Montage forecasts strong profit growth as shares plunge on Korea probe

Prosecutors in South Korea searched the local office of cloud-computing chip designer Montage Technology Co. Ltd. (6809.HK; 688008.SH) as part of an antitrust investigation, according to local media reports later confirmed by the company. Montage later issued a positive profit alerton Thursday after market close, forecasting first-half revenue of about 3.34 billion yuan ($494 million), up 26.6% year-on-year, and a net profit of 1.9 billion yuan to 2.1 billion yuan, up 63.9% to 81.2%.

The company attributed the growth mainly to strong demand driven by the AI boom. As DDR5 penetration increased and new product generations were rolled out, shipments of its third- and fourth-generation DDR5 registered clock driver, or RCD, chips rose as a share of its total sales. Revenue from newer interconnect products, including MRCD/MDB, PCIe Retimer, CKD and CXL MXC chips, also increased significantly.

The company’s first-half revenue from interconnect chips reached about 3.11 billion yuan, up 26.4%. Its second-quarter revenue from the product line totaled about 1.69 billion yuan, up 28.2% year-on-year and 19.5% from the first quarter. Higher investment income and gains from changes in fair value of investments also boosted earnings.

Montage’s Hong Kong-listed shares plunged 22.9% on Thursday after South Korean media reported that local prosecutors had searched the company’s office in the country. Montage issued a statement Friday confirming it was cooperating with an antitrust investigation by South Korean authorities. It said no allegations of wrongdoing had been made and that its operations remained normal. South Korean customers contributed 2.93 billion yuan in revenue last year, accounting for about 53.6% of the company’s total.

Montage shares opened lower on Friday and traded at HK$256.6 at the midday break, down 7.9%.

By Lee Shih Ta

To subscribe to Bamboo Works weekly free newsletter, click here