Marvell To Acquire Networking Chip Startup Innovium For $1.1 billion

Marvell Technology plans to acquire networking chip startup Innovium for $1.1 billion. The deal is a bid to capture a greater share 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 inside data centers—Innovium’s primary business—could double to $2 billion over the next five years.

“The bulk of that $1 billion to $2 billion growth is all the hyperscalers, even as regular data centers are going to be kind of flattish,” Murphy said. “But the hyperscale probably grows at 20% a year, maybe 30% a year, so it’s pretty significant.”

Innovium makes networking chips that act as a kind of traffic controller and direct data quickly and efficiently to various parts of a data center. Innovium’s Teralynx chips compete with
which makes products that perform a similar function. Adding Inovium’s products to the Marvell portfolio will further increase the breadth of chips it can offer its data center customers.

Marvell said Innovium’s chips have been selected by a big U.S. cloud customer, that will drive a significant amount of new revenue in calendar 2022 (Marvell declined to disclose the name of the customer).

“The interesting thing about Innovium, is what they’ve accomplished as a venture-backed startup,” Murphy said. “They have created a very competitive set of products and road map that have now gotten traction.”

The company said it expected $150 million of incremental revenue in its next full fiscal year, with the deal 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 serve as an advisor.

Marvell’s agreement to acquire the Silicon Valley-based startup comes months after it acquired optical networking component maker Inphi for $10 billion, another bid to boost its portfolio of cloud businesses.

Marvell’s Inphi acquisition arrived amid a wave of consolidation in the semiconductor industry. Last year,
(NVDA) announced its bold plan to buy Arm for roughly $40 billion, while
Advanced Micro Devices (AMD)
said it planned to buy 
(XLNX) for $35 billion.

Chip companies have looked to consolidation as the cost of innovation continues to grow. Developing a new chip using the most advanced manufacturing process can now cost more than $500 million.

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