Chipmaker Marvell Technology Group Ltd. today said it has inked a $10 billion deal to acquire Inphi Corp., a maker of semiconductors for optical networks.

The deal is a cash-and-stock transaction. Marvell estimates that absorbing Inphi will give it an enterprise value of $40 billion, while growing the size of its addressable market to $24 billion.

Marvell’s chips are used in devices ranging from consumer desktops to cloud providers’ data centers. The company is a major provider of storage drive controllers, the tiny circuits inside flash drives that manage the flow of data. Marvell’s products portfolio also includes central processing units for servers and security processors optimized to perform encryption. 

But the part of the company that will receive the biggest boost from the Inphi deal is its networking business. Marvell, in addition its other areas of focus, supplies chip for powering data center and 5G carrier networks. Inphi competes in the same niche with a selection of so-called data movement interconnect chips. 

Data-carrying light signals weaken as they travel through a fiber optic network link, particularly over long distances. Inphi has developed a circuit called a transimpedance amplifier that can catch an incoming signal, remove noise and amplify it to ease processing. The firm also provides a range of related components such as digital signal processors.

Inphi’s products are deployed as subsystems inside the optical network infrastructure that companies use to link together servers inside their data centers and to connect data centers with one another. The use of high-speed fiber optic equipment is growing rapidly as cloud providers, carriers and others scramble to keep up with the rapid rise in the volume of data traffic. This growth boosted Inphi’s revenue by a hefty 91.8% in its most recent quarter, to a record $180.7 million.

The $10 billion Marvel has agreed to pay for the firm suggests that it expects this momentum to continue for quite some time. The company said that the deal will enhance its “long-term financial model” by boosting its revenue growth, as well as gross and operating margins. Part of the margin improvements is set to come from annual run-rate synergies of $125 million that are expected within 18 months of the deal closing. 

Marvell is also gaining more customers in the lucrative hyperscale segment. The company said that buying Inphi will double the number of $100 million-plus clients accounts it has in the cloud and carrier markets, to eight.

“Our acquisition of Inphi will fuel Marvell’s leadership in the cloud and extend our 5G position over the next decade,” said Marvell Chief Executive Officer Matt Murphy. “Inphi’s technologies are at the heart of cloud data center networks and they continue to extend their leadership with innovative new products.”

The transaction is expected to wrap up before the second half of 2021. Under the proposed deal terms, Inphi shareholders will receive $66 in cash and 2.323 shares in the combined company for every Inphi share they own.

Photo: Marvell