Marvell rocks merger mania with buy of Inphi Corp. for $10B

Marvell Technology Group announced Thursday it will buy Inphi Corp. in deal valued at up to $10 billion, the latest in a string of six huge consolidation moves in the semiconductor space in late 2020.

Inphi make chips for storage and networking, but Marvell mainly wants the company to boost its capabilities in hyperscale cloud data centers and 5G wireless infrastructure.

“With the volume of data increasing to store it and move it around, you need silicon that is complex,” said Raghib Hussain, chief strategy officer and executive vice president of networking and processors at Marvell, in an interview with Fierce Electronics.

 Marvell already supplies many of the needed processing, storage, networking and encoding components as well as copper interconnects between data centers and segments of a 5G network.  Marvell hasn’t had, however, the much higher bandwidth data center interconnect optical modules that Inphi provides.

“Inphi is almost 100% complementary to what Marvell does,” said Chris Koopmans, executive vice president of marketing and business operations for Marvell. 

Copper-based interconnects can support typically up to 100 Gbps bandwidth, but Inphi electro-optics interconnects from Inphi can support up to 800 Gbps of bandwidth with a pulse amplitude modulation digital signal processor.

Marvell inphi graphic

“We did not have the switching element for 5G but now will have the most comprehensive offering,” Hussain said.  “Nobody else has a complete offering.”

Hussain said Marvell will compete against Intel and Broadcom, as it already has, but with a more complete technology approach.

The purchase comes at an ideal time, with COVID-19 forcing work and learning from home, placing greater dependency on cloud data centers. “Google and Amazon are adding more servers as fast as possible,” Hussain said. “There’s huge room to grow in this businesses.  No company can claim comparative technology. Intel has compute and doesn’t have storage, security and networking while Broadcom has networking and storage but nothing in compute.”

With Inphi, the optical interconnect also helps Marvell prepare for innovations in wireless that could last for a decade or longer, into the 6G era, according to IDC analyst Ben Sheen.

Patrick Moorhead, an analyst at Moor Insights & Strategy, wrote in Forbes that the purchase “makes sense from a technological and customer value proposition sense. Inphi adds that longer range, higher speed, lower power and higher margin photonics networking capability to Marvell’s copper-based networking.”

“Inphi isn’t cheap, is being acquired at a premium, but…it is where networking is going and I believe Marvell will be a much stronger company for it,” he concluded.

The purchase is expected to close in the second half of 2021 and  will give Inphi shareholders for each of their shares $66 in cash and 2.323 shares of the combined company. Marvell shareholders will have 83% of the new company and Inphi stockholders will own 17%.

Marvell shares declined 3.3%  on the news of the deal, closing at 38.21, while Inphi shares improved  26.7%, closing Thursday at 140.60. Marvell has about 5,200 employees and had $2.8 billion in revenues in 2019. Inphi has about 685 employees and recorded assets of nearly $1 billion in 2019.

The deal is the second announced this week in a spectacular number of semiconductor mergers this year.  On Tuesday, AMD said it would buy Xilinx for $35 billion, while Nvidia announced in September plans to pay $40 billion for Arm. Intel also said last week it would sell its flash memory fab business to SK Hynix for $9 billion In July, Analog Devices said it would pay more than $20 billion for Maxim Integrated Products.

The consolidation frenzy has materialized because the acquirers are at peak market capitalization and the companies can leverage their share price to pay for the acquisition, analysts said. Also, if an acquirer needs to borrow, money is at very low interest.

On the demand side, there is a need for companies to acquire IP in various areas. With the emergency of homogenous computing, there’s a “mixing and matching of IP to serve the end user,” said IDC analyst Shane Rau.  “The acquirers are looking for full IP to serve their existing customers and to buy into new customer bases,” he said.

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