Chipmaker Marvell today said it reached a deal to buy Avera Semiconductor, the application specific integrated circuit (ASIC) business of GlobalFoundries, for $650 million in cash.

In addition to the $650 million at closing, Marvell will pay GlobalFoundries an additional $90 million in cash if the business does well and “certain business conditions are satisfied” within the next 15 months. Marvell expects the acquisition, which includes Avera’s revenue base and design wins with infrastructure original equipment manufacturers (OEMs), to close by the end of its fiscal year 2020. The deal also includes and a new wafer supply agreement between GlobalFoundries and Marvell.

The combination of Marvell’s merchant silicon and semi-custom chips, combined with Avera’s ASICs, will create a “leading ASIC supplier for wired and wireless infrastructure,” according to Marvell.

“The acquisition is very strategic for Marvell as it moves them into the ASIC market,” said Zeus Kerravala, principal analyst at ZK Research, in an email to SDxCentral. “The network and compute industries of changing faster than ever before and ASICs are gaining popularity as they can be customized for very specific purposes. Also, at scale, ASICs provide much better price/performance and can be created much faster than general silicon and can be used in a wider range of devices. The rise of 5G networks and edge computing should create greater demand for ASICs as most data will need to be processed in more places. Given that, I believe Marvell’s acquisition is well timed.”

An ASIC is a microchip designed for a specific application, as opposed to a general-purpose chip like a CPU, and it’s designed to perform that special function repeatedly. This is important to more specialized workloads like machine learning and IoT.

IBM owned Avera until it sold its semiconductor business to GlobalFoundries in 2015. During its 25-year history, Avera claims to have “successfully executed more than 2,000 complex designs.” These designs include analog, mixed-signal, and system on chips (SoCs) as well as an IP portfolio that includes high-speed serializer/deserializer (SerDes), high-performance embedded memory, and advanced packaging technology. In addition to providing custom chips for OEM’s switches, routers, and base stations, Avera has also recently started providing its technology for cloud data centers and claims to have “multiple programs in development today.”

Marvell says it has seen increasing demand for custom silicon using its IP and technology platform. For example, within 5G infrastructure the company makes complete silicon platforms that enable a range of digital processing including baseband, processors, Ethernet switches, and PHYs, which connects a link layer device to a physical medium such as an optical fiber.

As these types of products gain traction in the marketplace, Marvell has started developing custom SoCs that address a broader portion of the base station. Several of these new products are designed to replace field programmable gate arrays with purpose-built optimized silicon.

At the same time, Avera has provided custom products that are deployed in the radio head of “a leading wireless infrastructure OEM” for multiple generations.

“Our acquisition of Avera enables us to offer the complete spectrum of product architectures spanning standard, semi-custom to full ASIC solutions,” said Matt Murphy, president and CEO of Marvell. “With their highly experienced design team and Marvell’s leading technology platform, we will be better positioned to capitalize on our expanding opportunity in wired and wireless infrastructure, starting immediately in the fast-growing 5G base station market.”

So which companies should be worried about Marvell’s latest purchase?

“Really, all of the merchant silicon vendors, Broadcom, etc. should look at this as merchant silicon has been a rising tide over the past several years that everyone has benefited from,” Kerravala said. “The pivot to ASICs could give Marvell a backdoor into a customer where another vendor is established.”

Marvell has made other major acquisitions in the silicon space, with the biggest being its $6 billion purchase of Cavium in July 2018. It also acquired Ethernet technology manufacturer Aquantia for $452 million earlier this month.