What Display Daily thinks: ams Osram isn’t a company without challenges. It has not been immune to the fall in demand that has gripped all tech companies. However, it has managed to make some innovative products for automotive, and it is investing about a billion dollars to build out its MicroLED manufacturing capabilities in Malaysia. If you isolate the opportunities in automotive, the company has sensors through to lighting, and possibly displays. It’s a pretty good tech stack for the car market. Additionally, the combination of sensors, integrated circuits (ICs) and display drivers, and MicroLED displays is a pretty good tech stack for wearables, and no doubt, smartphones (at some point).
Given that ams Osram runs a gamut of products that together create an end-to-end package that is unique, it still doesn’t take away from the fact that its MicroLED capabilities are key to its future. A product line that includes the emission part, the detection part, waveguides and microlenses, and most of the driver circuitry in-between is a pretty compelling offering. But, it’s probably going to require one very big partnership or one very big client to leverage the company’s capabilities in a meaningful way. One of Germany’s leading automakers could play that role, but how much can we rely on car OEMs? It’s uncharted territory for the display industry.
ams Osram Sees Strong Showing in Medical and Automotive
ams Osram released its financial results for the second quarter of 2023. The company reported revenues in line with its previous guidance, but also faced challenges due to unfavorable demand conditions in certain product areas. Revenues amounted to 851 million euro ($938 million), an 8% decrease compared to the previous quarter and a significant 28% decline compared to the same quarter in 2022. The company attributed the decline to various factors, including deconsolidation effects.
| Financial summary (millions of euro) | Q2’23 | Q1’23 | QoQ Change | Q2’22 | YoY Change |
|---|---|---|---|---|---|
| Revenues | 851 | 927 | -8% | 1,183 | -28% |
| Gross margin | 27.8% | 29.3% | -150 bps | 31.6% | -380 bps |
| Result from operations | 50 | 50 | 0% | 104 | -52% |
| Operating cash flow | 231 | 162 | 42% | 100 | 132% |
| Net debt | 2,034 | 1,940 | 5% | 1,727 | 18% |
| Financial summary (millions of dollars) | Q2’23 | Q1’23 | QoQ Change | Q2’22 | YoY Change |
|---|---|---|---|---|---|
| Revenues | $936.1 | $1,019.7 | -8% | $1,301.3 | -28% |
| Gross margin | 30.58% | 32.23% | -150 bps | 34.76% | -380 bps |
| Result from operations | $55 | $55 | 0% | $114.4 | -52% |
| Operating cash flow | $254.1 | $178.2 | 42% | $110 | 132% |
| Net debt | $2,237.4 | $2,134 | 5% | $1,899.7 | 18% |
However, ams Osram’s profitability exceeded expectations, with the gross margin coming in at 27.8%. Despite the challenging demand environment, the semiconductors business segment showed signs of stabilization and positive trends in the second quarter compared to the first quarter. This improvement was driven by better performance in some areas of the consumer business and a strong showing in the medical business.
ams Osram also reported substantial capital expenditures (Capex) during the first half of 2023, primarily due to strategic investments in their long-term manufacturing capabilities. These investments included the construction of an 8″ LED front-end facility in Malaysia, as well as focused investments in the group’s European manufacturing footprint in Austria and Germany. The company expects to return to its targeted 10% Capex-to-revenue ratio over an investment cycle by 2025.
Additionally, the company highlighted its progress in the development and industrialization of its MicroLED technology, which remains a focus of research and development spending. ams Osram plans to move towards high-volume manufacturing of this next-generation display technology in the new 8″ LED front-end facility.
Looking ahead, the company provided an outlook for the third quarter of 2023. It expects revenues to improve between 840 million and 940 million euro ($925 million–$1,031 million), driven by strengthening demand for its automotive products. The adjusted EBIT for the third quarter is projected to be in the range of 5–8%. The company’s CEO, Aldo Kamper, expressed satisfaction with the stabilizing trends in the automotive semiconductor supply chain. He emphasized the company’s focus on improving operational cash flow and profitability amid the challenging macro-economic sentiment in some markets.
