Broadcom, a company worth $170 billion, sells the vast majority of chips that power networking switches from Cisco Systems and others. But a gaggle of prominent investors is betting that the multi-billion networking market is big enough for a serious contender to Broadcom.
Innovium sits on a bluff overlooking the San Francisco Bay, the same town as Broadcom’s corporate headquarters, and the headquarters of Cisco Systems, its largest customer, and Arista Networks, another big customer of Broadcom’s and a prominent competitor to Cisco. From the bluff, the company is looking at a valley of targets.
“Going forward, the entire focus is on cloud and edge” for chips that run networking, said Amit Sanyal, who is the head of marketing for Innovium, in a phone call with ZDNet.
The occasion for the call was the announcement Tuesday that Innovium has secured a new round of financing, totaling $170 million, bringing its total funding to date to $350 million, and giving the company a valuation close to $1.5 billion.
The shift of the networking market from corporate and telecom data centers to cloud is a decades-long shift, Innovium believes, that requires a new kind of chip than the ones that Broadcom has been selling for years.
Innovium, which was founded five and a half years ago by former Broadcom engineers, is being funded in this new round by giant private equity firm BlackRock; venture capital firms PremjiInvest and DFJ Growth; and “multiple strategic investors,’ according to the company. A number of prior investors returned for this round, including the venture capital arm of chip vendor Qualcomm and venture capital firm Greylock.
“In this semiconductor world, it takes a lot of capital, and customers have always said, Do you have the runway?” said Sanyal. “This definitely gives us runway for the long term.”
Innovium has approximately 200 employees.
The new funding, said Sanyal, makes the company the first network switch chip vendor that has a unicorn valuation, as it were. The total post-money valuation is “between one and one-and-a-half billion” dollars, he said, “closer to the upper end.”
The market is changing, the company and its backers believe, in large ways that play out of years, making for opportunity for a challenger.
One factor is the design: less complexity, more integrated designs, said Sanyal.
“In the past, the switches were more complex, chassis-based switches. Going forward, it’s all compact, fixed switches.” Imagine large boxes that would take up 10, 12, 16 slots in a telecom rack in a data center being squeezed down into a “1U” pizza box design, said Sanyal. That’s the new standard, especially among “hyperscalers,” cloud computing giants such as Amazon, who want to buy compact, simplified boxes that don’t have line cards to swap out. Those cloud customers represent an increasingly important buyer in the networking market.
“The cloud customers are becoming a significant portion” of the market for networking equipment, he said. “The cloud is becoming a bigger portion, particularly of the higher-end speed.”
Another big trend is the coming move to fiber-optic connections into and out of the box at 400 billion bits per second, or 400-gig, as it’s known. Today’s most commonly deployed high-speed links are 100-gig, which took hold in 2016 in a kind of massive upgrade wave. 400-gig is supposed to follow on, and it will, indeed, be a force, said Sanyal.
“We see some of the large customers deploying 400-gig,” said Sanyal, referring to the cloud giants. “They clearly are pushing the envelope on 400-gig and deploying them in production.” The faster links are “slowly trickling into the tier-two cloud,” he said, and will find their way into enterprise data centers “over time.”
Innovium is the only company so far in the market to take significant share from Broadcom, by one measure. It claims to have 23% of the total worldwide shipments of fifty-gigabit-per-second “SERDES,” or serializer-deserializers, a common measure of ports shipped on a high-end network switch. That compares to 76% for Broadcom and just 1% for all other network switch silicon vendors.
That means for a lot of companies that make or buy switches, Innovium appears as their only alternative to Broadcom’s monopoly, said Sanyal.
“We have established ourselves as the only compelling silicon diversity option.”
The company has gotten business throughout Cisco’s product line. “Cisco is shipping a complete portfolio that includes top-of-rack switches, leaf switches, spine switches.” All of the “leading ODMs,” meaning, original design manufacturers, are also customers, he said. Hyperscale cloud operators, many of which have their own network operating system, are also direct customers for the chips.
Asked about Arista, and another prominent vendor, Juniper Networks, Sanyal replied, “We are clearly engaged with other OEMs; until the OEM is ready to announce, we cannot talk about it.”
“Customers find us as someone who offers them silicon diversity where our silicon is really top-notch; we have a compelling roadmap; and we have a consistent silicon architecture across the network, including top-of-rack and leaf and spine switches.”
The company started shipping its first switch chip, the Teralynx 7, in 2019 and followed it with the Teralynx 5, which serves the edge of the network, and started shipping six months ago.
Innovium plans to follow with a new part called the Teralynx 8 that will start being sent to customers for evaluation later this year. That part is “the only programmable switch with 100-gig SERDES,” said Sanyal. “It is something that people are looking forward to.”