Obviously, performance is a given and that can be traded off for power. So that is the only way to enter this market because we have been — these are second generation of investment and differentiation is what drives our position vis-a-vis incumbents who have been shipping for a while in this marketplace. So having said that, currently, the revenues we’re speaking about are optical transceivers, and that is easily the biggest part of the market. The next part of the market will be active optical cables. And as I’ve said before, the active electrical cables we expect in three years from now to about 10% of the market. So — and whether the active electrical cables are purely 100 gigabit phenomenon or they even moves into the 200 gigabit per lambda solutions that remains to be seen.
But as we speak today, active electrical cable is a smallest piece of the market. And in three years from now, we expect it to be about 8% to 10% of the overall PAM4 DSP market. And there is not much differentiation between the various markets as far as DSP is concerned. But there are differentiations with respect to the laser drivers and such other analog components for power efficiency between active optical cables and active electrical cables. I hope that gives you sufficient color.
Christopher Rolland: Yeah. Perhaps as the second one, MaxLinear probably has the largest peak to trough of all of our covered companies. You’ve — from peak to now trough, I think you’ve lost two-thirds of that peak revenue. So I’d love to know just longer term off of this, call it, 95 for March. What do you think is a more normalized run rate for you guys total Company over time? And what do you think your undershipping demand right now, sell-in versus sell-through, including customer inventories? How do you view that, is it $50 million? Is it significantly higher than that on a quarterly basis? How do you view that? Thanks.
Kishore Seendripu: Chris, let me take up the question, then maybe, Steve, you can add more color here. Firstly I think you’re referring to the two-thirds effect from the peak or specifically to the broadband business and connectivity business.
Christopher Rolland: All businesses, but you’re at 280 and 222, and you’re down to 95.
Kishore Seendripu: Yeah, so that is on a quarterly base — annualized, right?
Christopher Rolland: Yeah.
Kishore Seendripu: Obviously, we expect growth to happen towards the second half of this year, and that — this is our expectation to be a transient phenomenon. Number one, on an — just as we are under shipping demand quite extremely right now in certain parts of the business, then the flip side is also true that we overship demand during the pandemic period, and that’s the reason we are here. So I think the answer would be somewhere in between, right? Naturally, logically assuming the product portfolio has not changed, okay? So the legacy portfolio, as you saw maybe in 2023, mid let’s call it, I’m just going to do the math here, 1.1 to 700, somewhere in between, right? That’s approximately an $800 million, $900 million business.
Now, looking forward, we got all these new product cycle drivers, infrastructure being one of the most interesting ones. And other — and then recovery in the — and growth in PON business, which is very, very little, small fraction of that particular revenues looking back, what we talked about. You should see the Company get back to the $1 billion range in the next two to three years or so, three years or so, which will be true assuming that we are predicting this inventory drag down phenomenon being extreme, as Quinn pointed out, and that there should be a swift recovery once people say, hey, we need to get back to doing business much more in a healthy manner. So I think that we run businesses on a longer cycle basis. We do care about quarterly cadence and improvement.
And in that context of things, we’re building a fantastic portfolio here to smooth out the quarterly cycle growth looking forward. Explaining the past, there’s only one elephant in the room, and we go about it 1,000 times in the last three quarters, which is the inventory hangover. There’s no fundamental problem in the product portfolio, nor share losses. In fact, they’re adding more robust and market expansive products to our portfolio. So I think you should feel rest assured that the execution is going very well from a development and product launch perspective.
Christopher Rolland: Do you guys hazard a guess on how the difference between sell-in and sell-through for marks?
Kishore Seendripu: Yeah. And I wouldn’t hazard a guess. But the selling phenomenon says — phenomenon is a gain and inventory pile up, right? That’s a natural sequence. But to the extent that we are tracking the sell-through right now, it’s pretty healthy, which only means that we are undershipping demand quite significantly. So the inventory is burning down.
Christopher Rolland: Thanks, Kishore
Kishore Seendripu: Yes. Thank you, Chris.
Operator: Thank you . Our next question is from Tim Savageaux with Northland Capital Markets. Please proceed with your question.
Tim Savageaux: Hey, good afternoon. Sorry.
Kishore Seendripu: Hey, no problem.
Tim Savageaux: Can you guys hear me?
Kishore Seendripu: Yes.
Tim Savageaux: Okay, great. Sorry. First question on PON, I think you — did you mentioned $50 million in revenue for ’23?
Steven Litchfield: Yes.
Tim Savageaux: Yes, okay. And so I imagine that mix looked a lot different at the beginning of year than the end, and it looks like, that accounts for a quarter of the revenue. Would you expect in your Q1 guide for PON to be greater than cable, if you will. You can define it that way for the first time ever. And would you expect that to be the case for the whole of ’24, and if so maybe by what order of magnitude will PON be greater than 50% of broadband revenue? And then I’ll follow-up.
