Marvell Technology, Inc. (MRVL) J.P. Morgan 21st Annual Tech/Auto Forum Conference (Transcript)

Marvell Technology, Inc. (NASDAQ:MRVL) J.P. Morgan 21st Annual Tech/Auto Forum Conference Call January 5, 2023 11:25 AM ET

Company Participants

Ashish Saran – Vice President of Investor Relations

Chris Koopmans – Chief Operating Officer

Conference Call Participants

Harlan Sur – J.P. Morgan

Harlan Sur

All right, perfect. Good morning. Thank you for attending JPMorgan’s 21st Annual Semiconductor Technology and Automotive Investor Forum here at CES. My name is Harlan Sur and I’m [indiscernible]. Very pleased to have Chris Koopmans, Chief Operating Officer; and Ashish Saran, Vice President of Investor Relations and Marvell is here with us today. Marvell is one of our topics in the semiconductor sector for 2023, leadership in cloud data center, 5G networking with their networking compute storage and custom basic solutions and the emerging pipeline in the automotive. So gentlemen, thank you for joining us today.

I will go ahead and kick it off with the first few questions and turn it over to the audience if you have any questions. So let’s talk about the sort of full year outlook. As we enter calendar ’23, there are macro headwinds, pressure in certain parts of your business like storage, wired infrastructure, China enterprise networking. That said, though, the team has strategic idiosyncratic programs that are firing this year as well to offset some of the softness. Cloud spending is still growing mid- to high single digits percentage. On the last earnings call, I think Matt had articulated a growth profile for calendar ’23, albeit at a lower rate versus the team’s prior expectations. Consensus has the team growing revenues kind of low single digits this year. Help us understand, within your growth outlook for this year, what are the programs, end markets, geographies that are going to be driving growth for the team?

Ashish Saran

Sure. Yes. I think first, I think relative to the industry, I think we feel in a very fortunate position, right, given we have good secular growth in most of our end markets and as you pointed out, we have a number of kind of, call it, idiosyncratic opportunities. So maybe I’ll start with data center, cloud, in particular, where we articulated a couple of years back, we made a pretty big strategic shift identified in working with cloud customers directly for optimizing solutions. I think of these as custom opportunities. We won a significant number of them last year and we’ll start ramping late this year but certainly late last year and then growing to about $400 million in aggregate this calendar year. And then that continues into $800 million the following year. So that’s probably the single largest incremental revenue opportunity.

Within cloud, we also launched our new 400ZR data center internet program that’s ramping 800 gig PAM, again, within our electro-optics portfolio which is really being used for interconnect. So we have a number of independent growth drivers. Our automotive business, as you mentioned, this has been an absolute home run. This is Ethernet connectivity. We just crossed $200 million annualized last quarter going from essentially almost nothing, right, a couple of years back and that continues to grow this year. And then our 5G business, we expect very strong growth, right? It’s driven really by broader 5G adoption. India is a new geography turning on the U.S. certainly keeps going. And quite frankly, we have more content gains which will kick in. We’ll see some this year but certainly a lot more next year.

Harlan Sur

One of the biggest headwinds is your data center storage business due to inventory adjustments from your HDD and SSD storage customers. I mean the team has noted that inventory correction should last a few quarters for the storage business. It looks like after 2 quarters of inventory drawdowns themselves for your HDD customers, they are anticipating nearline shipments to inflect positively in the March quarter. So is the right way to think about it that Marvell potentially sees the inflection one quarter later, meaning revenue inflection in your storage business in the July quarter? That’s the first question. What’s the linearity of recovery back to that sort of $800 million annualized sort of storage run rate in your data center business?

Ashish Saran

Yes. I think these things typically do take, call it, a couple of quarters to clean up. So call it — our Q4 and our Q1 would be kind of in the same zip code, I would say, right? And then you start to see a recovery from that time period and then full recovery sometime in the back half of the year. So I think it’s kind of aligned with your time line. I think the one big difference as opposed to past storage cycles where we had a lot more PC exposure and a conversion from HA to SSD where the revenue would go down, it wouldn’t necessarily come back up. I think today, it’s a very, very different situation. So 100% agree with what you’re hearing from our customers. Fundamentally, the need for storage, for bit storage within data centers is going to continue to grow. You’re facing a couple of quarters of clearly, there was an inventory situation which has to resolve itself over a few quarters but this is fundamentally a growth business, right? As we look beyond, call it, towards the end of this year.

Harlan Sur

Yes. Certainly, as we cover Western Digital, we cover Micron. Certainly, they’re still seeing from their cloud customers, petabyte storage consumption in that sort of high 20s, low 30s sort of year-over-year growth range going forward. So I would agree with it.

Ashish Saran

We would expect unit growth rate within HDDs on the line side. But on top of that, we have a very strong position on the SSD side. We actually won new designs which are yet to launch as PCI Gen 5 and PCI Gen 6 start to roll out over the next few years, that again increases our total content and actually grows our share. So I think overall, our outlook for our data center storage business is very positive.

Harlan Sur

The team, as we’ve mentioned a couple of times here, except to drive $400 million of incremental cloud optimized, what we call cloud ASIC programs in calendar ’23, $800 million in calendar ’24. Help us understand how these strategic programs are trending for your customers? How strategic these programs are for your customers’ future growth initiatives and whether these could get cut in the downturn? And my understanding is that the ASIC pipeline includes custom DPUs, video transcode, AI acceleration and some custom networking programs. Is there anything that could be missing from that list?

Chris Koopmans

Yes. No, I think you nailed the big parts of it, right? It’s a lot of sort of compute offload type of things. And in terms of how critical they are, I mean, most of these programs are replacing or are sort of next generation of existing programs. And so I don’t expect that any of them would be the type of thing that were sort of science projects, they would just kind of move on. They’re all very, very critical to their overall infrastructure and to them, enabling them to deliver their capabilities to their customers. And so they’re tracking very much on track, very strong and we’re really excited about them ramping this year.

Ashish Saran

Yes. Maybe just to add to that, I think you’re not going to do these large custom silicon programs really for small projects. This is where you’ve essentially expanded significant amount of NRE working with us, plus a lot of internal resources. And these really drive down there to TCO, right? And that’s what they really care about. So in fact, if anything, I think the pressure on us to execute even faster has increased given some of the financial constraints that we find ourselves under. These programs are actually more critical as it go forwards.

Harlan Sur

Yes. As we’ve gone through the most recent earnings season, even recently in discussions with cloud customers. I mean you consistently hear them talking about accelerated compute initiatives, right which are highly strategic and things that they’re not going to get cut. And obviously, that’s a reflection of maybe a lot of these cloud optimized ASIC programs that you’re helping these customers to enable. 5-nanometer pipeline is beginning to unfold, right? The revenue ramp again sort of last year as a part of your cloud optimized ASIC-grams and some of your lead 5G customers.

5-nanometer contribution should be accelerating this year. In 5G, in particular, you have 5-nanometer wins with Samsung, with Nokia, with Ericsson, your 5G business is now running at more than a $600 million annualized run rate. India is expected to ramp aggressively starting this year which should provide some benefit to you guys. The team guided service provider segment to grow this year led by 5G wireless. What are the other product or customer or geographic drivers of the 5G growth this year?

Ashish Saran

Yes, I think first and foremost, it is the conversion across the world, right, of what matters to us right now, given we weren’t a very significant player in the 4G right cycle. What matters to us is not the total dollar CapEx in aggregate, right? But what matters is how much of that converts to 5G. And that’s what’s really going to be benefiting us this year, right? So even in the U.S., where clearly last calendar year was one of the bigger years in terms of total spend but you can’t upgrade large geographies in 1 year, right?

Typically, it’s a 4-year process. I think the U.S. is going to be one of the bigger contributors as well. And to your point, I think India is going to be a very large — they’ve really held back really their conversion to 5G for a number of reasons and now they’re ready to go. So I think you should expect pretty significant growth in that particular space. Korea, Japan have really been kind of already been deploying. So those are more — think of those as kind of existing runway businesses. But I would say U.S. and India was the one I would look at for this calendar year. I think we will also expect to see benefits from Europe, although I suspect that’s probably more next year but it’s very important.

If you look at the breadth of our customers and you mentioned 2 in particular, both Nokia and Ericsson. And I think given what will most likely be a shift away from Huawei, given they just simply can supply product, right? I think — and remember, Huawei had almost 30% to 40% share in Europe. So that’s a very big amount of dollars available which will shift to customers where we are broadly exposed to. So I think that’s all in front of us.

Harlan Sur

5-nanometer in whole is going to be a big, big revenue cycle for the team, right? And thinking, looking forward, you’ve been putting in place your next-generation 3-nanometer platforms to potentially commence designs for your merchant and cloud-optimized solutions. Can you just give us an update on 3 nanometers? I mean there’s a lot of things to be put in place, right, working with your foundry partners to make sure the manufacturing time lines are in place, you’re developing libraries, IP, discussing with your customers. Is the team — give us an update there on 3 nanometers? And are you already engaged on internal designs for your merchant solutions and/or cloud-optimized ASIC designs with some of your customers at 3?

Chris Koopmans

Sure. Yes. As you mentioned, this is really a parallel development, right? I mean, we started our 5-nanometer development, getting all the IP ready and our test chips ready years ago, turned those into products last year which are then turning to revenue this year. So last year, we really — we had our 3-nanometer IP test chip and we’re doing all the development to get all the different IP blocks ready. That’s aligned both to our internal merchant solutions as well as what we know is needed for the custom cloud-optimized designs that we’re already working with our customers on. It tends to be — in many cases, it tends to be the cloud-optimized designs that lead the cycle that end up being on the very, very front end of the cycle that have the most cutting edge of these giant compute types of solutions or networking types of solutions. But the merchant solutions are also working right behind that. So it’s really all of the above.

Harlan Sur

Any — I’m going to move on to the data center business but does anybody have any questions so far? No. Okay. So on the 200- and 400-gig optical upgrade cycle with your major cloud and hyperscale customers, the Marvell Inphi team still owns, according to our estimates, 80% plus market share, right? Right now, it’s driven primarily by the Tier-1 hyperscalers. The team has confidence that your optical business is going to grow this year, yet you’re working through some near-term inventory digestion with your cloud customers here in the January quarter. So what gives the team confidence on the growth for the optical connectivity business this year?

Ashish Saran

Yes, sure. I think first is on 200 and 400 gig. The adoption has been broad but it’s really 3 large customers, right? So it is still a fourth large U.S. customer which is completely in front of us in the market. And on top of that, there are obviously the next tier of customers, right? So they will inevitably adopt electra-optics technologies in PAM. It’s just a question of time. So that’s certainly in front of us. I think there was clearly a much bigger inventory situation on the storage side, given the way that particular market works which is really a commodity product.

So when the demand is there, right, there’s obviously — it’s considered fungible, meaning whoever supplies it, gets it, right? So everybody rushes and makes products and that’s essentially what created that situation. You don’t have that happening in the rest of the market, right? These are all one-to-one sole-source relationships. So I think out of, call it, caution, we did guided down a little bit before but it really wasn’t a big magnitude, quite frankly, right? And this is still fundamentally the fabric which drives the total bandwidth capacity. So we feel very good about our existing 200, 400 gig business. And on top of that, as I mentioned earlier, we have started ramping 800-gig PAM4. In fact, we’ve introduced our second ship, right which does that on the DSP side in a new process geometry along with the company TIAs and drivers and then 400ZR which is data center interconnect.

When you add it all up together, even if you have a very conservative view on, call it, not getting much help from cloud CapEx this year, we still feel very good about the overall business will continue to grow. And then, of course, as we look even further out in time, CapEx will certainly start to grow at a faster rate. So I think we’ll certainly get that acceleration again.

Harlan Sur

The other new product cycle in optical and you mentioned this in your prepared remarks as well as data center interconnect upgrade to the new 400ZR standard, I believe you’re ramping into Microsoft now. All of the other Tier 1 cloud hyperscalers have a plan to move to the 400ZR standard as well. Maybe you can provide some color on the revenue ramp profile, your share position? And how should we think about the adoption from the other Tier 1 cloud hyperscalers as we look out over the next sort of 18 to 24 months?

Ashish Saran

Sure. Yes. I think as a lot of people remember, 100-gig DCI data center was kind of the first project which was kind of a proprietary relationship with Microsoft and Inphi back that time which we’ve now acquired. And then we pioneered the 400ZR which is an open standard. And clearly, the lead customer clearly is the one adopting it but it’s spreading to your point beyond that. I think one of the big trends driving it, if you think about it is, if you think back in time, a lot of the cloud customers have these very large mega data centers, very significant ones in the single location. But as workloads are moving more towards the edge, you’re seeing a lot more proliferation of smaller data centers, a lot closer to where the end customer is and that is now causing hey, now I need to connect these data centers together.

So I think the overall usage of DCI to your point, is spreading to multiple customers. So for us, this is going to be in a ramp phase, I would say, for multiple years. Certainly, I think the revenue is obviously at 400ZR, I would say, is at the level or surpassing that we’re at 100 fairly quickly because it’s a much higher ASP. And then we still have additional customer adoption completely in front of us. And I think it’s not just cloud customers which is drive for the next few years. But over time, you will see the same technology also being used in optical transport, right, in the broader telecom market. So this is really a long, multiyear cycle is my point.

Harlan Sur

The team has mentioned 800 gig several times and it clearly looks like it’s a driver to the business. What’s interesting about 800 gig is that it’s not being tied to — when we typically think about optical, we think about optical being tied to a particular switching platform, right? But your 800-gig platform is actually not tied to a switching platform. It’s actually tied to accelerated compute clusters, right, like Google’s TPU cluster and a whole bunch of other different accelerated compute clusters. They tend to seem to be like the first adopters of these new generations of technology. First, is that true that the bigger consumer of 800 gig is strategic AI compute initiatives and not so much the tie between switching and optical?

Ashish Saran

Yes, I think that’s absolutely correct, right? You’re right. Historically, the first ease of electro-optics was the switch to switch linear [ph] right, essentially typically driven by the 3.2, 6.4, 12.8T cycles, right? 800-gig PAM to your point is being driven completely by AI and we’ve seen 2 very large customers driving a significant amount of growth. And as you think about the overall CapEx environment, while I know there’s concerns about deceleration, the reality is within that. That’s just a big number you see outside includes buildings and a whole bunch of other stuff. When you look at the spending profile, the priority which AI and ML projects get, it remains extremely high. So I’m not surprised at all to see the very strong demand we’ve seen, right, a strong push from customers to enable this product very quickly. So your assessment is spot on.

Harlan Sur

As we look out over the next several years, co-package electro-optical CPO solutions will initially roll out to support 51.2T switching chips and more significant adoption at 102 terabit per second family of switching products given power and cost savings. What are you hearing from your hyperscale customers on their co-package development strategies? And can you give us an update on Marvell’s co-package electro-optical portfolio?

Chris Koopmans

Sure. I’ll start. So certainly, our switching and our co-package optics initiatives, just like the rest of our initiatives for cloud are really being done in very tight partnership with our cloud customers. And so really, we’re trying to align to what they need. And ultimately, what they would generally prefer to do is to do pluggable as long as they can, right? And ultimately, the pluggable is just — it’s a very — a good technology in terms of how they actually run it and deploy it and maintain it in the field. But there is — absolutely, they’re all looking at the move towards co-package optics and Marvell is working very closely with them in terms of which generation they’re going to do it.

And actually, whether it is at the switch layer first or actually is it at the AI, as I mentioned with 800 gig first and whether that’s actually the first place that they’re going to really want to start to look at co-package optics. It’s not yet clear to me that, for example, 51.2 switching is going to be the first big move for co-packaged optics. And so Marvell’s working very closely with each of our hyperscale customers in terms of developing our technology to support those ramps.

Ashish Saran

Yes. I think if you think about the whole discussion we had on 400ZR, I mean that was fundamentally the first high-volume production of a silicon photonics enabled optical solutions. So we’ve learned probably more than a lot of other people have in terms of delivering this in high volume. So I think our ability to go execute. I think the key thing here is you have to work directly with your customers and basically give them the choice, right which is hey, it’s not an OR function, it’s more of an AND function. There will be certain applications where they will want to move very quickly to CPO but there’ll be a bunch of mass market solutions where they want to keep pluggable going as long as it can for obvious reasons, right upgradability, serviceability. There’s a number of very good reasons why. And I think that, I think, is what our customers like the fact will enable both ecosystems simultaneously.

Harlan Sur

Your Innovium cloud switching product was targeted to drive $150 million in revenues in calendar ’22. Did the team hit this target? And are you anticipating growth this year in cloud switching? And secondly, all of the revenues are coming from your Teralynx 7 platform which is 12.8 terabit per second which is equivalent to Broadcom’s Tomahawk 3. As we look ahead, right, Broadcom is ramping Tomo for getting ready to roll out Tomahawk 5 next year, like how should we think about Marvell’s cadence and road maps on the Teralynx platform over the next several years?

Chris Koopmans

Sure. So yes, we said at the last earnings, I think, that we were on track to hit that number for last year. And ultimately, it was supply constrained for last year for the big customer that we were delivering to. So — and so — and therefore, it was sort of a back half ramp. And therefore, yes, you should absolutely expect growth in calendar ’23 over calendar ’22 and that platform, it’s doing very, very well. When we made that acquisition, our initial focus was really to make sure that we were able to ramp and support with high quality and significant supply to that initial customer at the 12.8. And then now, again, similar to our other cloud-optimized platform which is working very closely with initially that first customer and then other customers in terms of what their needs are. And their needs really right now are at the 52T and that’s what Marvell is working on and aligned not just the switching layer but the 1.6T optics that go along with it, right? Because what’s a good having a 52T switch, if you don’t have 1.6Toptics if I can’t go along with it.

So our road map end-to-end is completely aligned with our customer needs and that’s really the cadence that we’re working on is to — initially, our focus will be to make sure we hit exactly what that very large customer needs at that 52T. But of course, we will be expanding beyond that customer after that, right? So ultimately, our cadence will be aligned to what our customers need and starting with that initial customer.

Harlan Sur

Before I move on to enterprise, any questions from the audience? So on Enterprise Networking, business is going through a strong inflection by product cycle refresh, new ASIC programs and the strength of the U.S. Tier 1 customers but offset by muted demand from China networking OEMs. Still the business nearly doubled over the last 2 years. Can you just help us understand how much of the growth is strong customer spending versus share and content gains and this is with your U.S. customers? And how do you see your overall enterprise networking business relative to the team’s outlook for total company growth this year?

Ashish Saran

Yes. I think this is — I mean, this has been a business which — it goes back — this is all the original Marvell organic businesses, right? And in fact, Chris was kind of heading that business back then, right? So this has been an amazing transformation. I would say the majority of the growth we’ve seen in the last couple of years has really been a combination of share gains, both in PHYs as well as in switches as well as a pretty shift up in content, especially on things like multi-gate PHYs with ASP significantly higher. I’m not talking percentage points, this is multiples higher, right? And that penetration continues. So the market itself has also grown perhaps higher than typical but it’s still somewhere in the single digits, right, the end market from a customer perspective partly because of supply constraints, right? I think they would want to grow faster. They have the orders but there’s been multiple supply constraints, including Marvell. Now that’s obviously starting to clear up.

In the meantime, we did see some of the China demand start to come down which, quite frankly, I think is a temporary phenomenon. Again, we’re not saying when it comes back but it will. I mean China is going to be a big — this is an endpoint-driven market by the enterprise networking and that is a very large population. It’s a large economy. So at some point, that comes back. And in the meantime, I think for now, we are now finally in a position from a supply perspective to meet our U.S. customers’ demands and that’s what the focus is. I think in the long run, what we would go back and say is, look, fundamentally, we think this is a low single-digit to mid-single-digit end market, we will still outperform that, right, perhaps not to the same magnitude of the, call it, 40% to 50% year-on-year growth because we’ve obviously gained a significant amount of share but I would still say we’ll outperform that call in low to mid-single-digit market.

Harlan Sur

Automotive is the next significant revenue opportunity for the team. As you mentioned, you’re already driving $200 million plus in annualized revenue run rate. Here, the team is leveraging its strong position in Ethernet networking and gaining share. Much of the auto products are manufactured on older generation technology nodes where the market, I think, continues to be in tight supply. Are the supply dynamics starting to ease here in lagging edge technology, mature technologies in longer term? The team has talked about the auto compute opportunity is a multibillion-dollar opportunity. Maybe if you can give us an update on the progress there, too.

Chris Koopmans

Sure. So yes, you’re right. Ultimately, we’re gaining significant traction with our Ethernet platform. Our Ethernet platform has some in older technology but it also has — we’re all the way into the sort of 16-nanometer generation with our Ethernet technology. So what I would say is generally the — yes, the older nodes are still constrained for sure. Having said that, because of the number of strategic moves that Marvell has made within our portfolio in terms of moving products between nodes, we actually have what we need to deliver at these older nodes in automotive right now. And we’ve been very good actually, throughout the entire time of not ever becoming a bottleneck for any of our automotive customers and they’ve really appreciated that.

So — so that traction just continues to grow. I think we’ve said we now have 8 out of 10 of the top OEMs, really 100% of the OEMs out there have a plan to adopt Ethernet across their portfolio. They’re not starting to move from sort of model by model or model-year type decisions to broad portfolio decisions — broad platform decisions across their entire set of models. And so we just see traction, if anything, accelerated in the Ethernet.

Now for compute, absolutely. I mean, that’s a big long-term opportunity. We’ve talked about compute everywhere and we approach the auto compute market, the way we approach the cloud compute market which is really a custom cloud-optimized type of a model as opposed to here’s a generic compute product, let’s go out there and try to win share and compete. That’s really not our option. We think some OEMs will adopt an off-the-shelf solution. We think other OEMs will want to build their own solutions. And we think we’re a great partner with all of our — not only our Ethernet and our storage and our automotive technology but with all of our compute technology that we’re delivering into these other markets such as cloud, we’re an ideal partner to help them with that. But it’s a long — I mean that’s really a long-term play.

Ashish Saran

Yes. I think in the, call it, near to midterm, right, there’s $200 million is going to — basically, we’re going to be adding hundreds of millions of revenue very quickly over the next few years, right? So I think for the next, call it, 3- to 5-year window, I think our Ethernet market, I think we’ve sized that in that time frame, the entire market at about $1 billion and we said at least 50% of that market. So we have a clear line of sight to a number which is probably north of 500 quite frankly. I think given our share gains, I think 50% is probably a pretty relatively easy target. And then outside that time frame is where I think the compute opportunity starts to make sense where there’s going to be large customers in the auto and you’ve heard them talk about this themselves, right? But at some point, you want to control your own destiny, right? If you think about a car of the future, your differentiation is going to be based on your AI ADAS capabilities and at some point, you want to have that software hardware stack controlled in a single place and I think we can certainly help them with that.

Harlan Sur

On the operations side, on the leading edge, can you talk about wafer and advanced packaging constraints right? Even with the industry slowdown, demand for leading-edge wafers and advanced packaging still seems to be tight and potentially more so for the Marvell team, just given you’ve got this many — several different 5-nanometer programs that are going to be ramping this year. How is the team managing through this dynamic in terms of securing supply and also trying to manage the cost profile both near term and longer term?

Chris Koopmans

Sure. So yes, I mean, look, the most advanced technology is always constrained. You don’t have an excess of the most cutting-edge advanced stuff. There’s — and so they’re very careful about where they — who they partner with, these suppliers in terms of making sure that they prove out the technology. And in prior generations, Marvell wasn’t there, right? We weren’t one of the leading edge. And so that was a little bit newer for Marvell. However, we have very deep, very strategic relationships up and down within these suppliers. And ultimately, they’ve seen our vision. They believe in our vision. They’ve — in some cases, even talk to our customers and understand — again, since these are cloud-optimized programs for specific hyperscalers, they know exactly where they’re going. And so they’re betting on us. And ultimately, we have the supply that we need.

I mean, obviously, we have to execute but we have the supply that we need. We have the commitments that we need from our supplier to deliver against the numbers that we’ve talked about and the programs that we’ve talked about. And ultimately, enable the success for our customers. And sure, there are certainly cost constraints. But we’ve built — there’s sort of point-in-time things. I mean, for — especially for advanced packaging, we’ve built long-term relationships in — with several of these sort of interposer substrate type suppliers that give us visibility going out years for the amount of supply that we need and with the cost structures that we need.

Harlan Sur

On the gross margin front, the team is driving 64% gross margin in second half of last year. It’s at the low end of your target gross margin range. What is the team’s confidence level on sustaining gross margins in the 60% range should we enter into a sharper down cycle? And then on the flip side, coming out of this week period, like what are the key levers that will drive the margins to the high end of your gross margin target range which is 66%?

Ashish Saran

Yes. I think the reality is mix is probably a bigger determinant trying to find gross margin. As our revenue has scaled up, you haven’t seen our gross margin significantly change either because I think this is the whole advantage of being essentially a fabless company, right, where yes, there’s some fixed cost leverage you get but that’s a fairly small amount. So I think that we’re very happy that we’ve been able to sustain our kind of 64% to 66%. I think where we are at towards a little bit on the lower end is more a reflection of the mix, right where the storage is which generally tends to be a pretty good gross margin product is dealing with a couple of quarters and then once that resolves itself right.

I think at a high level, I would go back to the end market gross margins we’ve discussed on Analyst Day where I’d say carrier and consumer are the ones which typically tend to be lower but everything else either in line or slightly above. So I think we remain pretty confident. I think we’ve done a fairly good job of managing our cost input increases and offsetting them with our customers but just offsetting them. So we’re not taking advantage of the situation but also obviously maintaining our overall margin profile. So I think our goal remains, stay in that 64% to 66%. And obviously the focus is drive revenue growth and drive significant operating leverage. And that’s what we’ve demonstrated over the last couple of years and that remains the focus for us.

Harlan Sur

Great. Well, we look forward to monitoring the progress and execution of the Marvell team this year. I want to thank you, Chris and Ashish for participating today. Thank you very much.

Chris Koopmans

Thanks. Thank you.

Question-and-Answer Session

End of Q&A