High expectations on Marvell’s opportunities with China Mobile

Follow-up: First real chances for Marvell on the tablet and smartphone fronts [Aug 21 – Sept 25, 2011]

After the technical and business excellence well reflected in my previous posts Marvell seems to be on the high rise.
See my previous posts as well:
– ASUS, China Mobile and Marvell join hands in the OPhone ecosystem effort for “Blue Ocean” dominance [March 8, 2011]
– Kinoma is now the marvellous software owned by Marvell [Feb 15, 2011]
– Marvell to capitalize on BRIC market with the Moby tablet [Feb 3, 2011]
– Marvell ARMADA beats Qualcomm Snapdragon, NVIDIA Tegra and Samsung/Apple Hummingbird in the SoC market [again] [Sept 23, 2010 – Jan 17, 2011]

Update: Marvell Leads TD-SCDMA Market with Industry’s First Commercially Available Single-Chip Solution Shipping in China [June 1, 2011] (emphasis is mine)

Company showcases at Computex 2011 a suite of new smartphones, tablets and mobile hotspot devices developed for the China market powered by Marvell’s PXA920 series of high performance single-chip TD-SCDMA solutions.

…

… said Weili Dai, Marvell’s Co-Founder. “Marvell has raised the technology bar for the entire industry.  We believe Marvell has delivered a quantum leap to the development and adoption of the TD-SCDMA standard.  Because of this breakthrough, more than a dozen world-leading mobile OEMs are launching Marvell® PXA920 based products in China. We’re very proud to enable the next billion users of connected devices in China.”

Marvell’s industry-leading TD-SCDMA solution is designed to deliver world-class performance – 3D graphics, mobile gaming, mobile TV, and high definition video with a unified user experience across different product platforms enabled by Marvell’s beautiful and easy-to-use Kinoma® software. Additionally, the PXA920 series of products are the industry’s first TD-SCDMA solution that combines a high performance application processor and modem and enables realization of the long-standing quest for mass market smartphones priced at 1,000 RMB.  This same platform is designed to support worldwide 3G and 2G standards, allowing OEMs to rapidly deploy WCDMA smartphones, tablets, and mobile hotspot devices in China and beyond.

Marvell provides a complete solution including system-on-chip (SoC) communication processors, modems, RF, PMIC, and integrated Wi-Fi/BT/FM connectivity including 1×1 and 2×2 mobile MIMO with beamforming capabilities.  Marvell’s TD-SCDMA silicon and software solutions were developed at its Shanghai design center, home to approximately 1,000 engineers dedicated to the China market.

Update: The PXA920 opportunity was realized only in September 2011, two years later than the September 2009 launch. See:First real chances for Marvell on the tablet and smartphone fronts [Aug 21, 2011]

Marvell Up 11%: Street Says ‘Inflection Point’ [May 27, 2011] (emphasis is mine)

Shares of Marvell Technology Group (MRVL) are up $1.53, almost 11%, at $16.09 after the company last night missedfiscal Q1 estimates but forecast the current quarter ahead of consensus, based on an expectation for a pick-up in its wireless chip business.

Most analysts this morning are saying business has hit bottom and is on the way back up. Estimates are up all around, though there are no ratings revisions, as far as I can see, and price targets are mostly staying where they were.

…

The China Mobile (CHL) “OPhone” project for TD-SCDMA handsets could bring the company $40 million in the latter half of this year.

… in Ophone it believes it has ~80% of a 10-12M C12 TD unit oppty …

… the Q2 forecast is “a fundamental inflection point,” even though the ramp-up of wireless chips for China Mobile’s OPhone will be relatively immaterial. “We believe the company is ramping several OEMs this quarter, with one being ASUS. Previously, management indicated that it had garnered design wins for 90% of current OPhone models across eight of the top nine OEMs. The company now expects to ship to over 12 customers this year with a design win rate of ~80%.” …

With that market capitalization of Marvell went from $9.2B to $10.2B in a single day.

Marvell Technology Group’s CEO Discusses Q1 2012 Results – Earnings Call Transcript [May 26, 2011] (emphasis is mine)

Given the recent market concern surrounding our Mobile and Wireless business, I would like to take a moment to address this up front. First, I would like to stress that the mobile end market is a key area for Marvell, and we continue to invest new product development and to strengthen our infrastructure to support new customers.

As an example, we are currently supporting over 20 handset designs at new customers. In addition to our current 3G and TD offerings, our investment in advanced technologies, such as LTE, are starting to pay benefits. We are already sampling our LTE solutions at some of our key customers and believe we are well positioned to benefit when the market ramps. Although quarter-to-quarter fluctuations are hard to avoid, we believe our business at our leading customers will be sustained, and we will continue to be a significant player in this space.

Second, I want to share with you the current status of the ramp in TD products. We are winning about 80% of the TD smartphone designs on the Android and OMS platforms. Our single-chip solutions address the entire spectrum of low- to high-end TD phones, and we are firmly entrenched in the high-volume sweet spot. We believe our solutions are compelling for this market and should translate into solid growth for our TD business this year.

We remain confident that our early investment in support of the TD has been extended in China will be very beneficial to us as the majority of China’s mobile 600 million subscribers continue migrating to the smartphone market on the TD standard.

In addition, we are working with our key carrier partners and handset customers on prototypes for our next-generation TD LTE, which we’ll be sampling later this year. These new products are best in class and fully backward-compatible. We believe these investments will further distance us from our competitors in TD.

During the last quarter, we achieved a significant milestone as the first company to ship TD single-chip solutions in production volumes. We expect these revenues to more than double in the second quarter. This should provide clear evidence that our strategy in TD is successful.

Question-and-Answer Session [of the above]

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Let me add a little bit more color about why is TD so important to China. There’s a lot of people — a lot of people in outside China are skeptical about the opportunities of TD in China. The way I look at it, I can explain it from a technical point of view. But then, I can speak until I’m tired, and nobody will care anyway. So I’m trying to, this time, answer you from a different angle, from a non-technical point of view.

As you know, Chinese have been run — the society has been run for 4,000 or 5,000 years of history. And over those history, they invented many new technologies hundreds of years before anybody else invented those technologies. Yes, okay, recently, okay, in the modern eras, in the cell phone, they were behind. But they were behind only for a few years. The TD-SCDMA industry standard was developed a few years later than the WCDMA 3G standards. So it’s natural for the WCDMAs to be ramping up in the rest of the world first.

However, China, with understanding the Chinese, already waited 5,000 years in history. Waiting for a few more years for ramping up all the majority of their cell phones to use Chinese phone standard. Okay, it’s of the highest priority for the Chinese people. So this, compared to anything else, this is more important than, let’s say, speeding up the deployment of 3G into China by using outside technology. And they’re only few years. And from then on the Chinese people will be labeled do not have any 3G technology. So the way I look at it, okay, that’s not going to happen.

What’s going to happen is that TD is beginning to be deployed in China for the Chinese people. They’re ramping up huge number of subscriber, and as I mentioned earlier, 600 million subscribers. Over time, those subscribers will all move to TD-SCDMA and TD LTE. The base stations already been deployed. More than 220,000 base station last year being deployed throughout the whole China, not just in the big cities. Everywhere, throughout the whole China. That’s more than base stations, the number of base stations in the largest area in, let’s say, in the U.S. in total. And this is just the new base station for China Mobile, and they continue to invest in new base stations this year and next year.

So you can see that the opportunities for us is great. The only thing, as Clyde said, is we need to just wait and see when the rest of the customer will ramp up. As the products get more mature, as the prices goes down, it will be natural for those design wins to continue to go into production. And the beauty is that we have 80% of design wins. So at least we don’t have to worry about, okay, when it actually ramps, it will be somebody else, not only us.

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… there’s a 800-pound gorilla that’s out there that’s very strongly the tablet business. So every other — the vast majority of companies there working on the tablet solutions do have a challenge on trying to get the tablet market in the short term.

In the long term. In the long term, I do believe that our strength in being able to integrate the modem and the application processors will be important not just in the cell phone, in the smartphone, but also in the tablet. There are so many — because after all, the tablet — if you think about what’s in the tablet, the tablet really is a smartphone with a bigger screen. So it’s just a matter of time.

You’re asking about in the next 2 or 3 years, I do believe in the next 2 years or so when things, the dust settle down, the tablet and the smartphones really looks just the same like we have design wins like we have significantly done with in the smartphones market, but we’ll have design wins, sizeable design wins, in the tablet. For the market, they are obviously, we’ll use the type of technology, the modem technology that we developed. For this market that we don’t use our own, the modem that we don’t develop, obviously, they’ll go somewhere else.

But as I said, TD-SCDMA, we invest in TD-SCDMA, LTE, TD LTE, as well, and WCDMA. So this is at least 70%, 80% of the market of the world anyway, so that’s enough. There’s a big enough time for us to address. And so if we can address our fair share of market share for those markets, we’ll be just fine.

And so for now, for us is to invest. We have to invest in the software. We have to invest and support of the customers. We have to design new chips with more advanced technology, better and higher integrations, and make the things lower cost and so on. So the standard stuff that we do in any other businesses. So sometimes these things takes time, longer time than we expect. I understand the frustration. I also wish I could get things get done sooner, but sometimes we win some. Sometimes, we lose some, and then things get delayed. We’ll come back and recover, and then we’ll become a stronger company as a result.