Osram sees continuing recovery in optical chips, investing in mini LEDs

Osram might well be readying a withdrawal from IoT lighting, but a push by customers to restock following prolonged pandemic caution, and recovery in the automobile market has positioned its Opto Semiconductor (OS) and Automotive units for profitable growth this year, when Osram will make factory investments in the emerging area of mini LEDs, outgoing CEO Olaf Berlien said this week.

“We had a strong start to the fiscal year,” Berlien said on a call with analysts discussing financial results for the company’s first quarter, which ended on Dec. 31. “A quick rebound in the automotive and electronics industry has led to full order books.”

Osram reported €6 million (US$7.3M) in after-tax earnings as sales declined 3.8% to €840M ($1B) from €873M ($1.1B) a year earlier, when after-tax earnings were €1M ($1.2M) As LEDs Magazine wrote, the numbers were dragged down by the Digital division, which includes Internet of Things (IoT) lighting, entertainment lighting, horticultural lighting, and other areas. While horticultural performed well, other Digital sectors struggled. Through cost cutting, Osram managed to limit Digital losses to €1M as sales declined to €178M ($215.7M), which was a 12.6% drop on a comparable basis.

Osram looks set to sell off various Digital operations, having already unloaded a components plant in Plovdiv, Bulgaria. The sell-off would match well with new Osram owner ams, a sensor specialist that 18 months ago in the early days of its prolonged pursuit of Osram indicated that digital lighting was “non-core” to its mission of creating a “global leader in sensor solutions and photonics.

But OS, with its mix of LEDs, lasers, and sensors, fits well with ams’ vision. For now, Automotive seems to as well, with its mix of LED headlight systems, replacement bulbs, and other products.

Berlien, who will leave Osram at the end of this month, told analysts that customer restocking helped to boost OS sales in the quarter, a trend he expects to carry on in the second quarter. Likewise, a recovery in the automotive market boosted sales and should continue in the second quarter. Although he said that the third and fourth quarter involve “a little bit (of) guessing” and could be “a little softer,” he said he stands behind a recently upgraded forecast for the year, when Osram said 2021 revenue should grow between 10% and 14%, up from the earlier predicted 6‒10% range; it also brightened its “adjusted EBITDA margin” outlook, to between 12% and 15%, from what was 9‒11%.

Factory investments will include adding machinery to the company’s Kulim plant to make mini LEDs, Berlien noted.

Osram opened Kulim with fanfare in November 2017, investing €370M ($449M) as the first phase of what was to be a €1B ($1.2B) build. The expansion seems to have hit starts and stops.

“Sometimes it takes time, but now it’s coming,” Berlien said of Kulim, noting that €1B plan “is still valid.”

“We invested in the last year in Kulim and the year before,” he said. “And we will invest currently as well and we will invest next year. So we are right on plan. Two new products are coming up. The mini LED will start soon. We need investments for the machines for the mini LED.”

Berlien credited the efficiencies of Kulim for helping Osram achieve what he said was its best ever EBITDA margin in OS, at 31.1% for the quarter.

MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]m).

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