Sunday, April 13, 2008
[Originally for Sramana Mitra's site]
In the prequel, I looked at Marvell’s fiscal 2008 financials focusing especially on the company’s expenses. As we move ahead, let me dissect its position in the storage industry in general and the hard disk drive market in particular.
Marvell offers a wide variety of storage products for hard disk drives, tape drive electronics, optical disk drives and storage subsystems technology. The portfolio consists of discrete components such as the preamplifier, read channel, hard disk controller, and tape drive controller and also System-on-Chip solutions efficiently incorporating multiple components into a single integrated circuit.
Marvell is one of the leaders in the storage industry. It has about a third of the hard disk drive silicon market share supplying solutions to Western Digital, Samsung, Toshiba, Hitachi among others. All credit to the company’s management for having successfully gotten Marvell this far despite starting as rank outsiders in this area. I estimate that storage products, revenue from which have grown over 30% y-o-y for Marvell, today account for over 50% of its revenue. The company also seems to have made the right moves with the mobile 2.5 inch hard drives. The mobile hard disk drive business has thrived in recent quarters increasing sequentially by 39% in unit shipments due to favorable market share shifts.
Though the competition has consolidated with the 2006 merger of LSI and Agere and the more recent move by the former to purchase Infineon’s storage assets, Marvell’s success story in storage will continue. Helping it is the ASP expansion coming from the transition to SoC products from discrete components. Besides, the market share shifts among the hard drive vendors, especially in the 2.5-inch mobile drives, have helped Marvell’s customers. Thirdly, the mobile drive market is itself accelerating rapidly. These should come together with the 10% y-o-y HDD unit growth rates and Marvell’s R&D efforts to sustain growth.
In summary, despite the cyclical nature of the HDD market and the consolidation of the competition, Marvell has mastered the space enough to lead the way. In the medium term, this business will continue to grow at 20% y-o-y helping provide Marvell a stable revenue source.