Media Eye: Marvell's comeback

Founded in 1995, Marvell once ranked among the top five semiconductor companies in the world at its peak. When China issued 4G licenses in 2013, Marvell launched the first 4G chip for 1,000-yuan smartphones ahead of MediaTek and Spreadtrum, and dominated the market that year. However, after Qualcomm, MediaTek, and Spreadtrum entered the market, Marvell made the outside world full of doubts about the company's future in the next two or three years.

Marvell's stock price trend over the past decade

But it was also in that year that Matthew J. Murphy, who had served Maxim Integrated for more than 20 years, was appointed as the company's new president and CEO. After three years of business adjustments, Marvell seemed to be back, and its stock price hit a ten-year high, but Marvell was no longer the Marvell it once was.

Looking at Marvell's 2016 quarterly report (statistical period: January 30, 2015 to January 30, 2016), the company's revenue for the year was $2.726 billion, a significant decline from $3.707 billion in 2015. From the perspective of its business composition, storage accounts for nearly half of the company's business, after all, this is the foundation of the company's fame. However, the mobile and wireless communication market, which they once had high hopes for, has seen a significant decline in revenue.

Marvell's revenue from 2014 to 2016

We know that smartphones have swept the world in the past decade since Steve Jobs released the first generation of iPhone in 2007. Chip suppliers such as Qualcomm have also made a lot of money. The Marvell team actually foresaw the development trend of mobile phones very early at that time, because they announced the acquisition of Intel's communication and application processor business for US$600 million in 2006. They were also full of confidence at the time. Dr. Sehat Sutardja, then chairman of the board, president and CEO of Marvell, said: "We are excited to work closely with Intel and that they will transfer this business to Marvell. This transaction provides Marvell with a great opportunity to become a long-term leading supplier of mobile phones and consumer electronics."

However, statistics show that in the three quarters of 2014 Q3, Q4 and 2015 Q1, Marvell's mobile phone chip business revenue was US$251 million, US$206 million and US$181 million, respectively, shrinking by 13%, 19% and 13% each quarter. In just one year, Marvell's mobile phone business revenue fell by 44%, dragging down Marvell's total revenue by 24.5%, and the proportion of mobile phone business in total revenue also dropped from the initial 33% to 25%.

Although Marvell has launched amazing products in the field of mobile processors, under the pressure of competitors, Marvell, like many other manufacturers such as Texas Instruments and ADI, had no choice but to gradually fade out of this market, which to some extent led to Marvell's turmoil in 2016. The drastic changes made by the newly appointed CEO have led to Marvell's rebirth.

Marvell's revenue changes from fiscal 2017 to 2019

As shown in the above figure, Marvell has directly cut off the "mobile and wireless business" since the 2017 fiscal year and increased its emphasis on the "network" business. Acquisition and sale of businesses have become the simplest, crudest and most effective way for Marvell to transform.

After taking office, Matthew J. Murph said that although the company has a great engineering team, we have expanded into too many different markets and have overly dispersed our investments in areas where we can gain an absolute market share. Therefore, his first goal is to focus on three areas of core business: storage, networking and connectivity.

After setting this tone, the first thing he did was to deal with the existing mobile business.

In May 2017, Marvell announced that it had successfully sold its MBU (Mobile Communications Division) to Chinese chip startup ASR. According to the information, the business sold by Marvell this time included baseband IP, thin-modem product line and mature baseband R&D team. This was also the first step for Marvell to sell its business.

In June 2017, Marvell announced that it would sell its multimedia business, which includes video and audio processing but has a large IP portfolio and security features for use with set-top boxes and digital personal assistants, to Synaptic for $95 million.

On May 29, 2019, Marvell announced that it would sell its wireless connectivity product portfolio, including its WiFi connectivity business unit, Bluetooth technology portfolio and related assets, and approximately 550 employees of the business unit to NXP for US$1.76 billion.

While selling businesses, Marvell also bought a lot of businesses to quickly strengthen its business capabilities.

In November 2017, Marvell announced that it would acquire Cavium for approximately $6 billion.

According to data, Cavium, founded in 2001, produces CPU/SoC based on ARM/MIPS architecture, providing network, audio and video, and security functions. Its processors and development boards are often used in routers, network switches, network attached storage and other products. Analysts also said that the acquisition of Cavium can increase Marvell's ambition in the network field. After the merger of the two companies, the company can expand its network capabilities and compete with large companies such as Intel and Broadcom.

Cavium and Marvell's product fit

On May 13, 2019, Marvell announced that it had reached a final agreement with Aquantia, a company in the field of Multi-Gig Ethernet network connection products: Marvell will purchase all issued common shares of Auqantia for $13.25 per share in cash. Through this acquisition, Marvell can expand the company's position in the Multi-Gig 2.5G/5G/10G Ethernet network market. Matt Murphy, President and CEO of Marvell, also said: "After the acquisition of Aquantia, Marvell will be able to strongly lead the transformation of in-vehicle networks to high-speed Ethernet networks in the next 10 years. At the same time, in the rapidly emerging field of Multi-Gig network infrastructure, Aquantia can extend our reach and create an end-to-end Ethernet network connection product group to lead the industry."

On May 22, 2019, Marvell announced the acquisition of Avera Semiconductor, a subsidiary of GlobalFoundries, for $740 million. According to an official press release, Marvell is committed to becoming the world's leading infrastructure semiconductor solution provider. Avera's ASIC design capabilities will accelerate this transformation. Matt Murphy, President and CEO of Marvell, said: "The acquisition of Avera will enable us to provide a complete range of product architectures, covering standard, semi-custom to full ASIC solutions. Their experienced design team combined with Marvell's leading technology platform will put us in a better position to better take advantage of our expansion opportunities in wired and wireless infrastructure and immediately start the fast-growing 5G base station market. In addition, we look forward to further deepening our cooperation with GlobalFoundries in the next few years and even longer."

Marvell founder Xiuwen Zhou once talked about it in an interview. Marvell has seized three growth opportunities in the process of development. The first one was in storage. From the above data, we can see that this will always be the main source of contribution to the company's business. Whether it is the past HDD control solution or the current SSD control solution, Marvell's business in this area is also leading the industry. In the future, the data demand driven by AI and cloud services will also bring more incentives to this part of the company's business, which is inevitable.

The second opportunity that Marvell seized was when the Internet was on the rise in 2000, when the company launched a 1G chip that could meet the Internet's storage requirements; the third opportunity was when Marvell promptly detected the growth in demand for WIFI in 2002 and made early arrangements, and their business in this area also performed well. However, as mentioned above, the company sold this part of the business in 2019; as for the fourth opportunity, it was to occupy a position on the eve of the explosion of smartphones, but this proved to be a failure.

This time, network infrastructure has become an area of ​​focus for the company. On the one hand, this is because the gross profit margins in these areas are higher, and on the other hand, the rise of 5G, AI and cloud services has caused a surge in demand for processors related to network infrastructure, and Marvell has also prepared sufficient "ammunition depots" through these acquisitions.

For example, Cavium, which they acquired, has performed very well in networking and storage, especially their latest thunder x 2 processor, which has the best performance currently. This will help them continue to expand in the ARM server chip market and find broad opportunities. In other areas such as the fast-growing infrastructure processors, there is also competition among several oligarchs, which is also a huge benefit for Marvell, which has strong strength.

The combination of Aquantia's Multi-Gig automotive PHY and Marvell's own Gigabit PHY and secure switch products can create the world's most widely used and advanced high-speed in-vehicle network solution, allowing Marvell to become a major supplier of networks required for L4 and L5 autonomous driving.

Avera Semi, which was born out of IBM's microelectronics business, has highly innovative design capabilities in analog, mixed-signal and system-level chips, and has a rich IP portfolio including high-speed SerDes high-performance embedded storage and advanced packaging technology. Marvell can provide a complete silicon platform that supports many aspects of digital processing, including baseband, processor Ethernet switches and PHY. The close combination of the two parties provides the company with the ability to customize ASICs for the wired and wireless infrastructure fields.

Judging from the surface, whether it is the Internet of Vehicles, ASIC customization or wireless infrastructure business, because their growth rate is visible to the naked eye, it means that Marvell has already grasped the ticket to enter the next era of semiconductors. But we still see that Marvell is not sitting on the Diaoyutai. Looking at the current competitors, Broadcom is still strong, Intel is eyeing it, and Huawei's devices are also improving their control in related fields through self-developed chips. As for the highly anticipated ARM server chip market, in the eyes of many analysts, it is also full of uncertainties.

But what is certain is that for Marvell, a new opportunity is opening up. As for its future development, it depends on how Matt Murphy plans.