Goodix Technology(汇顶科技), a leading Chinese IC design company, said it is planning to grant stock ownership incentives to its 135 core members in its U.S. subsidiary, mostly in R&D role.

Goodix Technology, which ranks the 14^th in JW Insight's Top 100 List of China's Semiconductor Companies, revealed the information after it held this year's third extraordinary general meeting of shareholders on June 6 with the agenda to deliberate upon the drafted 2022 Employee Stock Ownership Plan Phase II for its U.S. subsidiary and its related matters.

According to the summary of the draft plan, the equity incentives will be given to the key employees who contribute to the company's operating performance and medium-and long-term development. The specific number of participants, total equity, and proportion shall be subject to the actual participation of the employee volunteers, with the directors and senior managers of the company excluded.

Zhu Xinghuo, director of the company, presided over the Monday meeting on behalf of Goodix Technology chairman Zhang Fan who was absent for other obligations.

The drafted plan stipulates that the capital for the employee stock ownership will come from the 2022-2025 incentive fund and those allocated for Goodix America with an upper limit of $11.727 million.

Wang Li, the company's secretary of directors, told JW Insights that more than 90% of Goodix America's employees are in R & D function along with other related overseas staff, accounting for nearly 1/4 of the total in the company.

She added that Goodix does not divide R & D tasks for its subsidiaries. Instead, it integrates R & D resources according to the needs of different projects.

Wang emphasized that Goodix operates as a global company adopting multinationals' approach. In addition to the United States, Goodix Technology has also subsidiaries in South Korea, Belgium, Germany, Cairo, the Netherlands, France and other regions. But its current employee stock ownership plan does not cover other than the U.S. subsidiary.

For the company's long-term sustainable and stable development, Goodix needs to improve its global deployment, attract and retain global talents. The current employee stock ownership plan is set up to establish a mechanism of benefit- and risk-sharing with overseas employees, Wang said.

Wang told JW Insights, "the company does not make a division of the R & D work among its subsidiaries based on different product lines but integrates the R & D resources to meet the needs of different projects. Therefore, there is neither special division of labor within Goodix America, nor any particular focus on one category of products in the branch."

In fact, in addition to the U. S., Goodix Technology has also set up subsidiaries in many countries and regions of Korea, Belgium, Germany, Cairo, the Netherlands, and France. However, Wang said: "it is not yet possible to say whether the company will issue the equity incentives in the other overseas companies. It depends on the specific circumstances in the future."

Goodix Technology is at a stage in urgent need of competitive technologies and products to create a new performance growth curve. (See JW Insights report https://jw.ijiwei.com/n/821072 )

Founded in 2002 and listed on the Shanghai Stock Exchange in 2016, Goodix Technology thrived from fingerprint chips for mobile phones at its peak two years ago. It lost its market value when the fingerprint chip market declined. The company expanded to IoT and automobile electronics through two major acquisitions of an NXP's voice and audio division in 2019 and German auto-driving system company DCT in 2020. It also hired Sandy Hu, former TI China President as its new president to apply more global management. But it is still in a transition, with a loss in Q1 this year hit by weakened consumer electronics market demands.

But Goodix has stuck to R & D expenditures despite the effect on its bottom line. Its R&D spending from 2019 to 2021 was at RMB1.079 billion($162 million), RMB1.754 billion (($263 million), and RMB1.692 billion ($254 million), accounting for 16.67%, 26.23%, and 29.62% respectively of the company's revenue in those years. These increased R&D expenditures had affected its net profit during the reporting period, according to Goodix's financial statements.