Here's the thing with gutsy bets: You win big, or you lose big.

Marvell Technology (Nasdaq: MRVL) is betting heavily on Chinese smartphones, and it's not paying off right now. That's why Marvell shares are crashing through the trading floor today.

As the chip designer geared up for Thursday's third-quarter report, I told you to pay attention to the company's Chinese sales, specifically, in the TD-SCDMA market. That's the smartphone data standard of choice for leading Chinese network China Mobile (NYSE: CHL), and it's a make-or-break product line for Marvell.

The company reported adjusted earnings of $0.24 per share on $816 million in revenue. Those numbers missed Wall Street's estimates by 8% on the bottom line, and 6% in terms of sales.

CEO Sehat Sutardja chiefly blamed the global economy, like everyone else is doing these days. Marvell is also a major parts supplier to Research In Motion, which teeters on the edge of extinction, and isn't helping Marvell's sales at all. RIM's fortunes are flagging so fast, and Marvell has so few customers for its Armada-branded mobile processor line, that this chip line's future may be brighter in newfangled server systems instead.

After those overarching problems, wouldn't you know it -- Sutardja points right at slow demand from Chinese smartphone customers. "Revenue from TD smartphone customers in China declined due to slower than expected demand and increased competition," Sutardja explained. He expects TD orders to stay low for another quarter or two.

The toughest TD-SCDMA competition right now comes from local specialist Spreadtrum Communications (Nasdaq: SPRD), but American giants Intel (Nasdaq: INTC), through its purchase of Infineon's baseband operations, and QUALCOMM (Nasdaq: QCOM), are pushing into this market, too. These are not idle threats from unproven startups, but serious challenges by industry titans.

The Chinese smartphone market is still the key to Marvell's future. Unfortunately, somebody seems to have changed the lock. As a result, the stock is sniffing around three-year lows today. I'll give Marvell two more quarters to show signs of life in China before giving up on my bullish CAPScall. It's all about execution at this point.

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