Marvell doubled his position on automotive Ethernet

When they decided to buy Aquantia Corp. for 452 million dollars, Marvell Semiconductor has made a move to fix its position in the Ethernet IC market. They are expecting that Aquantia’s automotive Ethernet technology will be widely adopted by autonomous vehicle makers to enable on-board networking.

Future Level 4 and Level 5 autonomous vehicles will need in-vehicle connectivity at multi-gigabit speed to move a massive volume of data generated by the host of high-resolution sensors including vision, LiDARs, and radars that they will require. Aquantia’s proprietary AQcelerate PHYs and controllers support Ethernet speeds of up to 10 Gbps over twisted-pair automotive cables.

Aquantia was the first company to market multi-gig PHYs rangings from 2.5 Gbps to 10 Gbps over copper. Matt Murphy, Marvell’s CEO, reminded analysts that it was Marvell that was first to market with a 1-Gbps Ethernet PHY for in-car networks, which he said has already secured multiple design wins. The combined product portfolio, he said, would enable Marvell to deliver an end-to-end connectivity solution for in-car networks.

For example, Murphy said, both Marvell and Aquantia’s Ethernet solutions are integrated in Nvidia’s Pegasus compute platform for self-driving cars.

“I think it’s been very clear as we’ve made progress in automotive that there’s a huge opportunity there,” Murphy said. “And we kept getting customers asking us for these types of solutions. And then we were looking at next-generation roadmaps, and it just became very clear that Aquantia had a very strong position there.”

According to Strategy Analytics, demand for automotive Ethernet ports is expected to grow at a 62% compounded annual growth rate between 2018 and 2022, reaching more than 350 million ports.

Marvell billed the acquisition as highly complementary and said that it would also strengthen the company’s multi-gig portfolio for enterprise infrastructure and data centers.

The Linley Group’s Wheeler said that from a broader market perspective, the acquisition would have limited impact.

“In terms of the traditional Ethernet IC market, it simply reinforces the duopoly of Marvell and Broadcom,” he said.

But Wheeler added that the acquisition would also strengthen Marvell’s position in PHYs for the enterprise.

“Cisco has been an important customer for Marvell for a long time, and Cisco uses Aquantia’s PHYs,” he said. “So the deal bolsters Marvell’s incumbency at Cisco.”

Wheeler also noted that Marvell has had its own multi-gig Ethernet chips in production since 2016, a product line that dates back to the acquisition of a team and set of products from Solarflare in 2011. Marvell billed itself as a second-source supplier to Aquantia in this market, Wheeler said, but the products have not gotten much customer traction.

The acquisition coincided with the announcement of Aquantia’s dismal first-quarter results. Aquantia reported quarterly sales of $17 million, down 42% sequentially and down 40% year over year. The company reported a net loss for the quarter of $13.1 million.

Marvell expects the deal to close before the end of 2019. It has already been approved by Aquantia shareholders that cumulatively hold about 17% of the company’s common stock. The deal remains subject to regulatory approvals.

Marvell said that it continues to expect sales for its first quarter to be between $620.5 million and $669.5 million. Marvell reports its first-quarter results on May 30.