Marvell Tech to acquire Innovium for $1.1 Billion

Marvell Technology is ready to acquire networking chip start-up Innovium for $1.1 billion, aimed at bolstering Marvell’s share of networking chips sold to large cloud-computing companies to power the largest, most complex data centers.

Marvell 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, as the growth to come mostly from 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 Broadcom, which makes products that perform a similar function. Inovium’s products to the Marvell portfolio will further increase the breadth of chips it can offer its data center customers.

Marvell’s rival, Broadcom Inc, currently dominates the market for chips that go into the switches that help move digital information around inside massive data centers owned by Marvell said Innovium’s chips have been selected by a big U.S. cloud customer including Amazon Web Services , Microsoft Corp and others. Marvell took a step toward getting into that market last year with its $10 billion purchase of Inphi Corp, whose chips help connect the switches with fiber optic cables.

Marvell’s agreement to acquire the Silicon Valley-based start-up 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, Nvidia (NVDA) announced its bold plan to buy Arm for roughly $40 billion, while Advanced Micro Devices (AMD) said it planned to buy Xilinx (XLNX) for $35 billion.

Marvell also said it expects revenue of $1.065 billion, plus or minus 1.5%, when it reports earnings on Aug. 26, in line with analyst estimates, according to IBES data from Refinitiv.