Montage Technology (澜起科技) priced its Shanghai Stock Exchange initial public offering at CNY 24.80 (USD 3.60) per share. The firm has been performing exceptionally well: its net profit margin jumped over 41% last year, while operating income exceeded CNY 1.7 billion (USD 247 million).
Meanwhile, chipmakers feel a little restless lately, encountering a plethora of political and macroeconomic challenges. Not all of them though. We noticed that foundries (take HeJian Tech as an example), given their lower margins, are exposed to more risks than their fabless peers (consider Espressif Systems). IPO is an acid test for semiconductor producers and, in some ways, the last chance to identify essential weaknesses in their business models.
The Shanghai-based chipmaker is a unicorn generating lofty revenues. Interestingly, fabless semiconductor manufacturers, which by default are labor-intensive, often ace the “revenue per one employee” indicator. In this particular case, it gracefully hopped over USD 1 million. Two factors led to such an outstanding result: professionalism and careful selection. The second is worth digging into details.
The chipmaker excels by a seemingly strict HR policy. More than 40% of the employees working at Montage in 2016 were fired in the following year. This recent headcount optimization program apparently has something to do with the product mix shift undertaken by the company. As indicated in the prospectus, the last Montage-made consumer electronics chip was sold two years ago, the firm thereby completely shifted its focus to the memory and interface chips segment.
Despite the smooth performance over the last three years, Montage’s business reputation is far from excellent. In the U.S., when it had been once listed on Nasdaq, the company is famous for a short-selling-caused delisting.
Another issue that has been recently raised by the industry insiders is unbalanced payment system. “Average annual salary in Montage Technology is CNY 1.43 million (USD 208,000), while the chairman and the general manager gain CNY 35.5 million (USD 5.16 million) each”, said people with knowledge of the matter.