BitPush News, according to Bloomberg on October 28, Marvell is in advanced negotiations with optical device manufacturer Lumentum regarding a potential all-stock acquisition. At the time of the report, Lumentum’s market capitalization was approximately $83 billion, while Marvell’s was around $221 billion. Analysts Andrew Schmitt and Scott Wilkinson from market research firm Cignal AI, on the Semi Doped podcast, stated that the core rationale behind the potential deal is vertical integration, not a lack of laser supply for Marvell. If completed, the transaction would enable Marvell to integrate digital signal processors (DSPs), lasers, and optical components through co-design, enhancing product performance, securing supply chain control, and offering more comprehensive solutions.
Andrew noted that gross margins in the optical components industry have risen from around 25% in the past to nearly 50%, altering the economic logic behind chip companies acquiring optical firms. Lumentum possesses scarce technologies in products such as 200G EMLs, optical circuit switches (OCS), and high-power lasers. He believes that vertical integration, even if it affects the combined gross margin percentage, could generate higher gross profit dollars.
However, Scott cautioned that Marvell’s coherent DSPs are widely adopted by numerous optical module manufacturers, and if the acquisition leads to further entry into the optical engine and module markets, it could directly compete with existing customers. Andrew believes the company must assure its existing DSP customers and Lumentum’s optical customers that their current supply relationships will remain unaffected.
The two analysts also emphasized that competition in optical communications depends not only on being first to market but also on the ability to deliver at scale. Scott noted that being first to market with the ability to produce only 10,000 units may not outperform a competitor who enters slightly later but has capacity in the millions. Although Lumentum has expanded its indium phosphide capacity multiple times, it still struggles to meet all customer demand. Regarding discussions about NVIDIA potentially participating in the acquisition, Andrew explicitly stated that he has no insider information and that any such assessments are merely personal speculation.