ams OSRAM to re-assess its microLED strategy

ams OSRAM revises its microLED strategy with unexpected cancellation of cornerstone project. A non-cash impairment charge of EUR 600-900m, a slightly revised mid-term revenue CAGR of 6-8% on a like-for-like basis, and a positive impact to its cash-flow profile within the next 24 months is expected.

The Management Board of ams OSRAM AG has decided to re-assess the microLED strategy of the company after having been informed of the unexpected cancellation of a cornerstone project for its microLED program. Discussions with the related customer are ongoing.

Following the cancellation of the cornerstone microLED project, the company will revisit the future use of its assets related to its microLED strategy, particularly the new 8-inch LED facility in Kulim (Malaysia). Based on a first, preliminary estimation, ams OSRAM expects to record non-cash impairment charges on microLED related assets and goodwill of EUR 600 to 900 million in the first quarter of fiscal year 2024.

Changes to the capitalization of R&D investments into microLED and reduced subsidies from public funding schemes will impact the operational profitability (adjusted EBIT) for FY2024 by around EUR 30 to 50 million. The company considers additional cost improvements on top of its known ‘Re-Establish-the-Base’ program to further balance this negative impact on Fiscal Year profitability.

The underlying business performance is on track and the company continues to expect first quarter revenues to improve year-over-year on a comparable basis to a level of EUR 800 - 900 million. The adj. EBIT is expected to still come in between 4% to 7% of revenues but will be burdened by the aforementioned changes to capitalization of R&D and reduced subsidies within that range.

The cancellation of the cornerstone project is expected to improve the cash flow profile of the company in the next 24 months, among others due to reduced CAPEX.

The company now assumes on a like-for-like basis (without the non-core portfolio in semiconductors of EUR 300 to 400 million in 2023 and the divestments in the L&S segment in Q1/2023), to grow revenues now with a 6% to 8% CAGR mid-term, as volume sales from its 8-inch LED facility in Kulim can no longer be assumed in that time frame. The company continues to expect that the largest growth contribution will be coming from the strong momentum in its target automotive semiconductor applications, where it is clear market leader, followed by mobile light sensors on the back of the large design-wins that the company secured earlier besides the other growth drivers in industrial, medical, and selected consumer applications.