Analysis: Marvell's potential acquisition of Lumentum could achieve the first deep closed loop of "chips and optics," with vertical integration enhancing overall value.

BlockBeats news, October 31 - According to an October 28 report by Bloomberg, Marvell is in advanced talks with optical device manufacturer Lumentum, considering acquiring the latter through an all-stock transaction. At the time of the report, Lumentum's market value was approximately $83 billion, and Marvell's was about $221 billion. Market research firm Cignal AI analysts Andrew Schmitt and Scott Wilkinson said on the Semi Doped podcast that the core logic of the potential deal is vertical integration, rather than Marvell lacking laser supply. If the deal is completed, Marvell would have the opportunity to integrate digital signal processors (DSP), lasers, and optical components, improve product performance through co-design, control the supply chain, and sell more complete solutions.

Andrew pointed out that the gross margin of the optical components industry has risen from about 25% in the past to nearly 50%, changing the economic logic for chip companies acquiring optical businesses. Lumentum has scarce technologies in products such as 200G EML, optical circuit switches (OCS), and high-power lasers. He believes that vertical integration, even if it affects the combined company's gross margin percentage, may create more gross profit dollars.

However, Scott cautioned that Marvell's coherent DSP is widely used by many optical module manufacturers, and if after the acquisition it further enters the optical engine and module markets, it could compete directly with existing customers. Andrew believes the company needs to convince its original DSP customers and Lumentum's optical customers that existing supply relationships will not be affected.

The two analysts also emphasized that competition in optical communications depends not only on being first to launch products, but also on scale delivery capability. Scott said that being first to market but able to produce only 10,000 units may not beat a competitor that enters slightly later but has million-level production capacity. Although Lumentum has expanded indium phosphide capacity in multiple rounds, it is still difficult to meet all customer demand. Regarding discussion that Nvidia might participate in the bidding, Andrew explicitly stated that he has no insider information on the deal and that the relevant judgment is only personal speculation.