Montage Technology Co., Ltd.
Corporate Value and Return Enhancement Action Plan 2024
To adhere to the principle of "investors first" and uphold the interests of all
shareholders, Montage Technology Co., Ltd. (hereinafter referred to as the "Company"
or "Montage") has formulated the "Corporate Value and Return Enhancement Action
Plan" for the year 2024. This plan aims to further solidify the Company's leading
position in the industry, enhance its core competitiveness, safeguard investor rights, and
foster a positive image in the capital market. The main measures are outlined as follows:
I. Focusing on Strengthening Core Business, Enhancing Operational Quality,
and Achieving Stable Growth in Core Operations.
Montage is an internationally leading company specializing in data processing and
interconnect chip design, dedicated to providing high-performance, low-power chip
solutions for the fields of cloud computing and artificial intelligence. The Company
currently has two main product lines: interconnect chip product line and Jintide server
platform product line. In the era of artificial intelligence, the demand for "Computing
Power" and "Storage Capacity" in computer systems is rapidly increasing, with systems
requiring higher "Data Movement Power". Montage provides high-performance "Data
Movement Power" for computing and intelligent applications.. The Company's various
high-speed interconnect chip products can effectively enhance the system's "Data
Movement Power" and will play an important role in the future era of artificial
intelligence.
Montage's interconnect chip products mainly include memory interface chips
which includes MRCD/MDB chips, memory module supporting chips, MRCD/MDB
chips, CKD chips, PCIe Retimer chips, MXC chips, etc. The Jintide server platform
products include Jintide CPU and hybrid security DIMM (HSDIMM).
In 2023, amidst a global decline in demand for servers and computers,
accompanied by a surplus of related chips entering a destocking cycle, the Company
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faced operational pressures from this industry-wide destocking trend. However, it
confronted the challenge head-on by steadily advancing various initiatives around its
strategic objectives and operational plans. It actively progressed the iteration of DDR5
derivatives to maintain its global leading position in this field. Concurrently, with the
rapid advancement of artificial intelligence fueled by large models sweeping across the
globe, there has been a surge in demand for computational power and storage. As a
result, Montage capitalized on this opportunity by making significant strides in
developing a variety of high-speed interconnect chip products during the reporting
period.
In 2024, Montage aims to enhance operational quality and core competitiveness
primarily through the following two avenues:
(i) Consolidating its leading position in memory interface chips to drive rapid
growth in product sales revenue:
A. Memory interface chips and memory module supporting chips: Responding to
market demands and industry trends, the Company will strengthen product iteration,
upgrade, and quality control to solidify its industry-leading position, driving sales
revenue growth of DDR5-related products.
B. Jintide server platform: As industry demand gradually rebounds, the Company
will continue to intensify market promotion and sales efforts for the Jintide server
platform product line, aiming to introduce Jintide CPUs into more end-user and
application domains for significant 2024 sales revenue growth compared to 2023.
(ii) Seizing artificial intelligence industry trends to promote the scale shipments of
high-performance "Data Movement Power" chips
Steadily advancing preparatory work for various high-performance "Data
Movement Power" chips ahead of scale shipments, including PCIe 5.0 Retimer,
MRCD/MDB, CKD, MXC chips and others. These new products are expected to
commence scale shipments gradually from 2024 in line with industry ecosystem
development. The Company will seize opportunities in the AI era by intensifying
market promotion for these products, striving to contribute new growth drivers to
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performance.
Information on Montage's new products of high-performance "Data Movement
Power" chip is as follows:
Industry
Product
Application Scenarios Position of
Name
Montage
PCIe The PCIe Retimer chip is an ultra-high-speed timing integration chip Global Leading
Retimer Chip designed for high-speed PCIe data transmission protocols. It primarily PCIe 5.0 Retimer
addresses issues such as inconsistent signal timing, significant signal loss, Chip Vendor
and poor signal integrity encountered during high-speed and long-distance
data transmission in data centers. It can be applied in typical scenarios such
as AI servers, NVMe SSDs, and riser cards.
In the era of artificial intelligence, the importance of PCIe Retimer chips
is becoming increasingly prominent with the rapid growth in demand for
AI servers. Currently, a typical AI server equipped with eight GPUs
requires eight or sixteen PCIe 5.0 Retimer chips.
MRCD/MDB MRCD/MDB chips are the core logical components of the server's high- JEDEC SPEC
Chips bandwidth memory module (MRDIMM). The development of AI and big owner of MDB
data applications, along with the evolution of related technologies, has led
to a rapid increase in the number of cores in server CPUs. There is an
urgent need to significantly increase the bandwidth of the memory system
to meet the data throughput requirements of multiple cores in CPUs.
MRDIMM has been developed to adress this application demand. Each
MRDIMM requires 1 MRCD chip and 10 MDB chips as standard
components. The first-generation product can support a speed of
8800MT/s, and future iterations will continue to increase bandwidth and
support rates.
It is anticipated that there will be significant demand for MRDIMM and
MRCD/MDB chips in application areas such as high-performance
computing and AI, where memory bandwidth sensitivity is critical for
performance.
CKD Chip As DDR5 transmission rates continue to increase, the integrity of clock Delivered the
signals becomes increasingly critical with rising as clock signal Industry's First
frequencies rise. When DDR5 data rates reach 6400MT/s and above, DDR5 CKD Chip
memory modules for desktop and laptop PCs memories modules (such as Engineering
UDIMM and SODIMM), require a dedicated clock driver chip to buffer Sample
and re-drive the clock signals on the memory module. This ensures the
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integrity and reliability requirements of high-speed clock signals are met.
In the era of artificial intelligence, AI PCs require higher bandwidth
memory to improve overall computational performance. This will drives
the demand for higher-speed DDR5 memory and accelerate the penetration
of CKD chips.
MXC Chip The MXC chip is primarily used in the fields of memory expansion and Delivered the
memory pooling, designed for memory AIC expansion cards, backplanes, World's First
and EDSFF memory modules. It significantly expands memory capacity CXL Memory
and bandwidth, meeting the growing demands of high-performance Expansion
computing, artificial intelligence, and other data-intensive applications. Controller Chip
As the era of artificial intelligence draws closer, the demand for memory (MXC)
platforms that support fast interfaces and scalability is becoming
increasingly urgent. Novel memory modules based on CXL will be one of
the most promising memory solutions in the future era of artificial
intelligence.
II. Continuous Investment in R&D Innovation, Advancing Development and
Iterative Upgrades of Multiple New Products.
As a chip design company, Montage has consistently maintained a high level of
R&D investment, continuously expanding its product portfolio. Since its listing,
Montage's R&D investment has continued to grow. In 2023, the R&D investment
amounted to 682 million yuan, an increase of 21.00% compared to 2022, accounting
for 29.83% of its operating revenue.
(Unit: Million Yuan)
Graph: Montage's Annual R&D Investment Since Listing
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In 2024, Montage will continue to invest in R&D innovation, steadily advancing
product development and iterative upgrades, thereby enhancing the Company's core
competitiveness.
Product
Name/ Main R&D Plan of New Products for 2024
Category
Memory Advance the R&D of the mass-produced version of the fourth generation DDR5
Interface RCD chip and complete the engineering R&D of the fifth generation DDR5 RCD
Chips chip.
New Products
of High- Complete the tape-out of engineering samples for the second generation DDR5
Performance MRCD/MDB chips, second generation MXC chips, and PCIe 6.0 Retimer chips.
"Data Additionally, finished the preparation of engineering sample chips for PCIe 6.0
Movement Retimer chips.
Power" Chips
Clock
Advance the testing and verification work for the clock generator chips, and
Generator
complete the R&D of the production version.
Chips
Jintide
Server Advance the R&D of the sixth generation Jintide CPU.
Platform
In response to industry trends, characteristics of the next-generation large models,
AI Chips and user demands, we carry out the product architecture and frontend design work
for the next-generation chips.
III. Actively Enhancing Investor Returns and Engagement, Sharing
Company Development Achievements with Investors
(i) Dividend Distribution and Share Repurchase Information Since Listing
A．Dividend Distribution
Montage places high importance on providing shareholders with reasonable
investment returns and actively executes dividend distribution plans and profit
allocation policies to share the Company's development achievements with investors.
Since going public, the Company has implemented dividend distributions for four
consecutive years, with a total cash dividend of 1.359 billion yuan from 2019 to 2022,
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accounting for over 30% of the cumulative net profit attributable to parent company
during this period.
Despite the impact of the global decline in demand for servers and computers
leading to customer destocking in 2023, resulting in a decline in revenue and net profit
compared to the previous year, the Company remains committed to actively enhancing
investor returns and engagement, safeguarding their interests, and providing stable
dividend expectations. Upon approval at the 26th meeting of the second board of
directors, the Company plans to maintain the dividend distribution ratio unchanged
from previous years. The proposed profit distribution plan for the year 2023 is as
follows: a cash dividend of 3.00 yuan (tax included) per 10 shares, totaling
approximately 339 million yuan in cash dividends, accounting for 75.16% of the
Company's net profit attributable to shareholders in 2023. This profit distribution plan
will be implemented after approval at the Company's 2023 Annual Shareholder’s
Meeting.
B．Share Repurchase
To embody the development philosophy of being "investor-value" and to
safeguard the interests of all shareholders, based on confidence in the Company's future
prospects and its recognized value, Montage implemented two share repurchase
programs in 2021 and 2023. In total, the Company repurchased 11.263 million shares,
amounting to a total repurchase value of 686 million yuan.
(ii) Planned Dividend Distribution and Share Repurchase for 2024
A．Dividend Distribution
In accordance with relevant laws, regulations, and normative documents, and
based on firm confidence in the Company's future development, as well as considering
the undistributed profits and financial situation of the Company, the cumulative cash
dividend ratio for the fiscal years 2023 to 2024 will not be less than 30% of the
cumulative net profit attributable to shareholders for these two years. Additionally, the
Company will explore the feasibility of mid-term dividends and multiple dividends
based on fund utilization arrangements, operational development needs, and business
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strategic objectives. It will reasonably increase the dividend payout ratio and dividend
yield to safeguard the legitimate rights and interests of shareholders, ensure the long-
term steady development of the Company, achieve an effective balance between
performance growth and shareholder returns, and establish a sustainable shareholder
value return system.
B．Share Repurchase
To uphold company value and shareholder rights, Montage launched a new share
repurchase program in February 2024, as approved by the 24th meeting of the second
board of directors. The Company agreed to utilize its own funds to repurchase company
stocks through centralized bidding trading. The planned total repurchase amount is
between 300 million to 600 million yuan, and the repurchase period is within three
months from the date of approval by the board of directors. As of March 31, 2024, the
Company has repurchased a total of 4.37 million shares through centralized bidding
trading, accounting for 0.38% of the Company's total share capital. The total amount
paid for the repurchases is approximately 216 million yuan.
IV. Actively Engage in Investor Communication to Convey Long-Term
Investment Value
The Company attaches great importance to investor relations and adheres to
relevant laws, regulations, and regulatory requirements to ensure the standardization of
information disclosure. We are committed to the principles of truthfulness, accuracy,
completeness, timeliness, and fairness, fulfilling our obligations towards
comprehensive information disclosure. The Company received an "A Grade" (Excellent)
rating in the Shanghai Stock Exchange's information disclosure evaluation for the years
2022 to 2023. Additionally, the Company was honored with the 14th "Investor Relations
Pegasus Award" and the "Outstanding Investor Relations Secretary Award."
In 2024, the Company will carry out investor communication from the following
aspects to convey Montage's long-term investment value: On one hand, we will
leverage both online and offline avenues to conduct research activities with domestic
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and international institutional investors to deepen their confidence in the Company's
long-term development strategy. On the other hand, Montage will continuously enrich
investor communication methods, expand communication channels, and enhance
transparency. The Company has allocated dedicated personnel responsible for investor
relations, who will maintain efficiently communication with investors various channels
such as investor hotlines, email, and will promptly address inquiries on the Shanghai
Stock Exchange's interactive platform. This ensures that investors have smooth
communication with the company, enabling a through diverse platforms and gain in-
depth understanding of the Company's dynamics.
Moreover, in terms of interpreting regular reports and performance explanations,
Montage will release at least four vivid interpretation materials following the disclosure
of regular reports. This effort will help investors better understand the Company's
operating status. We will actively hold performance explanation meetings on a regularly
basis and participate in both online and offline investor communication activities no
fewer than 60 sessions to actively convey the Company's long-term investment value
to investors.
V. Establishing an Interest-Sharing Constraint Mechanism and Continuously
Improving Talent Incentive Mechanisms
(i). Improving the Executive Performance Evaluation System Linked to Business
Indicators
The current executive cash compensation consists of basic annual salary and
annual performance bonuses, and an executive performance evaluation system linked
to business indicators has been implemented. The annual performance bonus for
executives is linked to the Company's main operational indicators and market value
performance for the current year. The Compensation and Appraisal Committee of the
Board of Directors is responsible for studying and supervising the setting and
evaluation of executive performance. In 2024, the Company will continue to improve
the executive performance evaluation system linked to business indicators, strengthen
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the accountability of "key few," establish assessment criteria closely related to investor
interests, and continuously optimize and implement executive performance assessment
plans.
(ii). Strengthening Team Building and Improving Management Efficiency
As a "hard technology" enterprise focused on R&D, Montage Technology recruits
outstanding global technical and management talents globally to build an
internationally-minded team. This is crucial for maintaining Montage's technological
leadership and global competitiveness. The Company provides the R&D team with
world-leading and challenging projects, aiming to create a career platform where their
talents can fully shine. Montage not only values technological innovation but also
strives to cultivate a positive and inclusive working environment. It encourages
employees' innovative thinking, promotes a spirit of craftsmanship spirit, and
emphasizes equality and mutual respect among team members to facilitate mutual
growth for both employees and the Company. To attract and retain talents, Montage
provides competitive compensation and benefits packages, including an all-employee
stock ownership plan to deeply the align the interests of shareholders, the Company,
and employees. Since its listing, the Company has implemented three restricted stock
incentive plans and one employee stock ownership plan, with a comprehensive
coverage rate of over 95% for equity incentives. These measures not only enhance the
Company's ability to compete for talent and unit the team.
Through a sound talent development mechanism and incentive systems, Montage
has successfully attracted many outstanding professionals and effectively retained core
talents. In recent years, the Company's employee turnover rate has remained at a
relatively low in the industry, reflecting effective human resource management. From
the end of 2019 to the end of December 2023, Montage’s total workforce has grown
significantly from 334 to 767 employees, with R&D personnel increasing from 214 to
587. This demonstrates the continuous enhancement of the Company's overall
competitiveness and lays a solid talent foundation for the Company's future growth and
development.
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Graph: Total number of employees and R&D technicians since listing
As the Company's employee team continues to expand and its business scale
expands, higher requirements are placed on its team development and management. In
2024, Montage will further strengthen team building and enhance management
efficiency: On one hand, the Company will improve the job grading system and
promotion standards, optimize human resources management processes from multiple
dimensions, and ensure the efficient operation of personnel management, team
collaboration, performance evaluation, and organizational development to support the
talent echelon construction of various business departments and the steady development
of company business. On the other hand, the Company will focus on R&D management
personnel capability enhancement and business empowerment plans around strategic
goals, meticulously develop a diversified special R&D management talent curriculum
system, and implement corporate values in practical business operations to enhance the
overall team effectiveness of the company. Meanwhile, the Company will continue to
promote talent incentive plans, tap into and stimulate employee potential, enhance team
vitality, and more closely align the interests of employees, the Company, and
shareholders, strengthening employees' sense of responsibility and mission for the
Company's sustainable development, laying a solid foundation for the Company's
continuous and healthy development.
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VI. Enhance Governance Standards and Promote High-quality Development
of the Enterprise.
In 2024, Montage will strictly adhere to the "Administrative Measures for
Independent Directors of Listed Companies" and the "Guidelines of on Articles of
Association", actively implement internal governance documents, revise the "Articles
of Association" "Independent Director Working Rules" and rules of procedures for
various Board committees to improve its governance structure.
The Company plans to complete the election of its third board of directors and the
board of supervisors in 2024. In accordance with relevant laws, regulations, and
requirements of the "Articles of Association", the Company will conduct these elections
and organize the Company's directors, supervisors, and senior management to actively
participate in training organized by institutions such as the Shanghai Stock Exchange,
China Securities Regulatory Commission, and Listed Companies Association. The
Company will also arrange for the board of directors, supervisors, and senior
management to participate in training provided by professional institutions and internal
experts, promoting their understanding of responsibilities and duties to ensure the
Company's continuous standardized operations.
Moreover, to better assist the board of directors and supervisors in performing
compliance duties, and to solidifying their responsibilities, the Company will continue
improving communication methods. Through regular summaries of capital market
regulations and regulatory trends, the Company will promptly convey information to
the board of directors and management, strengthening the compliance awareness of key
personnel, and supporting high-quality development.
VII. Benchmarking Against Industry-leading ESG Practices and
Continuously Improving ESG Management Levels
Montage attaches great importance to ESG, actively fulfilling corporate social
responsibilities, and safeguarding the legitimate rights and interests of shareholders,
employees, customers, suppliers, and other stakeholders. It promotes the deep
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integration of ESG concepts into strategic decision-making, daily management, and
business operations, demonstrating its commitment d to the sustainable development of
the enterprise.
In 2024, Montage will continuously refine and improve its ESG systems,
processes, and execution based on the characteristics of the integrated circuit design
industry and combined with global advanced practices. The Company will actively
refer to international advanced experiences, further integrating sustainable
development risks and opportunities into ESG strategic considerations and
development goals. It will conduct research on carbon emissions-related policies,
deeply implement ESG concepts into the supplier management system, and take
multiple measures to strengthen team building and talent development to enhance
employee satisfaction. At the same time, the Company will comprehensively review its
practices in accordance with the Responsible Business Alliance (RBA) guidelines for
the international electronics industry to meet relevant requirements. Building on its
strengths in R&D innovation and core business operations, the Company will better
serve customers, reward shareholders, empower employees, and contribute to society,
striving to achieve harmonious development between the Company, society, and the
environment.
This report contains forward-looking statements that are not fait accompli and do
not constitute substantial commitments by the Company to investors, so investors are
advised to pay attention to the relevant risks.
Montage Technology Co., Ltd.
Board of Directors
April 8, 2024
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