Broadcom and Marvell Could Be the Big Losers If Arm Moves Into Chipmaking. Here's Why.

Arm's recent pivot into chipmaking has raised eyebrows in the tech industry, with potential implications for its competitors, including Broadcom and Marvell. As Arm secures its first major customer, Meta, for its internally designed server CPUs, the market dynamics could shift, potentially impacting the market share and revenue of Broadcom and Marvell. In this article, we will explore the strategic moves these companies could make to mitigate the potential loss of market share and revenue due to Arm's expansion into chipmaking.



Arm's strategic transformation
Arm, known for licensing its chip designs to industry heavyweights like Apple, Nvidia, and Qualcomm, is now stepping directly into the silicon market. This shift marks one of the most significant transformations in Arm's history, potentially destabilizing long-standing partnerships and reshaping the power dynamics within the semiconductor industry. Arm's first internally designed semiconductor is expected to be a server CPU aimed at the data center market, with Meta as its first major customer. This move could disrupt the traditional x86-based server ecosystem, which has historically been dominated by Intel.



Broadcom and Marvell's response
To mitigate the potential loss of market share and revenue due to Arm's expansion into chipmaking, Broadcom and Marvell could consider the following strategic moves:

1. Strengthen their relationships with existing customers: Both Broadcom and Marvell have strong relationships with major technology companies. They could work to deepen these relationships, ensuring that their customers remain loyal and continue to use their custom accelerator parts. For instance, Broadcom could continue to supply custom AI chips to Google, TikTok parent ByteDance, and Meta Platforms, while Marvell could maintain its relationships with Amazon, Microsoft, and Alphabet.
2. Diversify their customer base: To reduce dependence on a few large customers, Broadcom and Marvell could explore opportunities with smaller and mid-sized customers. This diversification could help them maintain revenue growth even if some large customers shift their business to Arm-produced chips.
3. Invest in R&D and innovation: Both companies could invest more in research and development to stay ahead of the competition. For example, Broadcom could focus on developing new ASICs and networking chips that cater to the evolving needs of AI workloads. Marvell, on the other hand, could invest in improving its custom AI processors and expanding its AI-related offerings.
4. Form strategic partnerships: Broadcom and Marvell could form strategic partnerships with other companies in the industry to create synergies and strengthen their market position. For instance, Broadcom could partner with a foundry like TSMC to manufacture its chips, while Marvell could collaborate with a software company to develop AI-specific software solutions.
5. Expand into new markets: Both companies could explore opportunities in new markets, such as the Internet of Things (IoT), automotive, or edge computing. This expansion could help them tap into new revenue streams and reduce their dependence on the data center market.
6. Optimize their cost structure: To maintain profitability, Broadcom and Marvell could focus on optimizing their cost structure. This could involve streamlining their operations, reducing expenses, or improving their supply chain management. By doing so, they can ensure that their products remain competitive in terms of pricing, even if Arm's entry into chipmaking puts downward pressure on margins.



Conclusion
Arm's entry into chipmaking could potentially impact Broadcom and Marvell's market share and revenue in the short and long term. However, by implementing strategic moves such as strengthening customer relationships, diversifying their customer base, investing in R&D, forming partnerships, expanding into new markets, and optimizing their cost structure, Broadcom and Marvell can better position themselves to compete with Arm and mitigate the potential loss of market share and revenue. As the market dynamics continue to evolve, it will be crucial for these companies to adapt and innovate to maintain their competitive edge.