Chinese Fabless Montage Lists on the Nasdaq

According to researcher iSuppli, the number of Chinese-manufactured set-top boxes sold worldwide is projected to grow 12% annually over 2012 to 2016 to reach 243 million units. The researcher estimates that 58% of Chinese set-top boxes will be exported to the rest of the world. Earlier last month, Shanghai-based semiconductor manufacturer Montage Technology listed on the Nasdaq. Montage is a fabless provider of analog and mixed-signal semiconductor solutions with focus on the cloud computing and home entertainment industries. Here is a quick look of the company and its performance thus far.

Montage Technology’s Offerings

Montage is best known for its technical expertise in analog and radio frequency solutions that help it design high-performance, low-power semiconductors. It is among the leading providers of integrated solutions provider for set-top boxes worldwide. Its products are able to optimize signal processing even in conditions of weak broadcast signals, which are prevalent in the emerging markets. Montage’s signal processing capability helps improve the overall video quality of the television broadcast.

Besides set-top boxes, Montage is also known for its high-performance, low-power memory interfaces that are needed for memory-intensive server applications for cloud computing. Montage sells its memory interface solutions to memory module manufacturers. Its products are integrated into dual in-line memory modules that help add memory capacity to a CPU.

Today Montage’s customers within the home entertainment segment include nine of the 10 largest set-top box manufacturers in China. Within the memory interface segment, since its inception in 2004, Montage has sold more than 230 million integrated circuits to over 150 customers worldwide.

Montage’s Financials

Montage has seen strong revenue growth over the past few years. Revenues grew 64% annually from 2010 to 2012 to $78.2 million last year. For the six months ended June 2013, Montage saw revenues grow 34% to $45.4 million. It has also turned profitable in recent years. After reporting a net loss of $8.5 million in 2010, it reported earnings of $18.3 million last year. Again for the six months ended June 2013, the company had net income of $8.8 million.

While Montage is sharpening its focus on the cloud computing segment, the home entertainment market is its big revenue earner. Last year, it reported 94% of revenues from this segment. During the first half of 2013, though, revenue share of the home entertainment segment has fallen marginally to 91%.

Last month, Montage sold 7.1 million shares for $10 each to raise $71 million from the US stock market. The stock has been received well in the market and is trading at $13.60, with a market capitalization of $360.1 million. It touched a high of $16.40 soon after listing.

Analysts are pleased with Montage’s offering and valuation. Not only is the company diversifying from the home entertainment segment into the rapidly advancing cloud computing memory market, but it is also ensuring that it maintains a strong presence in its main segment. It is expanding its presence in the emerging markets of Latin America, China, India, and Africa, where analog transmission is rapidly shifting to digital transmission and where there is heavy investment by entertainment companies.