Marvell sees 5G sales slump but guides for second-half revival

US chipmaker Marvell, which counts Nokia as its biggest 5G customer, has been hurt by telco spending cuts and inventory build-up.

Grizzled telecom veterans hardly need further evidence of the slump in network spending by operators that have struggled to make returns on their 5G investments so far. Results from both Ericson and Nokia, the dominant kit vendors outside China, have been a depressing read for several quarters, and challengers seem to have fared even worse. But Marvell Technology’s latest telecom figures certainly add to the gloom.

The US company is among a handful of chipmakers that design silicon for use in 5G basestation equipment. It obviously differs from Ericsson and Huawei, which produce chips only for internal consumption, by selling those 5G chips to the companies that build the networks. This distinguishing feature puts it in an even smaller group of so-called “merchant silicon” vendors. In one of the sub-sectors targeted by Marvell, the only notable players outside China are AMD, Intel, Nvidia and Qualcomm.

Including Marvell, all five offer chips for so-called Layer 1 baseband, the signal-processing activity that largely happens in server boxes (called distributed units in more newly architected networks) separate from the actual radios. But these Layer 1 baseband chips account for a tiny share of the revenues generated by AMD, Intel, Nvidia and Qualcomm. AMD and Intel are concerned mainly with PCs and data-center servers, Nvidia thrives as a monopolistic force in the market for AI chips and Qualcomm – when it is not litigating – provides the modems and application processing units that power many of the world’s smartphones.

This is not the case for Marvell, which made nearly $1.1 billion from “carrier infrastructure” sales last year, nearly a fifth of its total revenues. Unlike AMD, Nvidia and Qualcomm, it has been able to land a major deal with a Tier 1 vendor, benefiting there from the misfortunes of a rival. In 2020, after it was failed by Intel on the delivery of 5G basestation chips, Finland’s Nokia selected Marvell as a new provider of Layer 1 silicon. In the preceding year, Marvell had booked just $370 million in carrier infrastructure sales. By early 2022, annual revenues at this unit had soared to almost $908 million.

Laid low by Nokia

But the business went into reverse this year after telcos hit the spending brake. Sales plummeted 75% for the first quarter, year-over-year, to about $71.8 million, and another 72% for the recent second quarter, to $75.9 million, accounting for as little as 6% of Marvell’s overall turnover.

Today, Marvell’s heavy reliance on one customer – in a market for radio access network (RAN) equipment dominated by a few players – looks far from ideal. While Nokia appears to have gained 5G market share outside China in recent years, its performance so far in 2024 has looked worse than that of Ericsson, its big Nordic rival.