Sales fell and income crashed to a loss in ams Osram’s fourth quarter. But with profit margins coming in on the higher end of the company’s forecast, CEO Aldo Kamper conveyed optimism based on a strong automotive LED market, resurgent horticulture, and ongoing cost savings.
His bright outlook continues to include high hopes for micro LEDs, although significant revenue in that emerging segment is not expected to materialize until 2026, he noted. He downplayed the observation by LEDs Magazine that the timeline seems to have slipped from 2025, while he acknowledged to analysts that significant costs to build a modern micro LED factory in Kulim, Malaysia remain a “headwind” that in the long run will have been worth it.
For the quarter ending Dec. 31, sales dropped 23% compared to the same period a year ago, to €908 million ($979 million) versus €1.18 billion.
Adjusted net income nosedived to a loss of €16 million ($17.3 million), down 154% from last year’s positive €29 million. The “adjustments” excluded costs related to mergers and acquisitions as well as “transformation and share-based compensation costs, results from investments in associates and sale of businesses,” the company explained in a footnote to its financial report.
On a call with analysts this morning, Kamper emphasized highlights such as a 6.9% EBIT profit margin which, while below Q4 2022’s 7.3%, was “above the midpoint of the guided range.” The Premstaetten, Austria–based company had forecast between 5% and 8%. Kamper’s ongoing “Re-establish the Base” restructuring and cost-cutting initiative played a key role.
“We delivered a solid business performance in the fourth quarter, despite of a mixed bag in terms of end markets,” Kamper said.
LEDs in the fast lane
A lively automotive market for both LEDs and laser chips sat at the top of that mixed bag. On the analysts’ call, and later in the morning during a Munich press conference, Kamper emphasized that the trend toward digitalization of automobiles is driving sales of optical chips. That is especially true in China, he noted, where ams Osram’s customers include electric car maker BYD.
Orders are growing for a variety of automotive LEDs including headlights, taillights, and interior, with products including ams Osram’s new pixelated Eviyos headlight and thin Aliyos benefiting. Those two products are part of an LED revival that Kamper has overseen since taking over at ams Osram last April.
Car makers are also buying lidar systems that use ams Osram laser diodes. Although the “vast majority” of ams Osram’s optical semiconductor revenue comes from LEDs, lasers are an important part of the portfolio, Kamper told LEDs. Combined, LEDs and lasers make up about 58% of the revenue in ams Osram’s semiconductor business, or €1.4 billion ($1.51 billion) in the full year 2023. The balance of about €1 billion ($1.08 billion) comes from sensors and ASICs.
While automotive has grown, ams Osram’s industrial/medical and consumer segments have fared poorly for the semiconductor group.
Hail horticulture?
The disappointment once again included horticulture in the quarter. But that could soon change.
“Horticulture was still very muted,” Kamper told analysts. “The greenhouse lighting product tendering season in the first half of ’23 was particularly soft, if you remember. We believe that the tendering season this year will be stronger, especially on the back of our latest Hyper Red LED product, which boasts market leading efficiency, and should convince even more customers.”
Asked by one analyst to elaborate, Kamper reiterated that “we expect a lot more tendering activity in the first half of this year.”
His prognosis for renewed horticultural activity was similar to one given recently by Signify CEO Eric Rondolat.
Micro LEDs
Kamper was steadfast in ams Osram’s long-term commitment to micro LEDs. He told analysts that the company has moved equipment for making them into its Kulim location and has “made significant progress.”
Chief financial officer Rainer Irle added that Kulim ramp-up costs — which have pushed company capex levels well above normal — will likely continue into 2025, which is also when he said micro LED revenues should begin in small amounts. “We expect significant revenue then in ’26,” he told one analyst.
LEDs Magazine pointed out to Kamper that 2026 appears to be a year later than the timeframe previously articulated.
“The timing hasn’t really changed,” Kamper replied. “We have said in the past that the first products out of the fab will probably be ’25, but that is sample volumes to enable the rest of the supply chain. You’ll probably see something more concrete in ’26 starting to take off.
“But it is really for us about the long-term future. A quarter back or forth, or even a year back or forth doesn’t make [the decision for] technology in itself different. It is in our mind an important addition for the LED space in terms of technology capability and application spaces for our technology, and therefore we are heavily engaged in this,” he concluded.
Micro LEDs from Kulim will at first head into the market for small displays, he said. With that still a way off, the company is now showcasing the importance of automotive in the nearer term, a trend that emerged in the third quarter.
For the year 2023, ams Osram had revenues of €3.59 billion ($3.87 billion) down 25% from €4.82 billion in 2022. Adjusted net income fell 59% to €50 million ($53.9 million) from €124 million.
Looking at 2024, Kamper told analysts that “the second half should come in stronger than the first.” He cited challenges including inflation, higher wage costs, and micro LED development industrialization costs.
As part of its turnaround efforts, the company hopes to sell off at least two groups from its semiconductor business, including one that makes outdated facial recognition technology for mobile phones, Kamper said.
LEDs will bring you more on today’s results — including Kamper’s pledge for ams Osram to be “the last man standing” in automotive replacement bulbs — in a subsequent article. Replacement bulbs are part of the company's Lamps & Systems group, which makes up about 30% of revenue.
MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]).
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