology company.”

Wolfspeed, based in North Carolina, had pro-forma revenue of $173 million in the year ended March 2016 and Infineon expects it to immediately add to its adjusted earnings per share and margin. Infineon plans to complete the transaction by the end of 2016.

“This will enable us to create additional value for our customers with the broadest and deepest portfolio of innovative technologies and products in compound semiconductors available in the market,” Ploss said in the statement.

Liberum Capital added Infineon to a list of 10 conviction buys in Europe in April, calling it the biggest semiconductor beneficiary globally from accelerating electric-vehicle sales. The company’s sales overtook those of Geneva-based competitor STMicroelectronics NV last year to become Europe’s largest in the industry. In 2014, Infineon bought El Segundo, California-based International Rectifier.

Technology