Marvell’s Silicon Surge Continues

SANTA CLARA, Calif.—Semiconductor maker Marvell Technology has experienced a significant surge this year, and it’s due in large part to its focus on making custom silicon for hyperscalers.

Founded in 1995, Marvell started with an emphasis on consumer electronics. But it transformed itself into a global semiconductor company that designs, develops, and markets a wide range of integrated circuits. The company’s products are used in data centers, networking, storage, and consumer electronics. We attended Marvell’s Analyst Day this week to learn more about the surge this year and its plans for the future.

One of the biggest wins for Marvell, and a great example of its success with custom silicon, is its  expanding partnership with Amazon Web Services (AWS.) This five-year collaboration focuses on developing custom silicon solutions to power AWS’s data centers. By leveraging Marvell’s expertise in networking and storage technologies, AWS can enhance the performance and efficiency of its cloud infrastructure.

“Our collaboration with AWS continues to deepen, and we are excited to be a key partner in powering their cloud infrastructure,” Marvell CEO Matt Murphy said.

Custom Silicon Expanding

Custom silicon solutions, along with other customized networking solutions, are a huge part of Marvell’s present and future.  “If you take the AI-driven demand cycle and the addition of custom silicon, Marvel is now a data center company [rather than a semiconductor company], rising from about a third of our revenue a few years ago to being over 70% of our revenue for the first three quarters of this year,” said Marvell COO Chris Koopmans. “And if you take our guidance for the fourth quarter, it would end up being 75% of our revenue. And we don’t see that changing.”

Customized silicon, rather than a one-size-fits-all approach, is one important part of optimizing the entire data center architecture, which is critical in the AI era, Koopmans said. He elaborated:

“We’ve been talking about custom silicon for hyperscalers for three years at least, and we faced a million questions: Why would they customize? What’s the driver behind it? Is it going to be successful? How much share is it going to take? There were all these questions, and it just goes to show that there’s nothing like actually having the products in your hand and delivering revenue for the company. Ultimately, it’s an exciting time at Marvell, having custom silicon adding AI growth on top of our connectivity solutions.”

Marvell co-designs and co-architects these optimized, custom solutions with its partners. The advantages in data center performance are attracting big customers like AWS. Why? Koopmans continued:

“If you’re building standard products, if you’re using the same switches that you were using for general purpose data centers or for all of your data centers, if you’re using the same optics, if you’re using the same mix, you’re by definition suboptimal. Because you’ve got an overpowered solution with extra features for a multitude of applications. If you’re trying to design just this cluster or just this generation of AI data center, you can build a much-more optimized solution that solves your problem.”

Supply Chain Challenges

While Marvell is demonstrating strong growth and innovation, it faces several challenges. All chipmakers are dealing with supply chain constraints and geopolitical risks, particularly in Asia. They are having to navigate these challenges to ensure a steady supply of chips. The biggest geopolitical risk — the proverbial 800-lbs. gorilla in the room — is one big question that lingers over Silicon Valley: What if China invades Taiwan?

To deal with this, Marvell has to be more nimble than some competitors, because it doesn’t have its own manufacturing facilities. It relies on third-party foundries to produce its chips. These foundries, located primarily in Asia, play a crucial role in the global semiconductor supply chain.

The recent trend of building chip manufacturing facilities in the US, including the Arizona initiative, will help Marvell’s supply chain. However, the full impact of these initiatives remains to be seen. Marvell will need to carefully assess the potential benefits and risks associated with domestic manufacturing.

Marvell executives addressed the supply chain issue at its analyst day. Koopmans said that Marvell and other chipmakers have been dealing with the issue for a long time, and he’s happy there’s been more focus on the issue in recent years.

“I think most people didn’t really know that chips were a part of all this stuff until the supply crunch happened,” he said. “Then all of a sudden it was on the news every day. And all of a sudden people are like, ‘why aren’t we doing something about it?’”

Koopmans continued:

“And so then governments all over the world got involved. And now you see new fabs being built in Arizona that are up and running and doing very well. New fabs being built in Japan and doing very well. New fabs being built in Germany. You also have Samsung building in Texas. You also have Intel building in various places. So, there’s a lot of new capacity coming on.”

Crowded Field

Another big challenge for Marvell is intense competition. The semiconductor industry is highly competitive, with numerous players vying for market share. Marvell must continuously innovate and differentiate its products to maintain its competitive edge. Strategic partnerships, such as the one with AWS, are also a key factor, and Marvell has many.

Competitors and their products include the following:

• • NVIDIA: At the top of the chip pile is NVIDIA. It is primarily known for its graphics processing units (GPUs) and has expanded its offerings to include networking solutions. The company’s focus on AI and high-performance computing has positioned it as the key player in the data center market.
  • Broadcom: A major player in the semiconductor industry, Broadcom competes with Marvell in several areas, including networking, storage, and wireless connectivity. Broadcom’s strong financial position and aggressive acquisition strategy have made it a formidable competitor.
  • Intel: A long-standing industry giant, Intel has a diverse product portfolio, including processors, chipsets, and networking solutions. However, Intel is facing challenges this year, particularly when it comes to corporate leadership. Rumors of it possibly being sold, either in whole or in different parts, persist in Silicon Valley. Nevertheless, Intel remains a significant player in the semiconductor industry and continues to invest heavily in research and development.
  • Qualcomm: Known for its expertise in wireless technology, Qualcomm is a major supplier of mobile chipsets. The company has also expanded into other areas, such as networking and automotive.
  • AMD: AMD is a major competitor to Intel in the processor market, offering a range of CPUs and GPUs. The company has made significant strides in recent years, gaining market share and improving its product offerings.

To be sure, Marvell’s strong performance, strategic partnerships, and focus on custom silicon and optimized data center solutions position it well for future growth. By addressing challenges related to supply chain disruptions, competition, and geopolitical risks, Marvell can continue to innovate and capitalize on the growing demand for semiconductors and high-performance computing and networking solutions. Marvell’s advanced chip technologies are well-positioned to address this growing market.

By Tom Dunlap, Research Director, Avasant