On November 2nd, Marvell and Lumentum were hit twice by the news of a $100 billion acquisition. On November 3rd, there was a rebound before the U.S. stock market opened, and as of the time of this report, both had risen by 3%.
On the previous trading day, the stock prices of the two companies plummeted by 12.7% and 18.6% respectively. Although there was some recovery, the pre-market gains were still far from sufficient to make up for the losses of the previous day.
What caused a sharp fluctuation in stock prices was Marvell announcing a full-stock acquisition of Lumentum for an implied enterprise value of $115 billion. This is one of the largest technology mergers and acquisitions globally in 2026.
This transaction also brings a question to the fore: as the two key components of high-speed optical modules – the DSP chip and the laser – become further integrated, will the existing structure of the optical communication supply chain change, and how will independent optical module manufacturers be affected?
Marvell is the main DSP (digital signal processor) supplier for 800G/1.6T optical module manufacturers, with a focus on AI data centers. The core asset of Lumentum is high-speed EML lasers, which hold a global market share of over 50% in the 200G EML segment, forming a duopoly with Coherent.
According to TrendForce Jibang Consulting's estimates, after the transaction is completed, the market share of both companies in the wired communication semiconductor market will rise to nearly 7%, second only to NVIDIA and Broadcom.
In the longer term, what Marvell has acquired is an entry ticket that remains at the core of optical interconnection in the era of CPO (which involves encapsulated optics). “CPO will replace some independent DSP modules, but the need for signal processing does not disappear; acquiring Lumentum is about securing a foothold in lasers to hedge against the potential decline of independent DSP business in the future CPO era, rather than completely negating the central role of DSP,” said Zhou Hua, chief analyst at CINNO Research, to a reporter from Yicai on November 3rd.
However, as the main supplier of DSP, Marvell's vertical integration may also prompt some module manufacturers to turn to their competitors. Whether this merger will affect the survival space of other optical module manufacturers is expected to be a key point of review for the relevant regulatory authorities.
Zhou Hua told reporters, 'It is indeed possible for customers to become wary due to the situation where one person serves both as a referee and a competitor. However, the verification process for DSP is lengthy, and the capacity of Broadcom/ Credo to undertake this role is limited. It is expected that the share of Marvell will gradually decline over the next two years, but there will not be a sudden, precipitous drop in the short term.'
For Chinese optical module manufacturers, the potential impact of this transaction is also worth paying attention to. Zhongji Xuchuang, one of the largest purchasers of Marvell high-speed DSP, stated in a recent investor event that DSP is a key material for optical modules, and with the increasing demand in the industry, supply is somewhat tight; as an important supplier to customers, the company is able to obtain the required DSP that matches its share, so the overall supply guarantee is relatively good.
This transaction is expected to be completed in the first half of 2028, subject to the necessary approvals from shareholders and regulatory authorities. Both parties anticipate that after the completion of the transaction, annual recurring cost synergies of over $1 billion can be achieved. "The synergies of over $1 billion include significant benefits from price increases due to shortages. However, once supply and demand return to normal in 2027-2028, there will be a risk of re-evaluation of their profit margins and high premium valuations," said Zhou Hua.
Even though the latest quarterly performance of the three companies has still seen year-on-year growth, the capital market is not convinced.
Zhongji Xuchuang stated that the proportion of optical interconnection in global AI capital expenditure is expected to increase from about 5% to 10% or more in the long term.
Zhongji Xuchuang has just completed a share repurchase of 5 billion yuan, but it seems to have not boosted market confidence.
