In the Latest Semiconductor Merger, Marvell Buys Inphi

Marvell Technology Group announced last week—the same week that saw the announcement of the $35 billion AMD-Xilinx acquisition—that it plans to buy Inphi Corp. in a cash-and-stock deal worth $10 billion as the industry quickly consolidates. 

Marvell, the Bermuda-based semiconductor company with a market value of roughly $26 billion, produces chips primarily for data storage and networking. Through this acquisition of Inphi, Marvell will be able to expand its dominance in networking, a rapidly growing market segment that has helped catapult Inphi’s stock value by roughly 50 percent this year.

Marvell also said that it plans to build out its cloud data-center and 5G portfolio by acquiring Inphi.

 

Why Consolidate?

The Marvell-Inphi deal is the third multibillion-dollar chip industry acquisition announced in less than two months, following last week’s $35 billion deal between AMD and Xilinx and NVIDIA’s $40 billion purchase of Arm. 

 

Marvell’s Santa Clara headquarters. Image used courtesy of Marvell

 

In fact, this year, we’ve seen more semiconductor industry acquisitions than ever before. Some of the other huge names involved in recent M&A activity include Analog Devices' acquisition of Maxim Integrated and SK Hynix's acquisition of Intel's NAND memory business. This so-called M&A fever is set to make 2020 the largest year on record for the worldwide total value of semiconductor M&A agreements. 

But what’s causing this? Why are we seeing so much consolidation in the semiconductor space?

 

One of Inphi's Polaris platform solutions for data centers. Image used courtesy of Inphi 

 

In short, it’s a need for semiconductor giants to remain competitive in the proliferating chip market, particularly where cloud computing and data centers are involved. It’s no longer enough to rely on organic internal growth; chip giants need to diversify and bring new innovations and product portfolios to the market, and the easiest way to do this is to scale by buying up other companies—usually competitors.

 

Eyeing Up the Data Center Market

Indeed, much of this year’s M&A activity has to do with cloud computing and data centers. In the spring, NVIDIA acquired Mellanox in an effort to actualize the company's vision to advance the data center, which it sees as a primary computing unit.

By acquiring Arm, NVIDIA was able to lock in its position as a market leader in the sector and set itself up for more sweeping moves while focusing less on the competition. AMD has similar data center aspirations and doubled down by acquiring Xilinx, the oft-termed "inventor of the FPGA."

 

What Do Marvell and Inphi Bring to the Table?

While Marvell is far smaller than both NVIDIA and AMD, it specializes in chips for communication, storage, and moving large volumes of data. The company is also eyeing up the data center market just as NVIDIA and AMD are.

Inphi is highly complementary to Marvell’s portfolio with products designed specifically for helping data move faster between and within data centers and Internet infrastructure. 

COVID-19 has also had a huge part to play in the pressure behind these deals. Millions of people are now dependent on online connections to access educational content, work from home, and enjoy more leisure time, and it is data centers with powerful semiconductors at their core that are keeping everyone and everything online.  

 

The demand for more data center advances may be due, in part, to more employees working from home. 

 

Marvell will purchase Inphi in a cash-and-stock deal at $66 cash and 2.323 Marvell stock per Inphi share for a total value, placing a roughly $10 billion value on Inphi, or $157.83 per share. This will be Marvell’s biggest acquisition since its $6 billion purchase of Cavium Inc. in 2018. The deal between Marvell and Inphi is expected to close in the second half of 2021.