Marvell Technology's leadership recently shared insights into the company's strategy and market position at the Goldman Sachs Communacopia + Technology Conference. The discussion, led by EVP and CFO Doug Bettinger, provided a comprehensive look at Marvell's current standing and future prospects in the semiconductor industry.
Industry Landscape and Marvell's Position
The semiconductor sector is experiencing significant shifts, driven by emerging technologies and changing market demands. Marvell finds itself at the intersection of several key trends, particularly in data infrastructure and artificial intelligence (AI).
Bettinger emphasized the company's strong position in these areas:
"Listen, I hope everybody got all bulled up listening to Jensen this morning because if he's excited, I'm excited. Because you don't get GPUs for free, you got to build them using equipment."
This comment underscores the interconnected nature of the semiconductor ecosystem. As demand for advanced technologies like AI accelerators grows, it drives demand throughout the supply chain, including for the equipment used to manufacture these chips.
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Focus on Leading-Edge Technologies
Marvell has been strategically positioning itself in high-growth, high-value segments of the market. The company's focus on leading-edge foundry and logic technologies is particularly noteworthy.
Bettinger highlighted the strength in this area:
"Leading-edge foundry and logic is actually pretty strong this year. I think it goes without saying everybody understands what's going on there. It is a lot of the accelerator chips that I was talking about when I first sat down here."
This indicates that Marvell is well-positioned to benefit from the ongoing AI boom, which is driving demand for advanced logic chips and accelerators.
Memory Market Dynamics
The memory market, particularly DRAM and NAND, plays a crucial role in Marvell's business. Bettinger provided insights into the current state and future prospects of these segments:
On DRAM:
"DRAM pretty strong this year, partially because of the move from DDR4 to DDR5. Obviously, everybody is excited about AI. You got to be excited about high bandwidth memory. That is certainly a bright spot in terms of what's driving DRAM spending this year."
The transition to DDR5 and the growing demand for high-bandwidth memory (HBM) for AI applications are key drivers for DRAM growth. This trend is likely to continue, with Bettinger noting:
"I can't see that abating next year, right? I think DRAM is going to continue to be pretty strong."
On NAND:
"NAND is pretty weak this year. I don't think anybody is surprised to hear me say that, I've been saying it coming up on 2 years now. I have to believe that as we look into next year, Toshiya, it's going to be somewhat stronger next year for NAND, right?"
While NAND has been weak, there are signs of potential recovery. Bettinger expects this segment to strengthen, driven by technology conversions:
"We're moving our way through the normal inventory cycle there. I think you'll see next year largely driven by a lot of conversions, technology conversions, which, by the way, when that happens, we do really, really well because we are the constraint tools in a NAND fab for the most part."
Technological Inflections and R&D Investment
Marvell is heavily investing in research and development to capitalize on major technological inflections in the semiconductor industry. Bettinger outlined several key areas of focus:
3D DRAM:
"There's a technology change in DRAM that will still pretty far away, 3D DRAM is being worked on today."
New metallization schemes:
"There's new metallization schemes beginning to show up in the industry, right? Tungsten is moving to molybdenum or moly, everybody sees that happening. This may be the biggest metallization change since the industry went to copper."
Dry photoresist:
"We've been investing in dry photoresist, which is a disruptive capability that we believe is going to be quite a large business 3, 4, 5 years into the future that we're striving to disrupt some of the track business."
Backside power:
"We saw backside power beginning to show up, right? That plays to the strength of our metallization capability and deposition. It's our SABRE tool."
Gate-all-around (GAA) technology:
"Everybody knows gate-all-around is coming. It's a big opportunity that plays to the strength of our selective etch capability and our ALD capability."
These technological inflections represent significant opportunities for Marvell. The company's strategic R&D investments are aimed at positioning it to capitalize on these trends as they materialize in the coming years.
Advanced Packaging and High-Bandwidth Memory
Advanced packaging technologies, including those used in high-bandwidth memory (HBM), represent a growing opportunity for Marvell. Bettinger highlighted the company's strong position in this area:
"For us, when we look at high-bandwidth memory this year, what we sell into that is tripling this year. So that's a big part of what is driving growth for us this year."
The company's expertise in through-silicon via (TSV) applications is particularly valuable in this space:
"We own pretty much all of that across all of the industry. It's a tool we call Syndion, it's our deep silicon etch. And a tool we call SABRE 3D, which is an electroplating tool that deposits the tungsten."
This capability is crucial for various advanced packaging technologies, including chiplets and high-bandwidth memory, positioning Marvell well in the evolving semiconductor landscape.
China Market Dynamics
The Chinese semiconductor market remains a significant focus for many in the industry. Marvell's perspective on this market provides valuable insights:
"China has been strong this year... It's a broad set of customers in China. A lot of which -- not all, but a lot of which I would describe as new customers. So they're spending with an eye towards growing a business into the future."
Bettinger emphasized that the Chinese market is diverse, with a mix of established and newer players focusing on various semiconductor applications:
"It's largely 28-nanometer and above. So it's not the most advanced process nodes, but also if you haven't done it before, it's not easy to do... It's the broad set of semiconductor devices that don't necessarily need the most advanced process technology."
While some may be concerned about the sustainability of growth in the Chinese market, Bettinger expressed confidence in its long-term prospects:
"Now what I would describe to you is I think people get concerned, this spending is going to go away, it is not. I do not believe. And I say that because when we talk to this set of customers, they all have road maps that are many years in duration."
Capital Intensity and Industry Profitability
An important trend in the semiconductor industry is the increasing capital intensity required to produce leading-edge chips. Bettinger provided valuable insights into how this trend is impacting the industry:
"What I know for sure is capital intensity per wafer put in place is growing at every subsequent process node. As you go forward, it's getting more expensive to create these structures."
However, he also noted that this increased capital intensity is being offset by improved profitability across the industry:
"The metric I think people need to look at more than WFE per revenue dollar is WFE per profit dollar. And actually, Toshiya, if you look at that, and I know you probably have, but I'd encourage everybody in the room to go look at that, that's not going up. Because profitability in the industry in total has gotten better than it used to be."
This suggests that while the costs of developing and producing advanced semiconductors are rising, the industry is also capturing more value from these innovations, maintaining overall profitability.
Customer Support Business Group (CSBG)
A significant but often overlooked part of Marvell's business is its Customer Support Business Group (CSBG). Bettinger highlighted the importance and profitability of this segment:
"CSBG at Lam is the customer support business group. It's composed of 4 lines of business, if you will; Spare parts, service, equipment upgrades, and the reliant product line, which is the mature equipment that we've been selling for years actually at this point. You're right, it's -- in the most recent quarter it's about 40% of our revenue. It is a quite profitable business because it doesn't require a ton of research and development spending."
The CSBG represents a steady, high-margin revenue stream for Marvell, providing balance to the more cyclical nature of new equipment sales. Bettinger emphasized the company's strategy to grow this business:
"Our strategic intention with this business is to grow revenue dollars faster than just the chamber count in the field."
This is being achieved through a combination of spare parts sales, advanced service offerings, and AI-driven predictive maintenance capabilities.
Competitive Landscape
Marvell faces competition in various segments of its business, but Bettinger expressed confidence in the company's technological leadership:
"We've got 1,000 chambers of cryo etch in production today. We own all of it. So as much as I can point to and say, we're good at doing what we do. It doesn't mean others don't aspire to kind of try to get some of this business, they're trying, but we keep moving the bar."
Regarding competition from Chinese equipment makers, Bettinger acknowledged their presence but emphasized Marvell's technological advantage:
"There's a handful of smaller Chinese equipment companies. They're pretty far behind where the global leaders in the industry are at certainly where we're at today."
AI Integration and Future Prospects
Artificial intelligence is not just a driver of demand for Marvell's products; it's also being integrated into the company's operations and product development:
"Listen, some of that advanced service offering is using AI type capabilities. Our simulation capability and what we call Semiverse Solutions is enabled by a lot of AI. We use it for process development."
This integration of AI into Marvell's operations and products positions the company to continue innovating and maintaining its technological edge in a rapidly evolving industry.
Conclusion
Marvell's presentation at the Goldman Sachs Communacopia + Technology Conference provided a comprehensive look at the company's position in the semiconductor industry. With its focus on leading-edge technologies, strategic R&D investments, and strong position in growth areas like AI and advanced packaging, Marvell appears well-positioned to capitalize on major industry trends.
The company's balanced portfolio, including its strong CSBG segment, provides stability and consistent profitability. While challenges exist, particularly in navigating complex market dynamics in regions like China, Marvell's technological leadership and strategic focus on high-growth areas suggest a promising outlook.
As the semiconductor industry continues to evolve, driven by advances in AI, high-performance computing, and data infrastructure, Marvell's strategic positioning and ongoing innovation efforts place it at the forefront of these transformative trends. The company's ability to anticipate and adapt to technological inflections, coupled with its strong market presence, bodes well for its future prospects in the dynamic semiconductor landscape.
