October 29 – Marvell Technology Group announced it would acquire Inphi Corporation, a high-performance networking chips manufacturer, for $10 billion. The semiconductor giant expects the transaction will close in the second half of 2021.
Marvell is the latest corporation to participate in this year’s semiconductor industry consolidation trend.
Why Marvell is Acquiring Inphi
In its merger declaration press release, Marvell indicated it is purchasing Inphi to improve its position in the 5G and cloud-computing sectors.
Founded in 2000, Inphi has emerged as an innovative designer and developer of interconnect solutions. It offers trans-impedance amplifiers, drivers, optical physical layer chips, and digital signal processors that enable rapid high-volume data transfers. The performance quality and affordability of the firm’s products helped win the business of Microsoft and Cisco Systems.
Marvell views Inphi’s assets as a pathway to greater expansion as a global leader in the networking chip business.
The Santa Clara, California headquartered corporation noted that its latest acquisition would elevate it into a $40 billion semiconductor firm. At present, its market value stands at $24.47 billion. The tie-up will further increase its networking and cloud clients list and give it access to a $23 billion addressable market.
Once the transaction completes, Marvell expects its compound annual growth rate to reach 12 percent.
The semiconductor corporation will pay for its latest subsidiary in a cash and stock deal. Post organization, its shareholders will own 83 percent of the reorganized company while Inphi’s backers will have a 17 percent stake in the business. JP Morgan Chase Bank is providing the acquirer with the funds necessary to complete the deal.
Marvell also noted it would be domiciled in the United States when the transaction process concludes instead of its current home in Bermuda.
Explaining the 2020 Semiconductor Industry Merger Trend
The chip sector has seen a remarkable amount of merger and acquisition activity this year for two reasons.
One, the coronavirus pandemic introduced considerable volatility into the global semiconductor market.
Earlier this year, the outbreak shutdown components production and made logistics forecasting impossible due to regional travel lockdowns. But the crisis also fostered explosive growth in parts of the industry. Many organizations adjusted to COVID-19 by instituting mass work-from-home transitions. That prompted consumers to buy new computing hardware and data centers to buy new performance-improving chipsets and memory.
For example, pandemic related demand played a part in Marvell boosting its revenue by 10.7 percent last quarter.
Two, Huawei lost access to the U.S. derived technology that it utilized to become a telecommunications powerhouse last month. The conglomerate stockpiled chips from many of its vendors to ensure its ongoing operations next year. The company’s massive capital expenditure bolstered the near-term income of its suppliers, such as Inphi, but made their long-term future uncertain.
The shockwaves from those two events created conditions ripe for significant semiconductor industry consolidation. The volatility that defined 2020 gave many chipmakers the means and opportunity to expand and motivated others to accept buyout offers.
With Nvidia purchasing ARM for $40 billion, AMD paying $35 billion to acquire Xilinx, and Analog Devices $20 billion to snap up Maxim Integrated, the semiconductor industry is undergoing a lot of change. While the sector’s future is hard to forecast right now, proactive firms like Marvell are well-positioned to navigate its landscape.