Marvell Powers ZTE's New Smartphone with ARMADA Solution

Marvell Technology Group Ltd. MRVL recently announced that its ARMADA Mobile solutions have been used in ZTE's 5-mode 4G LTE smartphone for China Mobile Limited CHL. This enabled ZTE to offer the device at a much lower cost compared to its competitors such as Apple AAPL.
 
The ARMADA solution features Marvell's PXA1920LTE 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 IDC, in 2014, China's smartphone shipments are forecast to reach 420 million units, up 19.8% on a year-over-year basis.  

Another research firm, Strategy Analytics predicts that the Chinese smartphone market may generate revenues of $87 billion in 2014, breezing past the current market leader, the U.S., which is expected to generate smartphone revenues of $60 billion.

It is also worth mentioning that the global number of TD-LTE subscribers in the first quarter of 2014 increased to 12.48 million and is forecast to further increase to 70.4 million by the end of 2014, according to Digitimes Research. The report also stated that Marvell will unveil multi-mode, including TD-LTE supporting, 4G LTE solutions in the second half of 2014.

We believe that this presents a significant growth opportunity for low cost providers such as ZTE. According to Gartner, ZTE was the fifth largest mobile phone vendor in 2013. The launch of the new low-cost smartphone supported by Marvell's solution is expected to boost its market share going forward.

Increasing demand for 4GLTE wireless technologies and smartphones in emerging markets, particularly China will boost Marvell's market share in the region. Moreover, we believe that the expansion of Marvell's broad 4G LTE portfolios could be the growth driver in the forthcoming quarters. 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 #3 (Hold).
 

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