Marvell Technology plans to acquire network chip startup Innovium for $1.1 billion. The deal is an effort to capture more of the silicon used to power the largest, most complex data centers, Marvell said early Tuesday.
CEO Matt Murphy says the market for Ethernet switch chips in data centers — Innovium’s main business — could double to $2 billion in the next five years.
“Most of that $1 billion to $2 billion growth is all hyperscalers, even if regular data centers are going to be a little flat,” Murphy said. “But the hyperscale is probably growing at 20% per year, maybe 30% per year, so it’s pretty important.”
Innovium makes network chips that act as a kind of traffic controller and send data quickly and efficiently to various parts of a data center. Innovium’s Teralynx chips compete with
producing products that perform a similar function. Adding Inovium’s products to the Marvell portfolio will further increase the number of chips it can offer its data center customers.
Marvell said Innovium’s chips have been selected by a major US cloud customer, which will generate a significant amount of new revenue in calendar 2022 (Marvell declined to disclose the customer’s name).
“The interesting thing about Innovium is what they’ve accomplished as a venture-backed start-up,” Murphy said. “They have created a very competitive line of products and a roadmap that has now gained traction.”
The company said it expects $150 million in incremental revenue in the next full fiscal year, and the deal is expected to close in 2021. Innovium co-founder and chief technology officer Puneet Agrarwal will join Marvell after the deal closes, and chief executive Rajiv Khemani will act as an advisor.
Marvell’s deal to acquire Silicon Valley-based start-up coming months after it is acquired optical network component manufacturer Inphi for $10 billion, another bid to expand its portfolio of cloud companies.
Marvell’s Inphi acquisition came amid a wave of consolidation in the semiconductor industry. Last year,
(NVDA) announced its bold plan to buy Arm for approximately $40 billion, while
Advanced Microdevices (AMD)
said it was planning to buy
(XLNX) for $35 billion.
Chip companies have looked to consolidation as the costs of innovation continue to rise. Developing a new chip using the most advanced manufacturing process can now cost more than $500 million.
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