Marvell's telecom recovery may be a good sign for 5G, and Nokia
Telecom used to be a big deal for Marvell Technology. These days, it is almost an afterthought. Between 2020 and 2023, the US chipmaker owed between 18% and 20% of its revenues in any year to its fledgling carrier infrastructure business, set up after Marvell landed a big contract with Nokia more than five years ago. Following a well-documented slump in the market, carrier infrastructure's contribution dwindled to less than 6% last year. Once a popular topic of discussion during financial updates with analysts, 5G these days is lucky to be mentioned.
Matt Murphy, Marvell's CEO, would much rather talk about his company's dynamic data center business, selling digital signal processors along with Ethernet connectivity and other chips to hyperscalers. Sales there surged 88% last year, to almost $4.2 billion. They were up 69% year-over-year for the recent second quarter, to nearly $1.5 billion. Murphy astonishingly thinks he can increase Marvell's revenues in this sector to about $22.6 billion in 2028 as the planet becomes ever more fixated on artificial intelligence. Investors have little interest in hearing about other activities, and Marvell's share price fluctuations seem determined entirely by what its executives have to say on the data center and AI business and how that all looks.
The percentage contribution of the carrier infrastructure unit to overall revenues has naturally dropped as data center sales have exploded. But Marvell's carrier infrastructure revenues have also fallen steeply after an impressive rise between 2020 and 2022. While there is little color in Marvell's earnings updates and filings with the US Securities and Exchange Commission (SEC) about carrier infrastructure's various parts, the unit is not just a 5G affair. It also makes silicon products for broadband access systems, Ethernet switches, optical transport systems and routers used in telecom networks. Nevertheless, in the radio access network (RAN) sector, which accounts for a big share of telco spending, Marvell's most visibly transformative and significant deal is the one it struck with Nokia in 2020.
Replacing Intel
Marvell was named as a supplier after Nokia had run into 5G product problems that were subsequently blamed by numerous analysts on Intel. Nokia's response involved switching to other chipmakers for some of the critical components it needed for its 5G basestations. Broadcom was introduced for the digital front end, which forms part of the radio unit. Marvell's initial job was to supply the baseband chips for Layer 1, a slice of demanding RAN functions. Intel did, however, retain its role as the provider of baseband chips for other tasks.
The subsequent growth of Marvell's carrier infrastructure business probably owes much to this deal with one of the RAN sector's three big equipment makers, alongside Huawei and Ericsson. Revenues grew 37% in 2020, to more than $820 million, and another 32% in 2022, to about $1.08 billion. They remained strong in 2023, dipping just 3%. But last year looked nothing short of disastrous. Sales plummeted 68%, to as little as $338 million.
Marvell had almost nothing to say about this in its last annual SEC filing, and investors might not have looked past the stunning growth in the data center business, whose contribution to overall sales rose from 40% the year before to 72%. But the massive drop in carrier infrastructure sales coincided with a sharp contraction in the RAN market and a big squeeze at Nokia.
Between 2022 and 2024, annual sales of RAN products fell by $10 billion, about 22% of the former amount, to $35 billion, according to analyst company Omdia (which has the same owner as Light Reading). After the initial flurry of activity in 5G, operators made sharp cuts to expenditure, unimpressed by the returns they were seeing on their 5G investments. Worsening matters for Marvell was the big loss that Nokia suffered when AT&T decided to phase the Finnish vendor's products out of its RAN and rely more heavily on Ericsson, its other main supplier. At the time, in late 2023, Nokia had a third of the AT&T footprint and reckoned between 5% and 8% of its mobile revenues came from the US telco.
The sales performance of Nokia's mobile networks business group last year was considerably worse than that of Ericsson. While its Swedish rival's full-year revenues fell 6% year-over-year on a constant-currency basis, Nokia's sank 21%. That will naturally have had consequences for Nokia's own suppliers, including Marvell, which does not have the same presence in network products made by other big RAN vendors. Ericsson and Samsung, notably, look more dependent on Intel and internally developed silicon. But the worst may be over.
For a start, Omdia's latest forecasts suggest the market has bottomed out. After last year's stomach-churning dip, Omdia expects sales outside China – where Ericsson and Nokia today have a marginal role – to grow at a low single-digit percentage rate in 2025. Nokia's numbers for the recent first half also look much better than they did the year before. The constant-currency rate of decline was only 6%, compared with a lurching 31% for the first half of 2024.
The Finnish company has also done a decent job of landing new contracts outside North America. In its last annual report, it was able to boast of 12 entirely new "CSP" (communications service provider) customers and a net gain of 18,000 RAN sites. As small as that may sound in the overall market (the UK's BT alone is reckoned to operate about 19,000 RAN sites), it is obviously better than a reduction.
A strong first half
Marvell, however, also figures more prominently in Nokia's latest 5G goods than it did in earlier releases. Besides providing the chips for Layer 1 processing, it has now usurped Intel in the rest of the RAN compute area, according to sources familiar with the matter. Marvell's silicon is a critical feature of Nokia's "virtual" RAN offer, too. In that market, which substitutes general-purpose processors and common, off-the-shelf servers for custom chips and dedicated appliances, Nokia has appeared keen to avoid Intel, the market leader in virtual RAN silicon, as much as possible. Intel's loss has been Marvell's gain.
At its carrier infrastructure business, first-half revenues grew 82% year-over-year, to about $268.5 million, after the full-year drop of 68% in 2024. Murphy struck an optimistic note, forecasting "sequential" growth of 30% in combined sales of enterprise networking and carrier infrastructure products for the current third quarter. If that growth rate were achieved by carrier infrastructure alone, it would be on track for third-quarter sales of more than $169 million, pushing its contribution for the first nine months of the year to $438 million.
This is all highly speculative. Exactly how much of its recent improvement Marvell owes to the RAN market, and Nokia within it, is unclear. And carrier infrastructure's contribution to first-half sales was still just 7%. Despite growth in sales and profit, Marvell's share price fell about 14% last week after analysts were left disappointed by its short-term outlook for the data center business. Since the start of the year, the stock has fallen by 45%. For Murphy, that is obviously the chief concern.
