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30 Apr 2024
Component maker highlights design wins elsewhere as potential buyers signal interest in Kulim facility.
ams Osram’s move to exit microLED manufacturing following Apple’s bombshell decision not to use the technology in its smart watches is set to cost the Austria-headquartered firm €700 million.
Revealing details of that and a wider restructuring of operations in a quarterly financial update, executives at the diversified manufacturer of optical components and sensors also said that more than 500 employees at its sites Malaysia and Germany would be affected by the decision.
Central to that exit plan will be a deal to transfer ownership of ams Osram’s brand new site in Kulim, Malaysia - which was being kitted out with state-of-the-art tools for microLED production on 8-inch wafers - via a “sale-and-leaseback” deal.
Automotive growth
In an investor call to discuss the latest developments, CEO Aldo Kamper and his colleagues indicated that there was strong interest in the Kulim site from other parties. Although the official sales process is yet to begin, as many as ten different companies have already made an enquiry, they said.
“The industry dynamics in our LED markets have changed with cancellation of the microLED cornerstone project,” admitted Kamper, noting updated projections from market analyst firm TrendForce indicating that, following Apple’s change of heart, microLEDs would likely now remain a niche technology through 2030.
ams Osram will retain some interest in the technology for automotive use, for example in high-pixelated forward lighting units, adding that more significant development activity will only be continued if a major new lead customer appears in the very near future.
But as things now stand, TrendForce believes that self-emissive microLED displays will command only a $580 million market for LEDs by 2028 - largely for premium televisions.
The analyst company suggests that automotive applications - where ams Osram has a particular strength - is set to become the largest single market for LEDs by 2026, taking over from general lighting as the overall market grows from $13 billion this year to nearly $17 billion in 2028.
Of that total, automotive’s share is set to expand from $3.45 billion this year to nearly $5 billion in 2028, a compound annual growth rate (CAGR) of around 9 per cent.
“We adjust our strategy accordingly and continue to strengthen investments in the soon biggest LED market segment - automotive - which is to grow structurally for years to come,” said Kamper, pointing out that exiting the costly 8-inch wafer fab would also significantly improve ams Osram’s cashflow from next year onwards.
Further restructuring
The about-turn in microLEDs is not the only upheaval - ams Osram is also making major changes within its passive optical components and CMOS image sensor businesses, in a bid to create a much leaner and more efficient operation focused on intelligent sensor and emitter devices.
“The underlying core business is fully intact,” stressed the CEO, adding that the company is making good progress in the divestment of its passive optical components unit.
The company had also been aiming to divest its CMOS sensor business, but with no suitable buyer identified, it will instead close one development site in the US and restructure another as it focuses on higher-margin medical and industrial applications instead of consumer markets.
Reporting overall sales of €847 million for the opening quarter of the year, the ams Osram team said that its “optical semiconductor” business unit - largely LEDs and laser diodes - accounted for €345 million of that total, with strong orders for devices set to be deployed in new car headlamps and advanced horticulture applications.
The firm’s lamps and system business contributed €268 million to the latest quarterly sales total, with €233 million from CMOS sensors and ASICs.
However, the costs of moving away from microLED production dominated the overall result in the latest period, with ams Osram recording a net loss of €710 million.
Kamper and colleagues are hopeful that, once completed, the sale and leaseback of the Kulim fab should realize a benefit of at least €400 million, and possibly more than that, given the quality of the site, the apparent level of interest, and the recent surge in construction costs.
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