Research Note

Abstract

Marvell Takes the Fast Route to the Cloud LightCounting releases a new research note on Marvell’s acquisition of Innovium Marvell and Innovium operate in the very competitive data center switch silicon market, and both are fighting an uphill battle against the dominance of Broadcom. To help it improve its data center offering Marvell has made two big acquisitions this year: 1. In April 2021, Marvell acquired Inphi for $10 billion, thereby adding their high-speed data interconnect solutions consisting of opto-electronics, amplifiers, and digital signal processors (DSPs) to their portfolio. 2. In August 2021, Marvell announced its acquisition of Innovium for $1.1 billion, which includes Innovium cash and other proceeds totaling $145 million, equating to a net cost of $955 million. The transaction is expected to close by the end of calendar year 2021 and Marvell says Innovium will add approximately $150 million in incremental revenue next fiscal year. Marvell’s purchase of Innovium is expected to be beneficial to both companies in several ways including: Benefits for Innovium • It improves Innovium’s scale, technology access, and supply chain. Given the global semiconductor component shortages, where vendors are experiencing rising demand with limited supply, it was important for Innovium to join a company like Marvell with a strong ecosystem that includes Inphi (through its recent acquisition) and TSMC. In 2020, Marvell and TSMC announced a key partnership whereby TSMC was chosen to develop Marvell’s 5nm CMOS solutions on TSMC’s latest N5P process technology. Due to the TSMC collaboration, Innovium’s products should also receive higher priority on the production line which will likely result in a noticeable improvement in supply lead times. In the end, the deal provides Innovium investors with a safer trajectory to meet both their short-term and long-term financial goals. Benefits for Marvell • It enhances Marvell’s switch chip portfolio by adding Innovium's cloud data center products to its primarily enterprise & carrier (telco) solutions. • It expands Marvell’s customer base to include hyperscale cloud providers who are major data center switch silicon customers. Benefits for both vendors: • It allows both companies to combine their strengths and address their weaknesses by joining forces to be more competitive versus the industry leader Broadcom, whose semiconductor business generated $17 billion in revenue in 2020. More importantly, the acquisition better positions both companies against switch silicon rivals with smaller shares like: o Intel- via its 2019 Barefoot Networks acquisition for an undisclosed amount. o NVIDIA- through its 2019 Mellanox acquisition for $6.9 billion. o Cisco- after introducing Silicon One merchant silicon in 2019. o Xsights Labs- a startup which has reportedly raised over $100 million in its latest series D funding round in March 2021, according to a report by media outlet Globes. For more detailed information on the various competitive products within the data center switch silicon market, see LightCounting’s July 2021 Mega Data Center Optics report. LightCounting subscribers can access the full text of this research note by logging into their accounts.