Marvell Technology Group Ltd. (MRVL) recently announced the launch of Yulong Coolpad's TD-LTE smartphone for China Mobile Limited (CHL). The new smartphone is based on Marvell’s ARMADA Mobile solutions, which allowed Yulong to offer the device at a much lower cost compared to its competitors such as Apple (AAPL).
ARMADA solution features Marvell's PXA1088LTE System-on-Chip, which provides high performance at a much lower cost. The deployment of this solution is expected to boost 4G LTE adoption in China going forward.
Increasing adoption of smartphones in China presents significant growth opportunity for Marvell in our view. According to China Internet Network Information Center (:CNNIC) report, the number of Chinese mobile phone users, who surf net from their mobiles, reached 464 million by the end of June 2013. This is an increase of 43.79 million from the end of 2012.
According to IDC, in the second quarter of 2013, China’s total mobile phone shipments reached 110 million, of which smartphone shipments were 86 million, up 10.0% on sequential basis. The market-research firm expects China’s smartphone shipments to reach 360 million in 2013.
The issuance of 4G licenses and subsequent launch of iPhone 5S and 5C on China Mobile’s network are expected to increase smartphone shipments to more than 450 million in 2014. Of this, approximately 32 million smartphones will support China Mobile’s TD-LTE technology.
We believe that this presents a significant growth opportunity for low cost providers such as Coolpad. According to IDC, Coolpad was the third largest smartphone vendor in China at the end of the second quarter. The launch of the new low-cost smartphone supported by Marvell’s solution is expected to boost its market share going forward.
Increasing Coolpad shipments will boost Marvell’s market share in China going forward. Moreover, we believe that the expansion of Marvell’s broad 4G LTE portfolios would strengthen its position in China. This is expected to act as a tailwind for the company’s near-term financial performance.
We remain positive on Marvell’s diverse revenue model and stable balance sheet. However, sluggish macroeconomic conditions coupled with higher material costs, European exposure and intensifying competition from the likes of Intel Corp (INTC), are the near term headwinds.
Currently, Marvell has a Zacks Rank #2 (Buy).
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