News: LEDs
4 March 2024
ams OSRAM re-assessing micro-LED strategy after Apple project cancelled
After having been informed of the unexpected cancellation of a cornerstone project for its micro-LED program, ams OSRAM GmbH of Premstätten, Austria and Munich, Germany says that it is re-assessing its micro-LED strategy. Discussions with the related customer — reported to be Apple — are ongoing.
Specifically, ams OSRAM will revisit the future use of its assets related to its micro-LED strategy, particularly the new 8-inch LED facility in Kulim, Malaysia.
Based on a first, preliminary estimation, ams OSRAM consequently expects to record non-cash impairment charges on micro-LED-related assets and goodwill of €600–900m in fiscal first-quarter 2024.
The firm also expects a slightly revised mid-term revenue compound annual growth rate (CAGR) of 6–8% on a like-for-like basis (without the non-core portfolio in semiconductors of €300–400m in 2023 and the divestments in the Lamps & Systems segment in Q1/2023) as volume sales from its 8-inch LED facility in Kulim can no longer be assumed in that time frame.
Changes to the capitalization of R&D investments into micro-LEDs and reduced subsidies from public funding schemes will impact ams OSRAM’s operational profitability (adjusted EBIT) for fiscal year 2024 by €30–50m. The firm is considering additional cost improvements on top of its known ‘Re-Establish-the-Base’ program to further balance this negative impact on fiscal year profitability.
Nevertheless, ams OSRAM notes that its underlying business performance is on track and it continues to expect first-quarter revenue to improve year-over-year on a comparable basis to €800–900m. Adjusted EBIT is expected to still be 4–7% of revenue but will be burdened by the changes to capitalization of R&D and reduced subsidies within that range.
The cancellation of the cornerstone project is expected to improve the firm’s cash flow profile in the next 24 months, due partly to reduced capital expenditure (CapEx).
Cancelled collaboration casts doubt on 2026 launch of micro-LED version of Apple Watch, says TrendForce
Reporting that the cancelled collaboration was with Apple, market research firm TrendForce notes that this casts uncertainty on the launch of the micro-LED version of the Apple Watch as ams OSRAM was the sole supplier for the micro-LED vertical chips, along with South Korean panel manufacturer LG Display supplying the glass driving backplane and mass transfer processes. With the partnership dissolved, the 2026 debut seems increasingly out of reach, comments TrendForce.
For the micro-LED Apple Watch, supply chain scarcity is pushing micro-LED panel costs potentially 2.5–3 times higher than similarly sized OLED panels. Secondly, ams OSRAM’s smaller micro-LED vertical chips — while cost-saving and beneficial for redundancy design — demand higher transfer precision, posing another critical bottleneck for mass production. Thirdly, micro-LEDs still lacks a dedicated driving architecture, leaving micro IC or TFT solutions unresolved.
However, TrendForce remains optimistic about Apple’s venture into micro-LED technology. Taiwan and South Korea boast a robust line-up of manufacturers for micro-LED chips, backplanes, and related transfer processes, who are ready to fill the gap and offer Apple an opportunity to seek new supply chain partners.
Secondly, Apple’s commitment to micro-LED innovation is evident in its extensive patent portfolio, which ranges from integrated display and sensor elements and flexible displays built on micro-LEDs. Abandoning these innovations could contradict Apple’s consistently emphasized values, says TrendForce. Lastly, as a new display technology in the spotlight, the potential of micro-LEDs extends beyond watches to applications in head-mounted augmented reality (AR) devices, remaining an innovative new technology for Apple’s medium- to long-term product diversification strategy.
TrendForce emphasizes that micro-LED technology is at an early stage of development. The involvement of industry giants like Apple significantly contributes to driving positive advancements across the sector. Notably, the integration of micro-LEDs into products such as watches could emerge as a flagship application within the next 2–3 years. With potential shipments reaching millions of units, this development is poised to play a crucial role in shaping the future of the industry, believes TrendForce.
