⚠ Insurance Gets Priced Like InsuranceHigh threat

The second-source argument is sound and it is why Marvell has a business here: no buyer spending tens of billions wants one supplier holding the roadmap. But the logic that creates the position also caps what the position earns.

A second source exists partly to discipline the first source's price. That is its job. Buyers keep one to make the other negotiable, and a supplier held for that purpose is quoted against the incumbent rather than against the value of the silicon. The share numbers make the hierarchy plain — Broadcom holds roughly 70% of custom-accelerator design share against Marvell's estimated 20-25%¹ — and in a market where the leader has three times the volume, the leader also has the better cost position to defend a price war with.

There is a subtler version of the same problem. Insurance is bought in proportion to fear. A hyperscaler anxious about supply keeps a well-funded second source; one whose primary partner is executing well lets the second wither to a token program that never ramps.

The test is margin, not revenue. Marvell's non-GAAP operating margin reached 35.3% in fiscal 2026. If custom silicon grows while that margin erodes, the second-source position is being paid for out of Marvell's own economics.